The Future of the Modern Corporation
Why more companies are turning to Global Insourcing Centers to push digital transformation
US corporations are no stranger to the concept of IT talent outsourcing. An approach that has been widely used since the 1980s, outsourcing first became popular in the late 1990s as companies began to prepare for Y2K.
As a result, many IT leaders are familiar with the traditional services model that focuses on obtaining Indian engineering talent as commoditized labor. But the services model poses many challenges for corporations as they often discover that delivery doesn’t always meet expectations.
With more than 30 years of experience in building and managing IT captive centers for corporations, Co-Founder Steve Stephan weighed in on the benefits of SMC Squared’s unique GIC model versus the traditional services model.
“Under the previous framework, there was no real incentive for India talent to work more efficiently because they were focused on billable hours. As a result, companies often saw a decline in productivity per person and difficulty driving true India cost savings,” says Stephan.
According to a recent article in the Economist, prior to the COVID-19 pandemic, India hosted more than 1,400 captive centers employing a total of more than 1 million people with around 70% of the centers owned by large American firms. Now, however, companies across a wide range of industries and sizes are seeing the value in developing their own technologies. And as this technology landscape changes, they are discovering captive centers can often pay for themself with as few as 50 employees.
In this dynamic environment, SMC Squared is bringing a refreshing alternative to the legacy outsourcing model. Through an innovative approach that calls upon their Global Insourcing Centers (GIC), companies can save on average 42% as compared to the traditional vendors. What’s more, they build engineering teams that exceed a 1:1 quality and productivity ratio as compared to US-based counterparts and, probably most strikingly, have a legendary 91% talent retention rate.
“By using a GIC model, where the company wholly owns the entity in India, it provides an opportunity for companies to share their culture, empowering employees to feel as if they’re an extension of the US company while driving down costs. As a result, you’ll get the productivity lift only dreamed of with a traditional services model. By recruiting to fit, companies have the opportunity to create a connection with India-based employees, valuing people for their contributions towards the corporation’s overall goals,” says Stephan.
Having lived in India for several years, as well as spending much of his time traveling back and forth to the country to oversee large-scale IT projects, Stephan has a deep understanding and appreciation for the unique culture.
“I believe India has one of the most loyal cultures, which is a common misconception in the US. So when companies don’t see the true India cost savings or experience low employee retention with the services model they’re often confused. However, the root of the issue is that the traditional services model doesn’t take into consideration the cultural significance and value sincere appreciation for great work and the strong desire for continuous learning.”
SMC Squared transitions companies using a Build/Operate/Transfer (BOT) model, helping to mitigate the typical risk associated with owning an outsourcing center and making an owned entity, a GIC, a highly attainable option for IT talent sourcing while allowing corporations to quickly pivot their digital strategies. The unique part of SMC Squared’s model is there are no costs attached to transferring the entity once it’s established.
For many companies, 2020 has caused business planning and opportunities to collide, as IT leaders have been forced to adapt quickly to enable highly effective digital transformations.
According to Stephan, the COVID-19 pandemic has underlined the need for corporations to pivot and re-evaluate because:
- COVID has proven that the workforce can be distributed and use collaboration tools.
- Everyone’s digital strategy has had a massive priority pickup. Anyone equipped to provide anything online has clearly excelled during this period. Digital is critical.
- Companies are more actively engaged in cost/benefit analysis that focuses on true value.
For this reason, the use of GICs continues to grow at an increasing rate. While Indian IT talent consultancies may continue to retain market share for low-end engineering work, GICs are leveraged for mission-critical technology solutions in data, digital, and development efforts making US companies competitive and cost-efficient.
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Once again, we all made it through another year that we couldn’t have imagined in our wildest dreams. You can take that a couple of ways. Of course, the pandemic continued to test our abilities to adapt to moving targets. But you can also look at all the innovation and “esprit de corps” that were on display as we sought to do more than just rise above the challenges, but actually excel like never before.
Southern Methodist University’s Cox School of Business has ranked SMC Squared #8 of the 100 fastest-growing private companies on the Dallas 100 list. To be considered for the prestigious award, companies must show significant sales growth over the last three years.
As remote and hybrid work environments are making it more difficult for employers to recruit and attain high-quality digital talent, we asked SVP of Global Services and Co-Founder of SMC Squared Steven Stephan to share his thoughts on how to rethink the approach to scaling global teams while minimizing additional hidden costs.
Many Global Insourcing Center RFPs ask for hourly rates as a selection criterion to support cost control or optimization. Hourly rates themselves are easy to compare but do not accurately reflect the actual costs to deliver services or projects. Fixed bids make an attempt at solving this issue, but are often laced with caveats and take a significant effort to understand the scope.
Scale Your Tech Output: Step 1
Complimentary Strategic Assessment Meeting. Send us a message and tell us when would be a convenient time to learn more about what a Global Insourcing solution can do for your organization.