Today globalization has made our world smaller! Though globalization has its roots in cost arbitrage, companies now understand that globalization can help them create competitive advantage much beyond cost. Most large companies are going global to source diverse intellectual capabilities that can help them innovate faster for both large and emerging markets.
India is the emerging hub for value creation
Global Development Centers in India have not just increased in number and in diverse industries but have also seen a tremendous transformation in value contribution. A majority of global development centers are focusing on developing solutions with global relevance driving high-end design and development from here. Global development centers in India are not only taking up ownership of end-to-end product, but also owning more strategic initiatives like analytics, user experience, convergence etc.
India inherently presents some advantages which companies today have come to leverage better.
This includes the following:-
1. Workforce availability
- India today boasts of a large workforce suitable for IT/ITeS industry with more than 100 million English-speaking population; the second largest in the world after the US.
The trained and experienced IT workforce relevant for R&D is expected to grow at a steady rate of 14% in years ahead. Every year more than 200,000 engineering graduates join the IT industry.
- India also presents diverse industry capability – verticals such as banking &finance, healthcare, retail, manufacturing, government and utilities with experienced workforce and qualified graduates. (finance consultants (CAs, accountants, tax specialist), post graduates , lawyers, doctors, and many others )
2. Optimal costs to drive scale
The cost advantage has definitely seen a dip in the last few years but increase in value contribution has been much higher. Despite recent operational cost increase and higher inflation rate India still holds a comparative advantage and will continue to do so in the future as compared to other technology majors . The reasons:
- Continuous increase in the supply of the workforce available (as high as 14% yoy)
- Dollar / INR rate variation also helps contain costs
- Established IT/software destinations in the country such as Bangalore and Hyderabad which are still less expensive compared to similar destinations across the world and provide the required infrastructure
- In addition, the emergence of Tier 2 offshoring hubs such as Kochi, and Indore which offer 20-30% cost arbitrage as compared to a city like Bangalore
- The presence of government recognized IT/ITeS promotion bodies and various tax incentive schemes for the technology sector act as icing on the cake.
3. Availability of hot skills such as Big Data and Analytics
For most companies, Big Data and Analytics have become key focus and they are working to unleash the power of information and intelligence. Finding an edge, or a new niche, through extrapolating insights from data is more important today that ever before. Analysis of these vast datasets by various businesses is already creating a transformative impact across multiple sectors and is beginning to demonstrate that sophisticated analytical capabilities can result in great competitive advantage. Ironically, even with such vast data available, its’ its value remain locked in. .
The availability of experienced workforce especially people with expertise in statistics and machine learning together with managers and analysts who know how to obtain and use insights from data is a critical constraint in realizing the benefits of emerging technologies. Skills like Big Data and Analytics are comparatively new anywhere in the globe. India has seen a big opportunity in this area and fast becoming a hub for these skills.
By 2020, Bangalore is expected to emerge as the second largest destination for Big Data R&D, driven by its fast growing experienced workforce. MNCs such as Amazon, IBM, EMC and E-bay have big data teams operating from Bangalore. Local companies such as TCS, Wipro and Infosys are also building Big Data capabilities to cater to their international clientele.
4. Time zone advantage
India has an 8-12 hour time zone difference with respect to the US and other developed markets. This gives companies an option to execute the “Follow the Sun“ model from India. (especially in development and support function.) The time zone difference offers other key advantages as well:
- Business Continuity: Emerges as a great location for providing business continuity – optimally located in terms of time zone – can support countries in the west and in the east
- Time to market : Reduced turn-around time and speed to market (aided by agile development) to compete with changing market demands
- Support: Infrastructure and 24×7 support for multiple regions from Americas to EMEA and SEA; immediate issue resolution and customer satisfaction
- Professional services: Expertise available at optimal costs . Can be a hub for APAC customers
5. Thriving ecosystem
Vibrant ecosystem provides an opportunity for global centers in India to enhance existing capability. This includes:-
- Presence of 4000+ technology startups, 400 VCs & 2500 Angel Investors, and 150+ incubators.
- Presence of over 238 million internet users; and one of the fastest growing smart phone market in Asia
- 400+ Universities available to provide research support
- Engineering institutes making available of 250 K plus fresh graduates (from Tier 1 colleges) in the next 5 years who can be trained for R&D.
- Conducive services ecosystem with the presence of 350+ Service Providers. India provides the widest array of services (IT, BPO, KPO, R&D, and Engineering services ) and has the presence of most mature service providers such as Wipro, TCS, and Infosys
- Presence of 300+ national laboratories pushing the quality of research up by the day
6. Multi- function center advantage
Availability of experienced professionals be it in engineering, professional services or shared services, makes India a lucrative destination to build multi-function center. Multi-Function Centers offer certain unique benefits and enable the parent organization to derive higher value. Some of the key advantages have been stated below:-
- Creates a microcosm for the global organization and provide the “One Organization“ view
- Provides the global center with a clear vision and hence enables the site leadership to make strategic investments
- Helps create and operationalize a sustained innovation agenda
- Helps global center leverage economies of scale and hence deliver more for the money spent on services provisioning
- End-to-End process ownership provides for an integrated career path and hence helps in improving retention rates at the MNC Captive Centers
Globalization is a strategic imperative however it is essential to keep some key points in mind to lay a strong center foundation:-
- Ensure existing product roadmap, current operations and service delivery are not destabilized
- Create capability across functions – R&D, Support and Services
- Focus on functions that can increase efficiency and create business advantage
- Focus on roles for which there is adequate supply of skills in India