India, A Top Destination For Digital GICs: Zinnov
India has now become the top R&D outsourcing destination, with 60% of new MNCs establishing their Global In-house Centres (GIC) in India in the last decade, says the recent GIC Landscape study conducted by Zinnov, a leading management consulting firm. The study titled, ‘India GIC Landscape Study 2016′, shows that GICs in India today represent a USD 23.1 Billion industry and are engaging with startups to strengthen the ecosystem.
Moving away from just ‘participation’ to ‘ownership’, the study outlines the GIC India story which has been evolutionary, with the centers now becoming Value Providers & Innovation Hubs, driving global initiatives, providing meaningful cost savings with continuous productivity improvements, enabling digital transformation and converging into Centres of Excellence.
The study reads that these Indian GICs which were initially established with a purpose of facilitating lower cost for global R&D, over the last decade have scripted a story of success, by employing a workforce of 8 million in over 1150 MNCs across the country, a number that has risen from 928 MNCs with 1,165 R&D centres in 2015 to 943 MNCs with 1,208 R&D centres in 2016.
It further adds that MNCs from European and APAC region are now demonstrating higher inclination to establish GICs in India. Newer GICs are focusing on value creation and operating at a higher maturity level. With more than 60% of the MNCs entering India in the past decade, leveraging the start-up and university ecosystem, as well as building partnerships for digital capabilities is now the key agenda for them.
USA continues to be the top country for establishing GICs in India with approximately 63% of the overall GICs. At present, 96% of MNC GICs are established in Tier-1 cities while Bangalore leads the way with 35% of the overall GICs, followed by National Capital Region (NCR) at 15%.
The report also strongly emphasises on the Digitization mandate taken up by the GICs for their parent firms, i.e., addressing digitisation opportunities in the areas of customer engagement, workforce enablement, operational excellence, supply chain, risk management and developing digital product and services. Of the 1500 GICs in India, 20% are digital GICs with software and Internet MNCs leading the way at 65% of the Digital GICs & more than 70% of them being headquartered of the US.
Speaking on the subject of Digital GICs, Preeti Anand, Director & Practice Head - Engineering Excellence, Zinnov, said, “Digital transformation is an imperative for every enterprise in the current business context. GICs are a huge leverage for this transformation by providing the right talent, connect with emerging ecosystems and markets and driving innovation.”
Ease of access to diverse talent and its strong startup ecosystem, makes Bangalore the preferred destination, as per the released Zinnov study, despite being more expensive in comparison to Pune and Hyderabad. Coimbatore and Ahmedabad bag the position of the top Tier-2 cities for establishing R&D centres, while Kochi with its strong startup ecosystem is expected to emerge strong.
On the BPM side, the study highlights that more than 35% of the GICs, essentially in banking, finance & retail have reduced their BPM headcount in the last two years with the adoption of robotic process automation, witnessing just over 1% growth in headcount, despite 30 new BPO centers set up in India between 2014 and 2016.
Distribution of MNC GIC Centres based on headcount reveals that 39% of MNCs have a headcount less than 100 employees, while 47% are midsized having a headcount of 100-1000 employees and 14% of the MNC GICs in India have an employee base of more than 1000. The latter are spread across multiple cities carrying out functions such as R&D, BPM and ITO.
Increasingly, the GICs are also building on their India presence by leveraging the budding startup ecosystem to help achieve their strategic objectives. Cisco LaunchPad, the PayPal Incubator Program, Oracle Startup Cloud Accelerator etc. are examples of innovative models that are enabling startups at all stages to scale more rapidly.
The report also adds that there has been a considerable shift in the GIC operational model, which is moving towards a more strategic and accountability driven model. Further, speaking about challenges, the study establishes that attracting and retaining talent is becoming critical and developing leadership domain specialists across verticals is gaining importance.
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