In IT services awhat-do-3rd-party-suppliers-do-well-and-gics-struggle-withnd BPS globalization, organizations adopt outsourcing strategies that fulfil some or all of these key objectives – improved service to customers, reduction in cost base, extended hours of coverage, access to a global workforce, leveraging superior technologies for its business and other such benefits.

This journey has seen its evolution over the years with Global in House Centers (GIC) getting established in distributed locations across all continents. The leveraging of third party service providers (Service Providers) has become a viable, sometimes compelling alternative for clients.

This blog is about advantages that world class Service Providers offer, aspects that a captive GIC may not be geared for.

Speed to establish an operation is a characteristic of a global Service Provider

  • From basic requirements of a registered entity in the country of operation, facility and infrastructure readiness, management teams, corporate functions like HR, Finance, Administration – a Service Provider is well equipped and akin to a well-oiled machine. A GIC may take 6 to 9 months to get started!
  • Corporate functions (HR, Finance, Legal, Country mgt) are already performing to demand
  • At worst some customization may be required which can be done rapidly.

GIC’s will have to plan for a higher cost of doing business

  • Owing to its new entry in the country, GICs supplier arrangements and contracts are dictated by higher costs. Some of these are operational costs, charges and commissions that are in areas of recruitment, training, advertising, marketing, PR, facilities etc.
  • Some other significantly high cost contracts are in facility management, building security, hardware and software maintenance contracts, corporate hotel tariffs etc.
  • A Service Provider, because of size, presence and being a recognized entity will have negotiated, bulk volume contracts.
  • It may be argued that a GIC which is a subsidiary of a domestic bank or a telecom firm will already have brand recognition and therefore will have the advantage of competitive rates on offer.
  • There are instances when global standards – which could be in excess of Mexico/ India (or other low cost location) mandated – must be implemented by the GIC. This often adds to the overall costs

To attract and retain talent, GIC’s have to pay above the market

  • To be accepted as an employer of choice, GIC’s salaries are positioned higher than the benchmark salaries that are offered by Service Providers.
  • Depending upon nature of work and seniority levels, the premium can be from 7%-20%. A Service Provider is an established employer in the market, therefore having no compelling reason to offer premium salaries

GIC’s will have to plan for very high seeding costs

  • The GIC gets valuable guidance from the home office, yet it is located in a different time zone. Ongoing oversight, management guidance and onsite support requires investment of expat executives and functional experts – costs that run into thousands of dollars every month. Bank GIC’s are known to staff dozens of expats for 9 to 12 months while starting an offshore operation

Service Provider’s industry experience and depth of global best practices

  • Owing to its product and offering focused approach, Service Providers have clients in all major / developed markets. New clients can take advantage of transferability of global best practices from one account to the other (without any compromise on a competitor’s IP)
  • In the same token, access to existing high performing functional/ subject matter experts is a significant advantage with Service Providers

Access to Service Provider’s cutting edge technology at reasonable cost

  • Service Providers have available technology and prototypes that can be deployed to improve business process, yield and through put. As these tools are developed as a utility, they are on offer to all existing and new clients

Service Providers offer diverse career progression opportunities

  • A GIC operation is limited by the size it can attain. In times of growing headcount, staff will have opportunity for new projects, role growth and promotions. However once the GIC is fully scaled, staff have limited opportunity to move to other functions or get promoted.
  • A Service Provider, characteristically will win new business and additional ramp ups with the same client. Staff see this growth as career progression opportunities – leads to higher retention and improved staff engagement levels.
  • It is common for Service Providers to encourage people movement between technology and business process divisions

Service Providers scale up and scale down with relative ease

  • For a GIC to staff a couple of hundred positions, it becomes a challenging project with implications of high costs, management bandwidth and tight timeframes.
  • A Service Provider’s experience and enabling support functions are well prepared to implement this requirement faster because of – a) an established, year on year campus hiring programme, b) an available bench, c) a vast network of internal referrals, d) a vast network of “on tap” recruiter partners who have multi city presence

GICs are more tolerant of errors

  • Since the GIC has “our own people” handling the processes, there is a tendency to be a little more tolerant of SLA / TAT slippages, which could result in sub-optimal performance.

So, there are advantages that a supplier brings to a client that GICs will find hard to replicate.

This does not mean that there aren’t high functioning GICs that compete well. The benefits of well established, best in class service providers are a case in point for consideration to make informed decisions in a Clients Globalization Program.

Pankaj Dheer

Pankaj Dheer

Senior Director of Advisory Services at Neo Group
Pankaj brings over 20 years of experience in Buy Side Strategy Roles, Client Management and Operations.At Neo Group, Pankaj is, Senior Director of Advisory Services. He has procurement, offshoring and ops experience across BFSI, Media, Gaming and Telecoms. Having worked in the APAC, Americas and UK region, he is adept at understanding the pulse of Client Communities, their areas of stress and partner expectations.
Pankaj Dheer

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