Setting up a GCC: Regulatory approvals

There isn’t much of a decision making involved as all the regulatory approvals need to be in place anyways. There are a bunch of approvals. Here’s a quick (but not exhaustive) list: Registrar of Companies, Reserve Bank of India, Shops and Establishment, Tax registration numbers (GST, Permanent Account Number (PAN), Professional tax, Provident fund etc.,). 

 

However, the Government of India (GoI) has made all these seamless and made it a single window system. There are several local and multinational companies who’d assist in getting all these done. Still, the following decisions need to be made by the parent:

 

• The company (local/multinational) company to be engaged. Cost, time, and reputation need to be analysed and a call need to be made.
• The directors of the India entity. Usually this’d be from the company assisting in getting the registration done, along with the Site Leader. During registration a lot of documents need to be signed and to speed up the process the founders and other senior execs are brought in to the board later, in place of the directors from the company assisting with the registration process.
• STPI or SEZ? These are the two incentives that GoI offers to encourage foreign investment and offers different tax incentives. For smaller (<200) set-ups STPI sounds good, as it is little more flexible.

 

Good to know:

• Costs involved in registration (both the government fee and consultation fees)
• Dependencies (for example, bank account, lease agreements are needed before applying for some of the approvals)
• Transfer pricing (the profit that the India entity can claim). Most GCCs operate on cost+profit model for the India entity. The profit margin is usually around 15-20% and periodically the India entity will do dividend repatriation. This has been a messy issue with GoI demanding higher profits for the India entity, especially for bigger companies that claim to do end-to-end product development out of India. 

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

Setting up a GCC: Choice of the Site Leader

This is the 2^nd most critical decision that needs to be made. A great Site Leader can get the center take off quickly, absorb all turbulence and make the center cruise on auto-pilot and in alignment with the strategic objectives. A mediocre one will slow things down, distract senior leadership and worse might not be able to attract talent. The Site Leader is THE face of the parent organization in India and he/she should have the same spirit, passion and commitment of a founder (or CEO in case of large companies). Some of the key traits of the Site Leader include:

• Ability to attract talent (both engineering and enabling functions)
• Broad understanding of regulatory needs and the ability to patiently and tactfully deal with government agencies, bureaucrats and industry bodies
• Resourcefulness and the ability to tap on to the eco-system on demand (vendors for functions like payroll etc., hiring consultants, vendors of all sorts whose services would be needed, university relations, etc.,)
• Entrepreneurial mindset (ownership, keen sense of cost and benefit, bootstrapping, passion and drive to make the center and the parent successful)
• Cultural fit and bought into the mission of the organization

Of course, setting up is a one-time activity and once the center is up and running, the Site Leader will have to play an active role in making the center productive and help the parent organization to move forward. While some of the traits mentioned above, will continuously be needed, a few more traits would be needed to make the center successful in the long run.

• Engineering leadership
• Representing the company flawlessly, both internally and externally
• Managing change with grace
• Retaining the talent
• Vision for the site in alignment with parent’s strategic objectives
• Entrepreneurial mindset (continuous learning, making everything cheaper, faster and better, never letting the organization to entropy)
• Ability to manage quick growth

Good to know:

• One question that I get asked is whether the Site Leader should be a domain expert too? Good leaders are hard to come by and one with experience of the exact domain is even harder to find. My recommendation is to look for ability to learn quickly and strong transferable skills (leadership, ability to carry everyone along, strong engineering and program management skills, networking, ability to be the bridge between the parent company and the IDC, governance and regulatory experience). 
• I also recommend that giving higher weightage for Integrity. This is hard to detect in a couple of interviews, but it is essential. Afterall, this person almost has to act as co-founder for the IDC to succeed, especially for start-ups. 
• Both a Leader and a Follower. You wouldn’t need an “Yes-Person” and also someone that is not aligned. An Yes-Person would not add much value as the IDC grows, and someone that is not aligned might even subtly sabotage

 Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

Setting up a GCC: Location within India

This is the first and perhaps the most critical decision (apart from the choice of the Site Leader) that needs to be made. This is not exhaustive, but only dwells at a higher level. Some of the popular choices and their pros and cons.

Bangalore: Contributes over 40% of the exports. The Silicon Valley of India. High availability talent pool, Home to most large and medium sized MNCs, HQs of Indian behemoths like Infosys and Wipro, lately a glut of start-ups including unicorns, top educational units, California like weather etc., all make Bangalore a no-brainer (even after accounting for the potential bias of a Bangalorean!). However, salaries tend to be a tad higher increasing the overall cost. The infamous Bangalore traffic has taken some sheen away.

Hyderabad: As Bangalore started getting saturated, and competition amongst different states increased to woo investments, Hyderabad has grown by leaps and bounds. Anchored by biggies like Microsoft and Amazon, Hyderabad offers most of the things that Bangalore offers. Might not be the preferred option of migrant population as Bangalore remains popular.

Chennai, Mumbai, Pune and NCR (National Capital Region): Lately companies have started expanding into these cities. Chennai boasts of lot of manufacturing activities, Mumbai has been the media/finance/entertainment hub, Pune has a lot of automotive industry and NCR is dominated by firms that have a large regulatory need. However, it is still not comparable to Bangalore in terms of the sheer size of the talent pool. However, it makes perfect to open a center in these places if the nature of the business is closer to the type of activity happening in these cities.

Other Tier 2 cities: Lately, native entrepreneurs and biggies like Infosys (who hire in 1000s) have moved to Tier 2 cities to reduce their cost. However, the nature of work isn’t deemed cutting edge and they struggle to attract top talent. 

Some companies come to India inorganically i.e. they acquire some company so that they get a fast start. When this is the case, it is always better to start in the same place where the acquired company currently exists and think of opening a second center only after crossing atleast 250 in head count. 

Good to know:

• Due to highly competitive schooling, people with school going kids won’t move out of a city that easily (compared to my observations in western world). 
• Couples will move only if both of them get good offers that is in line with their career goals. 
• State taxes are negligible and the central governments Income tax remains the same across the country. Prices of groceries, white goods etc., remain mostly the same across India. House rent is a major variable and usually the only item that helps save compared to Bangalore/Mumbai/NCR. It is therefore very hard to woo someone to say Pune, with lesser salary compared to Bangalore. As salary costs form a very high percentage of cost per employee, it is difficult to get cost arbitrage moving to non-Bangalore/Hyderabad locations. 

One should have a very strong reason if they want to open a center in a non-Bangalore location.

Related posts on "Setting up a GCC":

• Introduction
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

On Setting up an India Development Center (GCC - Global Capability Center)

 Setting up an India Development Center (IDC) or a Global Capability Center (GCC) has been a preferred and well proven avenue for MNCs across the world looking to expand their business in a cost-effective way. Further, the burgeoning Indian economy and its affluent middle-class makes India a very attractive market. Most MNCs do have a specific “India Strategy” and use the GCC to develop products very specific to India market. Lately, geo-political considerations are also playing a major role in setting-up or expanding the GCC in India. While the advantages and rewards come in the form of vast talent pool, the cost-structure which is a fraction of the cost of developed countries and a pool of engineers that are flexible and learning all the time, there are enough challenges that needs to be overcome (and some key decisions thereof) for a GCC to be successful. This paper focusses more on some of the key challenges companies face and need to be aware, particularly while setting up. Key decisions and actionable best practices for this critical are discussed. 

The top critical decisions and challenges include:

• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

 

In the next few posts, we will discuss the above in detail.

*Note: This document comes directly from my experience in setting up and growing several IDCs/GCCs over last several years. This is an attempt to document my experience as and when my help and opinion was sought by my network. As such, the emphasis is more practical and actionable, than academic.

 

Customers First and Systems Thinking

 A loved one was in hospital for better part of last 5-6 weeks. I got to observe many things having spent most of my time as primary attendant. This is one of the better known hospitals and does indeed have an impressive mission statement that aims to put the customer (patient in this case) first. Doctors are very good, nursing staff excellent, administrative staff are very helpful, so are the lowest rung of staff. 

One problem is that each set works within their own framework:

• No one knows what time does the Doctor would come for rounds. When they come, and they definitely come, they are very patient, answer all the questions etc., Because they can't or don''t want to stick to a committed time, planning things become difficult. 
• Due to specialisation, it is very common to hear "my part is fine, you need to check with X for that other problem". At one time there were 4 specialists taking care, but I wondered whether they talk and co-ordinate amongst themselves. Hope they were, but it wasn't apparent.
• Nursing staff have their own pre-defined timetable to check vitals, draw blood, give medication etc., It doesn't matter to them whether the patient has just slept, or having some pain or need something else etc., I have to plead with them to come some 30mins later as my loved one might be fast asleep having completely missed the sleep the previous night! Ofcourse they are understaffed and it becomes difficult during weekend and holidays. 
• Billing, Insurance and other admin related are in their own world. It takes about 7-8hrs from the time the Doctor approves discharge for the patient to get home. They need to complete billing etc., write a lengthy discharge summary, send it to insurance company and they have to approve etc.,
• Insurance companies do not go over the bill incrementally say once every 2-3 days or so, even if they are all available. Everything has to happen on the day of discharge. 
• I met with the PRO (yes they have one) and gave him multiple suggestions. Guess his job is to only say "great suggestion sir, I'll see how best I can implement" and really not worry about it.

While each actor is doing fine within their own specialisation, no one seem to care about how the system as a whole is working and how does it affect the customers (patients and attenders).

No need to pick just on hospitals. We see such a thing happening in best of the organisations. Every group thinks that they are indeed doing well and perhaps are when looked from a narrow angle of their own department. However the overall result may not be satisfactory. 

Many organisations want to put their customers first, respond to customer's needs, be customer centric etc., etc., But when the goal/intent gets trickled down the systems perspective gets lost. Someone at the top cannot fix it. It calls for every person in the chain to see whether their actions are in line what the CEO wants to achieve and whether they can be open to let go of their "authority" for the greater good of customer. 

What RamP's Reading: Nov'20

 

  

Antifragile: Things That Gain from Disorder
Antifragile is a standalone book in Nassim Nicholas Taleb’s landmark Incerto series, an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we don’t understand.

A Tour of C++
In A Tour of C++, Second Edition, Bjarne Stroustrup, the creator of C++, describes what constitutes modern C++. This concise, self-contained guide covers most major language features and the major standard-library components—not, of course, in great depth, but to a level that gives programmers a meaningful overview of the language, some key examples, and practical help in getting started.

"Surely You're Joking, Mr. Feynman!": Adventures of a Curious Character
Richard P. Feynman, winner of the Nobel Prize in physics, thrived on outrageous adventures. In this lively work, Feynman recounts his experiences trading ideas on atomic physics with Einstein and cracking the uncrackable safes guarding the most deeply held nuclear secrets―and much more of an eyebrow-raising nature. In his stories, Feynman’s life shines through in all its eccentric glory―a combustible mixture of high intelligence, unlimited curiosity, and raging chutzpah.

Think on These Things - Jiddu Krishnamurthy
Thing on These Things was chosen by Parabola magazine as one the 100 best spiritual books of the 20th century. This is an excellent introduction to Krishnamurtis teachings for the young and the old. Consisting of Krishnamurtis talks and discussions with students, teachers and parents, these talks touch upon areas such as education, ambition, love, creativity, ambition, beauty, conflict, relationship, God, learning etc

What RamP's reading: Oct'20

The Almanack of Naval Ravikant: A Guide to Wealth and Happiness

Naval Ravikant is an entrepreneur, philosopher, and investor who has captivated the world with his principles for building wealth and creating long-term happiness. The Almanack of Naval Ravikant is a collection of Naval’s wisdom and experience from the last ten years, shared as a curation of his most insightful interviews and poignant reflections. This isn’t a how-to book, or a step-by-step gimmick. Instead, through Naval’s own words, you will learn how to walk your own unique path toward a happier, wealthier life.

The Most Important Thing : Uncommon Sense for the Thoughtful Investor
The Most Important Thing explains the keys to successful investment and the pitfalls that can destroy capital or ruin a career. Utilizing passages from his memos to illustrate his ideas, Marks teaches by example, detailing the development of an investment philosophy that fully acknowledges the complexities of investing and the perils of the financial world. Brilliantly applying insight to today's volatile markets, Marks offers a volume that is part memoir, part creed, with a number of broad takeaways.

The Personal MBA: Master the Art of Business
True leaders aren't made by business schools-they make themselves, seeking out the knowledge, skills, and experience they need to succeed. Read this book and you will learn the principles it takes most business professionals a lifetime of trial and error to master.