By Deborah Kops. Sourcing Change
Suddenly the GBS world has seemingly latched onto a new discussion topic—the rise of global capability centers or GCCs. Indian newspapers are rife with articles about this erstwhile hottest trend in IT/ITES services. A class of consultants dedicated to setting up operations is now making noise. Global business services folk are renaming their offshore centers GCCs. But they’ve been around for some time. What’s going on? Is it a case of a rose by any other name?
Frankly, I’m flummoxed by all of this. Large offshore centers have been a mainstay of global services delivery since we started to globalize work in the 1990s. But as last year’s new toys, such as AI, are implemented or lose some of their shine, our industry looks to the next topic to obsess about. And, friends, it looks like the current obsession is the GCC.
What’s causing the current chatter about GCCs? Here’s my take:
- A seat at the table Increasingly, experienced GCC leadership is pushing to equate GCCs with GBS as a creator of value
- Focus on cost and talent The simplicity of GCCs as a concept to quickly create cost savings and tap into talent, can compare favorably with the GBS model, while arguably more comprehensive, and dare I say, strategic, it usually takes longer to deliver
- Marketing from third-party consultants that set up and even operate GCCs In their quest to grow their businesses, they are understandably making more noise
- Dissatisfaction with outsourcing Enterprises are setting up their own centers to move work back in-house in the same geography
Some of us are conflating GCC with GBS, perhaps in an attempt to be au courant. But is GCC a synonym for GBS? Or a different delivery model? Or a name for an all-singing, all-dancing multi-function center?
Honestly, at times, it seems we are talking past each other. Folks seem to be creating definitions that reflect their roles or suit their own needs within the enterprise or the industry. GBS leaders, typically in Europe and the US, regard GCCs as part of their delivery network. GCC leaders, most often located offshore, may eschew referring to GBS, seeing their centers as taking primacy in a global services platform.
As much as some would like to call GCCs emblematic of next-gen business delivery, is it really so? So what is a GBS, and what is a GCC? Here’s my take:
- GBS is a model, a platform to globalize a range of the work enterprises do, often the work that powers the enterprise, such as finance and accounting, but increasingly activities that are core to the business, such as sales and marketing. GBS models come in all stripes and sizes; it can “make” the work for an internal customer through the delivery of processes as a service, or “landlord” the work by providing infrastructure and capabilities, or a combination of both. The model can resource itself by having its own employees do all the work, engage third parties to perform all or part of the work, or even enter into new resourcing structures such as joint ventures with consultancies. And core to the GBS concept is transformation—especially when it comes to realigning work end-to-end.
Designing and implementing a GBS model is part of a strategic transformation that can take years before it is fully operational. Its success usually depends on getting alignment among a varied group of stakeholders.
- GCCs, dedicated multi-tenant offshore or nearshore centers, are executing a simple mandate to offshore that either “landlord” or provide specialized services or capabilities to the enterprise. Historically focused on enabling technology development, research, and operational support, their scope is increasing to encompass other corporate functions, with investment in enabling capabilities. Unlike a GBS model that deploys a range of resource strategies, GCC employees most often perform the work, usually reporting to the parent function. They may operate as part of a GBS model, as part of a network of GCCs, especially with the addition of cross-site enabling capabilities, or particularly if they are a one-off, independently. And, very often, they landlord corporate functions.
What works best when?
Let me say it again: GBS is a model that can harness GCCs. GCCs are centers that house or provide services as part of an enterprise’s objective to globalize work.
A GCC can be part of a GBS model, but it’s not a GBS. But they have similar characteristics, such as the leverage of offshore locations and enabling capabilities that make offshore work…work.
Look to a GBS model when:
- There is a strategic change in the operating model. When all strategic decisions are on the table, including, but not limited to, organization realignment, delivery strategy, and use of technology, and the enterprise has a strong conviction to operate on a global platform, designing and implementing the GBS model is the right approach
- Change in strategy is more important than speed to cost. Setting up or rebooting a GBS model takes time before it’s fully operational. If the enterprise wants to pull a range of transformation levers, unleashing more than labor arbitrage, GBS is a better bet
- Consolidation and synergies between functions and geographies is an objective. A GBS model is best placed to look across functions and move end-to-end, given its focus on transformation, integration, and continuous improvement
- Partnership to the business is critical. When the enterprise seeks a strategic partner to the business that encompasses all functions, the GBS model is better placed
Look to go the GCC route when:
- Speed to cost and talent are of the essence. When the enterprise’s primary aim is to leverage cost advantage by quickly relocating specific works to lower-cost locations, rather than full integration, GCCs usually are easier to implement with the ability to spin them up in a matter of months
- Customization and ownership are critical. If the business needs a solution that caters to its unique processes, workflows, or technologies, GCCs provide the freedom to design solutions without the constraints of a GBS framework
- Repatriation of work from a provider is becoming a burning platform. The days of provider primacy in delivery excellence are arguably over; expertise and technology have leveled the playing field. When third-party costs are at par or more expensive, client satisfaction becomes problematic, or the enterprise wishes to reduce dependency on third parties, lifting and shifting work from a provider to a GCC works well
- Incrementalism is important. If the enterprise is in the early stages of global operations and prefers to test the waters before committing to a more integrated model such as GBS, GCCs are a low-risk entry point. GCCs can also be considered an opt-in opportunity
GBS. GCC. Both are valid approaches for globalizing work. Offshore is a key component of both. They succeed on strong delivery and enabling capabilities. But they are not synonymous. However, when combined with a GBS model deploying the best of GCCs, we can move the dial.