A perspective from CtrlSpend on latest developments in GCC
A perspective from CtrlSpend on latest developments in GCC
Global capability centers(GCC) have a long history in India. Since the days of liberalization when India opened doors to foreign direct investments, many multi-national firms have experimented with setting up an in-house captive center for multiple processes in some of the key cities in India, with varied success rates. The earliest of the firms focussed on driving profitable growth, such as General Electric, American Express P&G, piloted with setup of a shared services center, centralizing a significant portion of their backoffice processes in India. As per the latest Nasscom-Zinnov report, India has over 1580+ GCCs with a majority of the companies headquartered in the US with GCC revenues of nearly projected to grow to $60-$85 billion by 2025.
GCCs offer several economic benefits compared to outsourcing work to multiple suppliers, such as:
Cost Efficiency: While outsourcing may involve dealing with multiple vendors, a GCC provides a centralized hub for procurement activities. This reduces transactional costs, negotiation efforts, and overheads associated with managing multiple contracts.
Control and Governance: A GCC offers greater control and governance over procurement processes. Companies can implement standardized policies and procedures, ensuring compliance and risk mitigation.
Scalability and Flexibility: GCCs can be easily scaled up or down to align with business needs. This agility is crucial in dynamic markets where procurement demands may fluctuate.
Intellectual Property Protection: Unlike outsourcing, where sensitive information might be shared with multiple vendors, a GCC operates under the direct control and ownership of the parent company, ensuring intellectual property protection.
Key Success Factors for GCCs
Talent Acquisition and Development: Access to a vast pool of skilled professionals in India is a cornerstone of GCC success. Companies invest in robust training programs to upskill employees and align them with global procurement best practices.
Process Standardization and Optimization: GCCs enable the standardization of procurement processes across different regions, ensuring consistency and efficiency in operations.
Advanced Technology Adoption: Leveraging cutting-edge technologies like Artificial Intelligence, Robotic Process Automation, and Data Analytics, GCCs enhance decision-making capabilities and drive efficiency gains in procurement.
Compliance and Risk Management: GCCs in India often have robust compliance frameworks to ensure adherence to global regulations and minimize operational risks.
Learnings from GCC Implementations
Balancing Global and Local Expertise: Striking the right balance between global procurement strategies and local market expertise is essential for GCC success. Any step in procurement, which does not require a constant interaction and insight into local market developments, is apt to be transitioned into a GCC. Procurement roles requiring close collaboration with key market stakeholders, is better positioned in respective geographies. While some companies experiment with moving these roles into a GCC in India, our experience suggests that it would be wise to desist engagement in this model.
Investment in Talent: Continuous investment in talent development is critical. This not only ensures high performance but also drives innovation and process improvements. Specifically in procurement, building familiarity with contractual language and requirements for respective geographies is crucial to build a strong procurement team in GCCs.
Technological Innovation: Embracing emerging technologies and staying abreast of industry trends is imperative to maintain a competitive edge. Significant innovation in digitizing procurement is on the core agenda of multiple procurement technology firms. India is home to the third largest startup ecosystem in the world and there is tremendous potential to co-build procurement technology solutions for the world through strong collaboration with deep-tech start-ups in India. As per the 2020 nasscom report on GCCs, over $1.5Bn was invested by GCCs in Indian startups, with 10-15% share of startup leadership coming from GCCs. When it comes to building solutions for the world, the Indian startup ecosystem benefits significantly from onboarding leadership from GCC to navigate complexities of B2B selling.
Conclusion
Global Capability Centers in India have transformed procurement dynamics for multinational companies. Through strategic investments in talent, technology, and process optimization, GCCs drive efficiency, reduce costs, and enhance procurement capabilities. As exemplified by companies like Procter & Gamble, successful GCC implementations demonstrate the potential for global procurement excellence. By establishing a GCC in India, companies not only gain cost advantages but also ensure greater control, scalability, and innovation in their procurement operations, making it a strategic move for sustainable growth in a competitive global landscape.
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Industry
Global capability centers(GCC)
Location
US Global market
Technologies
Artificial Intelligence
Robotic Process Automation
Data Analytics
Case Study
