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Are Global Competency Centers (GCCs) a Strategic Move for Your Business?
What Companies in Education Need to Know

  • 29 February, 2024
  • Reading Time: 6 mins

In the pursuit of operational brilliance and strategic expansion, companies in the education sector are increasingly turning to Global Competency Centers (GCCs) as transformative catalysts. Positioned strategically in talent-rich regions, these hubs offer an array of benefits that can redefine how education-focused companies navigate future challenges. Based on our latest podcast episode with Ashish Malhotra, Acky Kamdar, CEO, Magic EdTech, dives into the strategic benefits and potential pitfalls of exploring GCCs as a business strategy.


How does a Global Competency Center help?

Companies use GCCs to streamline processes, drive innovation, expand their market reach, and mitigate risks by diversifying operations across different geographic locations.

The ultimate goal is to transform GCCs from mere cost centers into profit powerhouses by aligning their missions with broader business strategies, adopting strategic billing practices, and maintaining a diversified service portfolio.


Building a Business Case for Your GCC

As the education market evolves, especially those in edtech and publishing, feel the heat to keep up with the times. That’s where GCCs come in, offering a ticket to new technologies and skills to stay relevant.

Sure, saving money is a perk, thanks to wage arbitrage. While wage arbitrage shouldn’t be the primary driver for adopting the GCC model, for most companies, it becomes a beneficial outcome once the GCC is established and fully operational.

When establishing a GCC, what the organization should focus on are identifying the current operations, areas of operational efficiency, and extracting spending power from these activities. In an environment where budgets may be finite or shrinking, this approach is a proactive response to financial constraints.

In short, when you’re pitching the idea of investing in a GCC, show how it’ll make things run better, kickstart game-changing projects, and help your organization reach its long-term goals.


Two Approaches to Adopting a GCC

In his talk with Acky, Ashish shares two different ways to go about adopting a GCC.

First off, there’s the idea of creating your own GCC. This involves investing more money upfront and taking a bit longer, but the payoff could be big. The key here is to think about why you’re doing it and what benefits you expect.

Now, if you don’t have a ton of money to start with, there’s another option. You can team up with partners who have the funds and skills to help set up and run the GCC. They invest, bring their expertise, and maybe hand it back to you down the road.

No matter which path you take, there are a few important things to keep in mind. Make sure everyone in charge is on the same page, especially those in the C-suite. Also, be ready for some big changes and don’t rush things. Take your time to transform, train your team in new skills, and shift away from the usual day-to-day tasks. This careful approach will help you reach your goals.

Go beyond the technical. You need a good story that ties everything together, and your goals should line up with where you want your business to go. Ashish stresses that each client is different, so tailor your approach to fit your unique situation, goals, and timeline. There’s no one-size-fits-all solution when it comes to adopting GCCs.


GCC Set-Up Compliance Requirements

Ashish sheds light on the compliance requirements when setting up a Global Competency Center (GCC). In the United States, the regulatory landscape is primarily restraint-based. For instance, if the GCC is involved in finance outsourcing, compliance with audits like SSAE 18, SOC 1, and SOC 2 is crucial. Data privacy is also a key consideration, with rules such as GDPR in Europe being more stringent than those in the US.

For specific domains like medical work, adherence to HIPAA compliance is essential in the US. Moreover, various local and federal agencies may have their own regulations, such as restrictions on working for the Department of Defense (DOD) from an offshore location.

Despite the complexity, Ashish emphasizes that these regulatory requirements are well-documented, publicly available, and have been implemented in numerous cases. On the local side, when establishing a GCC in a target country like India, attention should be paid to incentives provided by the local government to encourage job creation. Once set up, considerations include understanding local laws, the enforcement duration of contracts, and the frequency of taxation events throughout the year. These factors were likely part of the initial location assessment, serving as thresholds for deciding the suitability of a particular destination for the GCC.


Avoiding The Pitfalls in GCC Setup

When establishing Global Competency Centers (GCCs), it’s crucial to navigate potential pitfalls effectively.

In the past, the challenges of a GCC were primarily related to cultural aspects. But in today’s matured labor pool, these have evolved, with a contemporary emphasis on more profound issues.

To run a successful GCC, you must prepare to address your offshore team’s sense of identity, foster thought leadership, and create a cohesive global team. The transformation of GCCs from cost centers to profit centers, with global reporting lines, necessitates leadership empathy for both the sending and receiving sides.

Assessing political risk is vital during location assessments, using what Ashish terms the S-P-R-I-T-E model to consider social, political, regulatory, infrastructure, talent, technology, and economic/environmental factors.

Despite these considerations, the main goal of setting up a GCC is still about getting the right technology and talent at the right price. Adapting to adversity ensures that the environment aligns with the company’s vision for long-term success. It goes beyond overcoming challenges to creating the right conditions for sustainable achievement.

Below are pointers to avoid the common pitfalls of GCC setup

1. Adversity Factors: Evaluate regulatory constraints and political stability thoroughly.

2. Precedence and Regulatory Compliance: Navigate regulatory landscapes with attention to compliance.

3. Location Assessment: Conduct a comprehensive assessment, considering incentives, taxation, and contract enforceability.

4. Partner Selection and Relationship: Leverage partners but maintain empathy and fair performance management for all employees.

5. Scale Considerations: For optimal cost-effectiveness, evaluate growth plans and consider provider-partner models for smaller scales.

6. Strategic Focus and Vision: Align GCC vision with speed to market, operational excellence, and access to talent pools, avoiding a focus solely on wage arbitrage.

7. Flexibility and Innovation: Embrace flexibility and innovation, balancing cost-efficiency with long-term sustainability.


Transform Your GCC from a Cost Center To a Profit Center

Turning your Global Competency Center (GCC) into a profit-making powerhouse requires a thoughtful strategy.

The first step is aligning your GCC’s mission with the overall business strategy, highlighting its crucial role in reaching long-term goals. By prioritizing operational efficiency and innovation, the GCC becomes a dual force for both cost optimization and service excellence.

To truly position the GCC as a profit center, strategic billing, and a diversified service portfolio are crucial. Build strong partnerships, infuse innovation into operations, and position your talent pool for sustainable growth.

Taking your GCC’s status to a global leadership position, coupled with performance-linked contracts, solidifies its role as a profit center. Transparent financial reporting becomes the linchpin, allowing organizations to articulate the delivered value and shift from cost-centric to profit-centric GCC operations.


Adapting to AI: Insights

Ashish highlights AI’s role in economic downturns, emphasizing AI’s potential to create new roles. GCCs provide access to a global talent pool, enabling swift adaptation to emerging technological trends, including AI. Parity in global teams ensures equal contributions across regions, positioning companies strategically in the AI landscape.

Ashish hints at the future potential for monetization, suggesting opportunities such as transferring or selling established GCCs. This perspective underscores the enduring value that well-established GCCs can offer companies.

To wrap it up, creating a Global Competency Center in the education sector is not just a smart move; it’s a strategic necessity. More than just a way to save costs, GCCs become powerful agents of transformation, opening doors to innovation, global talent, and continuous growth.

By going the GCC route, companies in education can position themselves for long-term success, setting the stage for sustained success.

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