Employee Relations

The impact of black swan events on GICs

While conventional wisdom would suggest that a focus on cost reduction across organizations globally would give an impetus to the industry which has its entire value proposition built on that pillar, there are still some concerns.

As we deal with the economic fallout of the self-imposed lockdown by the majority of the countries, all major platforms are rife with speculations from analysts and economic commentators on what is going to happen next, but all agree that managing costs and driving sustainable growth would be critical. This is when the focus shifts to an industry whose value proposition is predicated on these critical aspects; the outsourcing sector, especially the GICs.

Organizations that have struggled to cope with the recent pandemic have fundamentally faced three common challenges, viz. Speed of adoption of technology, lower workforce preparedness, and lack of robust processes and speed in scaling or ramping down in face of business headwinds, all of which are critical aspects on which the GIC value proposition is predicated on, helping them become more resilient.

Prior to 2009, the majority of the GICs were focused on what is colloquially known as body shopping, but the crisis helped them to change the model. Leveraging their investments in technology and robust processes, they emerged as a role model for the organization. The value proposition transformed from cost arbitrage to value arbitrage. The growth story of the GICs was fueled by the expansion of their service portfolio across risk, analytics, and technology.

The current economic crisis does present an opportunity for the GICs to leverage on their resilience and reinvent themselves. Speaking to business leaders from across the GICs, and leveraging our learnings from the previous black swan event, a few emerging trends that are expected to define the new reality include:

Digitization is expected to become mainstream: Leveraging technology to drive business outcomes is likely to become critical. Given that the GICs are more heavily invested; it could enable them to emerge as leaders defining the new ways of working going forward.
Increased focus on Automation: Processing work is expected to be automated with a focus on doing more with less. The workforce is expected to be redeployed to deliver more decisions based and skill-based work.
A distributed workforce is likely to be here to stay: The workforce of the future is expected to be more distributed and hence engaging with them and delivering a uniform customer and employee experience will be a critical differentiator for organizations. This is also anticipated to expand the business landscape to new geographies which are catchment areas for critical talent segments.
Increased focus on improving productivity: As automation and digitalization kicks in, we are likely to see a lot of the current employees becoming redundant or at least have reduced utilization. There will be a need to invest in reskilling them to be able to deliver the higher-order processes within the services ecosystem.

Given the revised operating realities, we believe that the human resource priorities are likely to be focused on upskilling, digital preparedness of the workforce, enhancing manager maturity, and acquisition of talent with the requisite digital skills to service an expanded portfolio. Upskilling will be critical to help drive higher productivity. With increasing virtualization of work, organizations with a digitally ready workforce are likely to rebound more quickly. Lack of leadership skills with the manager group, as far as has been highlighted as a critical skill gap, and with an increasingly distributed workforce is expected to only accentuate this challenge. Also we anticipate that the new higher-value processes that will get added to the service portfolio will demand more niche skills that will have to be bought or borrowed from the talent market.

The GICs have far touted the massive available talent pool as a critical differentiator to expand their India operations. But in the last decade, as we moved up the value chain, some fundamental flaws were unearthed: employability and niche skill availability or lack thereof. GICs could learn from some leading outsourcing service providers who have sustained the past decade by constantly innovating the talent paradigms. Some initiatives that could be explored:

Expansion of the talent catchment areas: Over the years tier-2 and other unexplored locations have invested in establishing themselves as a good source of alternate talent segments. Organizations would need to start identifying more such relatively low-cost catchment areas to leverage. The increasing digitization of work is also likely to support such a movement.
Building niche skill talent pool: Although given the size of the available talent pool, a low percentage on this parameter still positions India as the best place to scale, investing in building the skills of culture would be critical.
Greater collaboration with academia: Investing in collaborating with academia to improve the overall employability and to create more job-ready pool of candidates would be key.

There have been multiple reports, recently, highlighting how manufacturing companies are likely to shift base from China to India. But that would be possible only if we have a comparable infrastructure network to support them. This is a challenge that GICs also are likely to encounter. While we anticipate a quick rebound for the GICs with increased work, there would be need to invest in basic telecom and technology infrastructure to cope with it. There is also an increasing focus on nearshoring, coupled with the frenzied activity by some governments to change the trade and foreign policies to bolster and protect the local workforce, which could prove a roadblock for GICs in India.

All in all, we do understand that while this crisis does present a massive opportunity, it would also need a concerted effort from all stakeholders to invest and re-invent themselves.

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