00:00.24

Acky Kamdar

Hey, Everyone, Welcome to the Tech in EdTech Podcast. We are very happy to bring you back here today for our latest episode on Leveraging Global Competency Centers for designing, building, and supporting Digital Learning products and platforms. The question to answer here is are global competency centers a good strategic fit for a tech business? Today I have a guest with us, Ashish Malhotra. Ashish is an Organization Design Specialist with an emphasis on leveraging global human capital. His scope includes design and transformation of talent and processes within business technology and operations. Throughout his 30-year career, he has worked with and advised companies across industries large and small, and across functions such as finance, HR, technology, engineering, customer care, and procurement. He has led the global resource strategy as a buyer, seller, and an advisor in an executive capacity, and for several Fortune 500 companies. Welcome, Ashish, to our podcast and thank you for being here.

01:21.37

Ashish Malhotra

Thank you for having me here today, Acky.

01:27.50

Acky Kamdar

Ashish, you and I first interacted around 2009 ah when you were at Citibank. I recall you were in the midst of a major transformation and migration project. I'd like you to give our listeners some color to the experience that you were going through during that project and you know, your journey till now.

01:52.25

Ashish Malhotra

Sure thing and yes indeed even though it seems like yesterday it was more than a decade ago. But if you recall the financial industry had taken a turn for the worse around 2007. And many large and reputed firms were in trouble and being liquidated or sold off. Citi was also in similar trouble just like the others and TARP had advised Citigroup to cut costs. It is important to know I think that Citi is one of the first companies to embrace outsourcing and offshoring and these Global Competency Centers long before the term was coined and in fact, over the years, has given birth to many offshore companies such as Polaris and i-flex which is now acquired by Oracle by building and then monetizing such GCCs. During my time and under the leadership of a dear friend from a prior life, I was the Program Manager for the Global Technology Resource Strategy or the GTRS program within Citigroup. We had built technology centers of excellence in almost 10 countries. We had established centers in 10 countries and Citi had over 50,000 global technology and engineering resources globally. One of the first things that I did was, we executed an RFP to pick about 10 to 12 preferred providers for the GTRS program. During the five years successfully, took out about half a billion dollars in costs on a run-rate basis. Subsequently, I've worked at Time Warner. I joined an advisory firm, AlixPartners, and I've spent the rest of my career focused on this particular topic as you've stated in the introduction, finally.

03:24.11

Acky Kamdar

Wow, the scale, and who'd forget the financial crisis that we all were going through Wall Street, Main Street you know, and the government bailouts as well. To be able to drive such a large-scale transformation and migration program at Citi, you must have faced a lot of challenges particularly aligning different stakeholders to agree to such a scale transformation and migration, isn't it?

04:45.91

Ashish Malhotra

So, Acky, Citi had done this several times before, good amount of experience, leadership alignment having achieved successes in establishing these destination centers, and then the fact that the regulators were so keen in seeing these companies drive our costs was an added kind of impetus to get those changes and transformations done. So we did have the benefit of alignment. How we did that though, is by maturing existing destination centers that already existed at Citigroup as that's what we called them back then, around the areas of their excellence adjacencies. We've built a few new centers such as Citi Enclave to do some critical work that needed to be internal back in those days due to regulatory scrutiny. You know things like risk management and regulatory compliance required almost their own excellent centers. And like I talked about you know since Citi had built so many centers and had you know gone through cycles or even monetizing them, we were able to monetize a few of our Global Competency Centers such as CITOS, which we transferred to Wipro, one of our technology partners back then. I think if I, you know think about alignment I think the critical alignment that we needed and we achieved was that rather than trying to do it all by yourselves in a DIY model and building your own brick and mortar we were able to build many of these centers with the help of our provider partners in institutional clients group as well as in consumer and private banking.

05:41.80

Acky Kamdar

So, Ashish, you said 2 things whenever I'm thinking of large-scale transformations and migration I'm thinking everything else is stable and I'm in control. However, in your case, the crisis put everyone behind this transformation of migration so you got an alignment internally behind this crisis. Um, that's ah, that's an interesting point you're in education. Also, we are right now going through massive disruption. So I think you will be like we go to come and talk about that a little bit later the two things that I want to ask you or rather reiterate, one is that when the clients are setting up a Global Competency Center often. The thinking is to set up on their own but you seem to recommend a partner strategy to set up a Global Competency Center. The other one was even more interesting which is to monetize an existing Global Competency Center. So it's a 2-way street if you can elaborate on that a little bit, that’d, be great. 

06:36.56

Ashish Malhotra

Sure, so let's start with the first topical area which is you know, utilizing good providers and partners to help you set up your centers. Essentially, to set up these centers, it takes a longer period of time if you do it on your own, and um, it also takes a little bit of C capital and investment upfront. The benefit of doing this with the partners is that the partners will often at times make that initial investment, freeing you from that capital, Initial Capital that is needed to seed such GCCs because they have the expertise in standing these up for multiple clients and for themselves in various cities and locations not just in one country but across multiple countries around the world. You have they have the added advantage of them having the hiring practices, the training practices setting up the standard operating procedures. All those you know things are pretty well-oiled machinery so to speak that the partner brings to the table. Now many of these partners might work on a BOT model which is you know they'll build it for you, they'll operate it for you for three or five years to amortize and extract the value for themselves of the initial investment they made on your behalf and then they may transfer it back to you. And I will confess that usually the T in that BOT scarcely happens, why, because clients generally are you know if you're happy with the arrangement and if everything is running well in 3 to 5 years there's absolutely no reason to disrupt it. Taking that second example or the second part of your question which was around monetizing these assets. Indeed so, right? So not only do the banks do that other industries have very good examples of monetizing established centers because either they're looking to actually move out of those practices because it's not their core or you know there are several other reasons why one may monetize established centers. And if you think about a 5 to 7-year journey if you got the value that comes from value from wage arbitrage and drove the efficiencies if you got the value from quality management systems if you access new talent tools and ecosystems and build out new products and gain new technological know-how. Five, seven- eight years later you might want to restart that cycle and hive off the established one. From a point of a provider, they're willing to you know make that investment in your established center and acquire it from you largely because they're looking to either get into that new business, learn new skills, or enter a new industry segment and so it is a win-win for both parties. 

09:51.99

Acky Kamdar

Absolutely, it's interesting. So this is almost like a cherry on top because, within 5 to 7 years, you created an asset that has a value, you also got the benefit of labor arbitrage during these five to 7 years, and you should be able to know, extract some value of this asset by giving it to our partner. That's fantastic.

10:11.60

Ashish Malhotra

Absolutely! So in our example that I talked about previously, we monetized an asset which was an established GCC and we handed it to one of our preferred providers and the flipside of that contract and sale was that we'd continue to use the benefit of those services at those same prices, you know, moderately adjusted for cost of living, for the next five years also.

10:40.61

Acky Kamdar

Yeah, that's actually really cool, and what would be the driver for you to monetize the asset after 5 to 7 years? You said that particular GCC may not be core anymore. But when you started the journey it was core, wasn’t it? 

10:55.85

Ashish Malhotra

Right. I mean so the focus of organizations I think changes for their business cycles and competitive and environmental, you know changes, right? So at some point, you know you might have for reasons of saving cost. I’ll make an example up for illustration, taking your, you know, accounts payables and accounts receivables, your P to P, you order cash processes and you’ve done some outsourcing of it, you extracted a lot of savings, you matured the standard operating procedures and now five-seven years later you know it's become ah a hum ho activity that seems to run well on its own. And to you, as long as it continues to run well on its own, without too much oversight, and at around the same price points. You're pretty happy but there may be a provider out there who's willing to pay a premium for that well-established set of practices because they can leverage it to sell the same services now within the industry or in or an adjacency to several other clients which was never the client's original intent. So that creates a secondary arbitrage of sorts and in that, we took five-seven years, we established something that runs really well, we're not looking to sell that as a service because that's really not our core business to other clients but there is a party that is interested in that well-established, well-oiled machinery because they can make more money off it taking it to market as a product and as a service and they're willing to pay a premium for that. So that's the arbitrage that you're looking to capture in that monetizing activity.

12:46.68

Acky Kamdar

Great, so something that was core in the beginning may not be core after five or seven years because your organization's priorities have changed and the initial need to do the governance and review mechanism may no longer be required because this ah GCC is now working in auto mode. You have set all the processes and it is okay for a third-party partner vendor to run it in a vendor-supplier mode. Am I correct?

13:17.75

Ashish Malhotra

Absolutely, so if you take an example, right, and if you think about Cognizant, it was Dun and Bradstreet, and the term we're using now is Global Competency Center, and it was spun off and made into an independent entity and today Cognizant’s market gap is greater than Dun and Bradstreet’s, right? So there is a heck of a lot of value in that asset that was created by Dun and Bradstreet by taking some of their work offshore in creating this entity as a global competency center which could only be realized if it was spun outside of Dun and Bradstreet and made into an independent entity that was able to sell that excellence that they had established over the years to many many many many more times and so if you think about Cognizant today you know it's a tier one company that services almost every facet in every industry of our you know of our Fortune 500 spectrum.

14:15.23

Acky Kamdar

Wow, so you know, let's now come to the hypothesis of this podcast right, for our listeners, it looks like the education publishing houses and edtech companies, particularly here in the US, are now coming around to leverage the global talent pool by setting up a global competency center in a country like India. India, obviously, is rich in engineering talent and there's certainly potential to save fifty-sixty percent of the cost. If you can help our listeners understand how this strategy of setting up GCC can be a game changer for education publishing houses, EdTech companies, and even Universities, that would be fantastic if you could take us through that.

14:54.55

Ashish Malhotra

So again, that's an excellent question and if you'd allow me I want to first start at the fact that the appetite for education in a country like India is very high so when I think about edtech, any strategy to do engineering work in India for edtech companies, I would imagine needs to have in the narrative the access to the market that India is for advanced studies if not immediately then down the road as part of a considered strategy. I think you would lead not so much with the savings and it is true as you pointed out that you should be able to see forty-fifty sixty percent savings but like many you know sectors that have gone before edtech, manufacturing, and financial services I think many of these now pursue these strategies to gain scarce skills, access talent pools, access ecosystems which they can leverage in these centers and you know to be on the front on the leading edge of technology by doing work in such destinations.

16:03.18

Acky Kamdar

Let me reiterate, one of the biggest drivers for setting up a GCC is cost savings, but your point of view is that that should not be the driver alone. You want our listeners to look at the holistic value proposition and in thinking of a location like India, there are many other factors that play up besides cost savings, time zone, infrastructure, political risk, you know and quality of talent, etc. We'll come to all of this a little bit later. One of the overarching trends in the education business is you know the swings that we see in the investments 2020-21,  we saw a huge upswing in investments and today we see some kind of ah ebb in investments. You know, so the investments have contracted, funding has contracted. However, the education sector, whether it is universities or whether it is edtech companies or publishing houses, they have to continue to innovate, they have to continue to march forward, and for that, they have to launch new initiatives and new products and they need investments for that, they need funding for that and one of the best ways to do that is to look at your internal spend on legacy technologies existing infrastructures and find avenues for cost savings. In that context if you can elaborate for our listeners, given your experience in setting up GCC and also setting up the business cases for GCC, what is your advice for all these cases?

17:41.71

Ashish Malhotra

So, it's a fantastic question, Acky, because that is precisely the leading set of objectives and aspirations that many of the, you know, predecessors and mature companies that have done this for several iterations going to GCC now. It's a luxury to have had funding in this industry segment which now seems to be drying up. There are many industries that never had such IPO VC-based funding and had to make accommodations and tighten their belt. I have personally helped firms migrate their spending from the run-perform activities to the build-transform activities because budgets are finite and in fact, in some cases, budgets are shrinking. So you've got to be able to look at all the things that you utilize just to run and operate and drive efficiencies and excellence in those things so that you can extract the spending power out of those activities and reutilize them as an investment in your build transform activities.

19:00.14

Acky Kamdar

So it's all about portfolio management, I guess.

19:05.32

Ashish Malhotra

Absolutely, right, and so imagining for, you know, for the edtech companies, the market pressure to continue to invest in new initiatives to stay relevant is going to continue to mean you know to drive these sorts of efficiencies. GCCs are a great enabler of that. They're not just access to new technologies and new skill sets. GCCs, just by virtue of the fact that there is a wage arbitrage play, and I've cautioned before that shouldn't be a primary reason why you embrace the GCC model but that is going to be a benefit that is going to fall in place as soon as you know your GCC is established and is fully operational.

19:47.61

Acky Kamdar

And, let me add, I think AI particularly is going to be a very big disruptive force I think everybody's talked about it. We all understand it and you know when we are talking about its impact on learning products and platforms. It is really big I also want to add that um, several companies that we interact with, and some of our listeners will agree with me is that AI is not just ah for ah, they're not looking talent ai talent just for you know the learning products and platforms that they're building for their customers, but they're also incorporating AI to transform their organizations corporate functions like HR, legal, accounting. You know, I think you know the demand for AI talent will be huge and this will require them to, overall, look at the demand-supply gap in their organization for AI talent. Besides the technologies, you know, growth that they may have at their end the general infrastructure technology growth that they may have. I like the concept of run-perform activities versus build-transform activities. Thank you for that. I want to move to another related topic. Let's say we are talking to our clients and helping them understand the process of setting up a GCC. Is there a particular way or particular guideline, or process, by which you can help them create a business case?

21:17.71

Ashish Malhotra

Well, so there are two approaches as I think briefly touched on. You could set these up as a DIY, self-owned, and run GCCs in which case you know the cycle, the capital investment, the cycle to stand it up is a little longer, the capital investment is a little higher, and the business case will have to factor that in and then you would look upon you know the benefit side of that business case and the value propositions that you're looking to actually extract from your GCC. If you, ah you know, if the client is not able to raise the capital that might be needed for the initial seeding of the GCC then an alternative way to start these is through partners as we briefly touched on and they invest in the GCC they bring all the excellence to the table to stand it up and get it operational and at some point might consider transferring it back to you. So in addition to those elements you know there are a couple of other typical considerations that I want to highlight that are important in embarking on this journey right? Stakeholders need to be aligned, the C-suite specifically, there are certain cultural issues, you know, being ready for change, and because this is you know transformative, and not only is it transformative in the way operations would happen. It's transformative in the morale, things like that. So you know that readiness to change, not setting it up, I mean this program like this if done right does not need to be set up as a chop shop. There's a really nice method to this madness where you know you're able to transform and reskill some of the resources to focus on those growth initiatives that we talked about and as they migrate away from some of the routine run activities. You also probably want to pay attention you touched on the narrative which is very important but you want to probably pay attention to some of the other objectives that you're looking to actually achieve through this process. These objectives might be investments in new platforms and so it creates a kind of sort of double bubble because you do have your existing platforms and existing product suite that you're taking to the market that kind of requires continued upkeep and you're looking to make that and that investment in these new platforms. So driving the efficiencies in the existing platforms whilst they keeping the lights on is again a place where the GCC can come into place and then and then utilizing you know those centers of excellence to build out renewed platforms can perhaps reduce the burden of that double bubble. I don't think there is a cookie-cutter approach to this. I think the most important thing is that it should align with the leadership's aspirations and their sense of timeline.

24:37.23

Acky

So, Ashish that was a great perspective. So it's not just the cost savings that we're talking about when you're building a business case though that might be the initial driver for one of my customers to think about going and setting up a GCC but it's also the holistic view of the business, alignment of the leadership, etc. I would just zoom into one particular attribute in this transformation-migration journey when you're setting up GCC which is People. At the end of the day you know you're talking about change management with people on the ground here in stateside and then also as you're building up the GCC talent pool, let's say this is in India, then you want to be able to ensure that you know the people are coming together. But do you have any you know maybe with examples you know, illustrate to our listeners, you know what are the pitfalls you should avoid and what practices you should bring into play?

25:42.50

Ashish Malhotra

Sure, so you know a couple of years ago or decades ago when this all began, the types of challenges people spoke about that were people or cultural types of issues were around communications, around language, accent, time zones, teaming, so to speak interactions, right? I think the segment of creating GCCs or working with providers, and not just in India but in the Philippines and Eastern Europe and Brazil, Chile. Argentina, all over the world has matured so much that I don't think those are any more the pertinent issues and concerns, right? I think what is now more important as the labor pools have matured themselves in places like India, is the sense of identity. It is the ability to be able to contribute to thought leadership, is having a feeling of that participation much like the sending side and the receiving side being part of the same cohesive unit. You know there used to be in fact, almost invariably, all the GCC set up in the past were cost centers many of them today are profit centers. The reporting lines are no longer In Region, For Region, In Country, For Country. The reporting lines now are actually essentially global for many of these GCCs right? So I think the empathy that leadership must have for both the sending side because they're going through their own sets of concerns and issues to deal with and the receiving side which is being brought in as new members of the team is absolutely crucial in driving success and then to your point in formulating cohesive work units that are all focused on the same set of objectives, mission, vision, and charters.

27:46.83

Acky Kamdar

That's a good point. I like the concept of receiving side and sending side and bringing them together to create one team. I have one more question, would you consider putting your full-time employees into the GCC which is located in a place like India or Brazil, or you know off-shore?

28:06.20

Ashish Malhotra

So in some cases, it's unavoidable, but you know the approach that is more prevalent is often and I'll come back to the statement I just made but the approach that is more prevalent is usually the providers have local account managers that work with clients on the stateside. So you have local account managers, local delivery experts who work with the client's teams to understand what is being built and then transfer that knowledge and manage the folks on the other side, and if you have your own GCC, you know I'm probably one of the few voices that does not really encourage sending expatriate positions. I think frequent business travel is adequate but there are companies that have had success with you know planting their own resources in the GCCs whether they were you know cell-phoned, brick-and-mortar operations or they were you know at provider facilities. Yeah, the risk of sending one or two or three expatriate positions sometimes in such situations is a sense of isolation. So the alternative approaches of the post could be short-term business travel, the multiplicity of it, bringing people there here sometimes sending some people from here to there. You know it creates a great opportunity for teaming as well as maybe perhaps hiring and you know that's rare, this is the rare example I was talking about earlier that I started with sometimes hiring locally in those markets if you have an office where those people become not only your subject matter experts but there are also boots on the ground for governance activities and just you know general oversight of operations.

30:10.01

Acky Kamdar

Often when we talk about setting up a GCC in a country like Argentina, Brazil, or India, Political Risk comes up as a big topic. Could you, for our listeners, elaborate a little more on this topic?

30:23.17

Ashish Malhotra

So when you're setting up a GCC, one of the first things, you know you're likely to do is a location assessment and typically when you're doing a location assessment you know there's a well-established set of criteria to do these and I call that you know the S-P-R-I-T-E model. It's social, political regulatory, infrastructure, talent and technology, and then economy and environment. And so when you think about doing a location assessment. You're going to look for those types of regulatory risks, as part of that assessment before you determine the destination you want to be at. What I will point out is you're actually going in for only one reason and one reason only, which is access to technology and talent at the right price. Some of these other considerations are what I deem as “adversity” considerations. They are almost like threshold checkpoints. You want to confirm the environment is not adverse to your aspirations and your objectives in any matter like, a good example, you know these days unfortunately, is you know you might reconsider Ukraine as a destination even though Ukraine probably has some of the best technical skills and that might have been a different outcome just you know two years ago. So you want to see the absence of certain adversity considerations. You want to make sure there's an adequate amount of infrastructure to support your aspirations. And but, then at the end of the day you're looking for curriculum in the schools I mean know the output of local universities. You're looking for you know your peer community. How many other prevalent mega technology companies operate in the same place that might you know be able to poach your employees once you have them up and ready? So those are that's all around the technology, around the talent, and around the price points, and access that you have to these things. 

32:41.08

Acky Kamdar

Very well, I think I understand that keeping or remaining focused rather on a higher goal is much more important than getting stuck with some of these adverse factors as you call it. Am I correct?

32:54.14

Ashish Malhotra

Yeah I mean look so much of it has already been done by so many companies within so many industries that there is an adequate amount of precedence. Whether it's from a regulatory point of view, the issues there are, I'm sure they are can they be handled, of course, they can otherwise it won't have so many centers around the globe. So, that's why I call them the adversity factors is you're actually not factoring them into your evaluation other than confirming that none of these things are adverse to your aspirations for some reason, one reason or another. And the absence of such factors, um, as hindrances to your mission is really what you're looking for.

33:42.25

Acky Kamdar

And thank you for that. I do want my listeners to know that Ashish advises several Fortune 500 companies on their transformation and migration programs, as well as helps them set up GCCs. He has written up a global workforce strategy white paper. And also, he has, you know, contributed to a SPRITE framework if you'd like to connect with Ashish separately, we can help you with that. So Ashish, going back to the question on regulatory considerations for both us and in a target country like India, can you talk a little bit about that?

34:15.64

Ashish Malhotra

Sure. So let's do the simpler one first, right? In the US, the regulatory regime that would matter is restraints-based. So for example, if you're looking to do finance work outsourcing in the finance work whether it's ah the GCC or a partner. You have to pay attention to SSAE 18 SOC 1 SOC 2 kinds of audits for compliance purposes. These are published rules by AICPA and are generally available in the public domain. Data privacy comes into play again it's a set of constraints that you have to adhere to. In the European regime, the GDPR data privacy rules are a little bit stricter than in the US and most providers today adhere to GDPR to get themselves certified by the international standards organization on ISO 27000 and more or 27001 on things like that. If you were doing medical work HIPAA compliance comes into play here in the US and then there of course you know, ah certain local governments, certain states, and certain federal agencies that have their own stipulation. So, for example, you cannot do any work for the DOD while being in an offshore location. So, the point about regulation and such regulatory compliance that I want to make is all of this, while it's frightening, is available in the public domain. It's well published, it's well understood, and it has been implemented in many many cases prior to today, right? Now when you go to the local side, the receiving side of your GCC or provider the first thing to pay attention to is the incentives because a lot of these governments will actually incentivize clients like the ones that you are speaking of to bring new jobs to that market. So those incentives the tax benefits these things matter and that's important to pay attention to but now you have it all stood up, and you want to actually think about what are some of the other regulatory matters that you should pay attention to so local laws, for example, makes you know is an important consideration. How long does it take to enforce a contract at your destination? How many taxation events are there within a year? Will that surmount to too much overhead for your organization? But again, you know that's all part of that location assessment that you did upfront and these were the kinds of things that would have served as the threshold adversity factors for you where you said oh I just don't even like that I'm not going to go to that destination.

37:06.70

Acky Kamdar

Yeah, ah yes, I agree with you on that point. I think it's a good way to think about you know what US wants versus what the destination country like India wants and I think your SPRITE framework helps us figure. Um, figure these things out even before you decide where you want to go and set up your GCC. And one way to maybe mitigate against you know meeting all the regularity requirements of a destination country is to perhaps leverage partners and I think you talked about that earlier in this podcast.

37:40.39

Ashish Malhotra

So I, you know as a practitioner, I have leaned a lot on partners throughout my career. I think partners bring a lot to the table, they bring established processes, hiring practices, training practices, they can standardize operating procedures, they bring in you know a variety of different skills that they have access to, they have to know of the local markets, they have programs and universities where they go hiring from so those are all benefits that can come to the table. Most importantly, what partners bring to the table is this expediency in terms of time to market to get it all set up. So that's very important, a couple of things that you still cannot take your eye off of whether it was your own center or you're working with the partners and we spoke briefly about this before one is having the empathy. Whether that person has empathy for not only your resources here and stateside but even the team that you're now putting together. Whether that resource is your own employee at that destination or your partner's employee having them feel like they're part of your team is definitely an advantage. I obviously would encourage you to stay completely clear of indulging in any form of performance appraisal or performance management when it's your partner setting it up for you. But giving your people, if they're your people, the opportunity to grow and things like that you know those things become very pertinent in terms of setting up sustainable GCCs.

39:20.91

Acky Kamdar

A lot of education publishing houses and edtech companies already work with vendor suppliers who are located in a place like India. Some of my listeners might be thinking that. I already have a vendor partner, I already have an MSA, I got some arrangements to outsource my work to that destination and so I'm already doing some kind of leverage on cost and leveraging the global talent pool. So what's the difference when I'm thinking of setting up a GCC versus leveraging partners in a regular supplier-vendor model?

39:57.17

Ashish Malhotra

Well um, their firms like if we were setting up your own GCC by yourself, right? Then you are likely to find new providers that have expertise in finding you, for example, good real estate. Helps you build an office space you know that is assimilated to your culture. I remember when we created the office space for about a thousand-seater called the City Enclave for Citibank. One of the fact things that I was really after was to have it be a LEED or platinum facility. We ended up creating a LEEDs platinum facility which was the first of its kind in Pune and you know among the very few in India and it created a tremendous amount of motivation for our employees because it was unique and it kind of showed how much attention was paid to things that mattered to them. So you know you'll end up engaging a few other providers in addition to the providers you have that specialize in these unique things that become necessary when you're setting up your own brick-and-mortar. But I do think that you know sometimes the clients do not challenge their preferred providers to the degree that their preferred providers can be challenged to. So, you know there is an opportunity there to actually ask of your preferred providers if you have them already on what else they can bring to the table to help you build up your own facility. Now, you just have to be a little careful because the messaging over there automatically spells cannibalization of the revenue that they're hoping to make with you as a client. So you just have to be a little bit you know, careful about um how that message goes down if that was already previously understood that was the intent, that's excellent. I think it's simple when I think about global resource strategy and workforce and I hate saying this about my own body of work. I think it's a simple matter. I just think it's costly if you get it wrong, but it's simple to execute as long as you have good vision, good ask, you know, and your narrative properly documents your aspirations.

42:22.96

Acky Kamdar

Ashish, I think you've done it so many times so it's easy for you to say it's simple. However, there are many of my listeners here who may be first-timers when it comes to thinking about setting a global competency center. So on their behalf. Ah you know, let me ask you do you have a step-by-step checklist? Do you have a model that they can adopt when they're taking up a GCC? You mentioned something about SPRITE framework, so maybe that could be a good starting point. Ah, quick question, what is the timeline that they should budget, you know, when they think of setting up a GCC, and what's the minimum scale that they should think about?

43:03.92

Ashish Malhotra

So I've set up 50-people-shops and floors for that took six months um and I also set up a thousand seaters that stood up all in a year. Again the pace is more determined by the ability to consume such change and transformation internally on the client side and you want to pace it such that it's not destructive, it's additive. It shouldn't be disruptive to the point that it's taking away from how business is conducted. But that aside, I mean I think six to nine months is a very good timeframe to have your own operational center where you begin the clock at the point where you've completed your business case. The process of you know, creating a business case could be another month or so prior to that. But that aside I think um, you know as we've talked about before the providers can do it faster. 

44:06.76

Acky Kamdar

So you mentioned 50 people to 1000 people. Is there a timeline for that scale, for a GCC?

44:13.54

Ashish Malhotra

Sure.

44:14.21

Acky

So I'm thinking of 3 to 5 years maybe you know what's the advice on the scale?

44:18.34

Ashish Malhotra

Sure, absolutely and that's a very good question. So when you when you create your own center there are certain overhead costs that you're just going to incur. You know, then there are other services that come into play, the cafeteria and things like that team services, so these are all overheads. They're all different than other corporate overheads that you would sustain in any other place and but those overheads have to be amortized because these are the non-billable overheads they have to be amortized over the billable resource pool, right? So the bill of resource pool over here is the people who are actually productively doing the engineering work or whatever work you wanted your GCC to do for you. I think that number for proper amortization of those overheads is around that 200 mark that if you're if you're smaller than 200, you're likely to have you know I mean other GCC that have been established for less than that sure you know, but you've rented space rather than built out your space in you know in in these ready to use offices those costs a little higher. You know you paid for the pre-fitment of infrastructure and computing infrastructure and things like that. So that's where the threshold is do you, if you think you're going to grow to that It's worthwhile perhaps to make that investment. But if you're if you're approach to that, to the GCC space is to never be larger than 100 -150 people then perhaps it is the right model to consider to consider a provider-partner model. If you're going to be significantly larger than that then you might even consider a hybrid because then you buy some assets and some resources on a fixed-cost basis because they're your employees at that destination and you still have a hybrid model with a provider where some of the resources some of the skills some of the technologies that keep changing so frequently for us these days you know are all on a variable cost structure because they can be brought in and off ah they can be onboarded and off-boarded based on your needs. So again, you know the answer is not a cookie-cutter answer and not probably as straightforward as you might have wanted it to be Acky, but there is you know there is a threshold and I think it all comes back to you know the client aspirations and how much needs to be achieved at what pace.

46:56.38

Acky Kamdar

And thank you for that. Yeah, I think I agree with you that it is not a cookie-cutter model which is also probably why I think customers who are trying to go and set up a GCC the first time should take advice and check with other companies of similar size who have set up GCC and learned from their experience. Earlier you mentioned about looking at GCC not just as a cost center but as a profit center. Could you elaborate a little bit on that?

47:28.25

Ashish Malhotra

Yeah, So um, a lot of GCCs that were set up as cost centers created nuanced friction so to speak with headquarters and demand managers back home like in the sense, why are these costs high, you know why is this additional investment needed in this GCC since there wasn't any direct costing, a lot of the costs were allocated based on either headcount being utilized by let's say the finance department and you use 20 people and HR uses 10 people and so all our overheads are being you know, allocated in some manner that not everybody agreed to. Many of the newer GCCs are established as profit centers where they have a building and you know and rightfully so their bill rate should be lower than a market rate by about 15 to 20% because if you were working with a provider you'd be paying for their 15 to 20% margin over and beyond all their costs per resource that they were putting and deploying on your team. So that is a fair benchmark but then you have a bill rate now that gives the GCC a sense of freedom to drive efficiencies and perhaps make investments in local technologies and local exploration. With, of course, the you know the approvals of you know the area and functional leaders back at corporate. The other aspect of profit center which is very very unique and rather new and being used by few of the really sharp companies is where the geography is not a considered factor at all. So you have an administrator who has a GCC in a place like India and that GCC has a thousand people for example, 200 of them are in finance, 100 of them report to HR, and 400 in technology. But the lines of reporting of all these people is to various Directors VPs, and SCPs globally wherever they are, right? So, there is no the only role that this GCC lead is providing is and the role of an administrator of these thousand you know people in India and each one of these functions is behaving like its own cost of profit center as described by you know by the parent company. However, they may be a business that the local party in India, the local teams in India, are globally responsible for. So a good example which I think is still current is Netapp's storage business is run by the the GCC Head in India, globally. So the people in Boston, the people in Amsterdam, actually report to this gentleman who's based out of India and who provides administrative oversight of the entire Indian operation but is responsible for the global PNL of the entire storage business, right? So that's a very unique and advanced way of thinking but it's exciting that in that now you have created parity among your global teams no matter where geographically they are. They are equivalent in terms of participating in thought leadership. They're equivalent in participating in the delivery of Product and services and they're equivalent in terms of how their performance is measured at the end of the year and they're therefore rewarded even though moderated by you know, local cost of living type of adjustments.

51:38.37

Acky Kamdar

That's a great example. Thank you for that. So you're also thinking about your talent pool and giving them a seat at the table. The importance of making them feel like they've been brought into the organization to deliver value as opposed to just doing mundane work. Great point.

51:50:09.

Ashish Malhotra

So that approach of I want to give my mundane low-in-the-trenches work to this offshore team and I want to keep all the exciting stuff here really worked well 15-20-25 years ago. The labor pool today in places especially these mature destinations like the Philippines and India, and the amount of market that exists for this labor pool to jump to the amount of opportunity that exists is so high that none of them are excited to do the mundane work unless it is no different as a percentage of their total work as it would be anywhere else. So I've got to do certain reports I've got to do certain you know things you know which is no different than anybody else, but they're all now participating in the value creation and the value proposition and that equivalency is what excites them. That's what drives the retention levers in being able to keep your resources for a long time. If you consider doing only mundane work in these destinations well then you become the training ground where you teach the basic skills and then somebody for you know, just a margin more is able to poach upon them and take them away from your team and so then you have the high turnover. You're in double digits maybe even perhaps over 20% turnover in a destination like India and that's because your staff is only there for a brief year of time to learn a few skills and then move on. So it's important to actually factor that into the type of work and the type of participation you're looking from these teams in your core product and services suite.

53:49.39

Acky Kamdar

And my hope is that all the mundane work should go away, thanks to AI, repetitive boring work should be able to delegate it to and you know people can be used for more valuable stuff, globally.

54:03.75

Ashish Malhotra

Absolutely, I come from that school of thought that AI, never in our humanity have we needed less people other than during business downturns and recessions we always need more people to do the work so AI is going to be no different It's going to make certain roles go away and it'll probably give birth to certain rules that we haven't yet imagined like if I think about ten-fifteen years ago, cybersecurity was you know a discussion point in Hollywood movies and it's $175 Billion industry today. So. I'm sure AI will give both to new needs and new roles and here again you confirm the idea of GCC by being in these global markets, you are tapping into more than one source of such skills.

54:54.13 

Acky Kamdar

Um, I was attending the Holon IQ event in the summer and they talked about an emerging gap, a huge gap, between demand and supply for AI talent. They also mentioned that India is being ranked as the number one country to supply AI talent over the next ten years. I think this is an interesting data point. Ashish, is there any parting advice that you might want to leave our listeners with today?

55:23.20

Ashish Malhotra

I think one thing that to conclude the message that I would have for our listeners is do this, do it now but don't do it for the savings which I think will come naturally. Do it for driving speed to mark excellence in operations make those requirements and success criteria, access to new technology, and new talent pools and ecosystems, and the savings impact on your EBITDA. I think will follow. Just because there is a wage arbitrage lever I feel like companies that lead with wage arbitrage leave a lot of these additional benefits on the table as unattended or underutilized and so you know, build a business case and aspirations based on the fact that you need a lot more value out of your GCC than simply the savings and you know and answer the most important and crucial question, why are you doing this in the first place? But Acky, I thank you for having me on and an insightful conversation and it's already getting my head spinning a little bit with some ideas that you've planted now in my head.

56:47.14

Acky Kamdar

Ashish, thank you very much for your time today. It was lovely to have you here and I'm sure our listeners will find valuable insights in this podcast. I invite our listeners to send us their feedback and if they would like to follow up with them on any further questions, meeting with Ashish, we welcome all of that. Thank you again, everyone, and thank you, Ashish.