‘The Indian GCC ecosystem has matured over the years’

Piyush Jha: Starting operations in India looks extremely exotic, but when you go through the rhythms and the grinds, it essentially doesn’t always enter that route. We have been working with GCCs for decades now. We have a very good brand name in India, and we can almost attract any kind of talent that we want to attract. But that means these GCCs get a head start on the kind of talent that they want to attract and the kind of innovation or value that they want to drive from the centre, because essentially, it is a value play. Unless you deliver value out of the cost arbitrage, it doesn’t really make sense.

Milind Patwardhan: Simply put, what are the alternatives for any multinational to embrace a prolific geography like India? It’s a foregone conclusion that India has moved away from just pure labour arbitrage, but that was a 20-year-old story. Today, it is really about having a very deep technical bench in India in terms of talent; the ecosystem has matured over the last 20–30 years because you have had MNCs and world-class companies setting up shop here.

There is a rich ecosystem and that is what is really attracting various companies. Now, the options before them are that if you are a very solid and well-known brand, there won’t be any need for a partner. On the other hand, there are folks who have an aspiration to really leverage India in much broader ways. But they’re probably not ready to really take the plunge.

So, the option for them is to work with a good partner and explore the ecosystem and then gradually grow. The GlobalLogic business model has been able to provide a much more accelerated bridge to captive aspirations, which works at twice the speed. It’s not just about hiring people; it is about the culture, the right fit, doing the right kind of activities, creating that voice within the larger parent organization so that more and more work comes to the GCC. In our model, we call it a lab. It’s a badgeless organization, a private labelled extension. It is purpose-built to the needs and aspirations of a particular company. This becomes a very low risk, highly mature and predictable way of gaining access to a GCC kind of setup.

We also work with existing GCCs because nobody can do it alone in today’s world, so partnerships and ecosystems are the key. That’s really representative of our relationships with Ericsson or Verizon for example, or with T-Mobile or interests that are getting generated from the likes of Mercedes Benz which is committing lots of software investments to India.

Piyush Jha: If you take examples of a few companies that were operating in the same space a few years ago, they were mostly coders or executors sitting here. Most of the design used to happen in the US or Europe or Australia or somewhere else, and the person sitting out here would receive a requirement document, a design document, an architecture that was fully laid out. Today, the addition in terms of value is end-to-end. Our people sit with the product team to develop the product requirements. They sit with the design teams, or rather, they design the products themselves. They build out the architectures themselves and they execute, code it out, and in more instances than not, manage the entire deployment from here. What that means is the addition in terms of value that has come about in the last few years is almost immense.

Many times, we just receive an idea on the back of a napkin and the entire story is being painted from here. Look at the evolution of the digital payment infrastructure in India with companies like Paytm, others...the banking or retail infrastructure with companies like Myntra, Flipkart and Snapdeal...their digital and electronic infrastructure is second to none. The maturity of the entire ecosystem that builds on software in India is far more than any other alternatives in the world, which makes these GCCs bank on India for end-to-end value arbitrage rather than going in for a transactional cost arbitrage. That is how I would define having arrived.

Milind Patwardhan: Absolutely. If we take software, it fundamentally is moving from on-premises to the cloud. A lot of companies move to the SAAS licensing model without moving the underlying infrastructure, and there are obvious obstacles to that. But the reality is that you cannot live with semi-annual release cycles for new features and products. The market is becoming competitive, and in the software space, if you have to survive, you have to be delivering meaningful products quickly to the customer. Even if they get to quarterly or monthly releases from annual or semi-annual cycle, that itself is a big thing.

So it is about what is the overall value that is getting delivered. Are you owning life cycles of software development? It has to be through autonomous teams and autonomous decisions. If somebody moves 50% of the entire R&D budget to a GCC, that cost arbitrage is just Year 1 game. After a year or two, your entire R&D spend is now baseline to that number and you still have to deliver all those outcomes that you expect as a commercially viable, world class company, as a software company. Then, you cannot be operating in augmentation mode and just looking at cost, but you got to be looking at real value, life cycle ownership, and the ability to have fungible skill sets. I think that’s one key differentiator and driver that you’ll notice when you say GCCs have arrived.

Piyush Jha: The demand that we get from GCCs is almost secular. The technologies of the day keep evolving. The technologies change every few months, if not every couple of years, and that pace has certainly doubled. Whoever is making a product today would want to work on the latest and greatest of technologies. That said, I think there are two streams in which we get demands. One of them is a stack that is a few years old, but extremely popular, extremely robust, in which a company needs to maintain itself, and then there is a demand for new products that are being built or new platforms that are being erected which are being done today. This would mean that we would be looking at number of things around microservices certainly, but at times in Rust, or Python, etc. These are the two frames of demands that we get. I think the demands is larger today and more than ever. But the Indian software training industry or the schools have also matured. People who are coming in are focusing a lot in developing more algorithmic skills, in developing themselves more on the software and technology of today, and they keep themselves really abreast. I think that is one reason why this demand does keep getting fulfilled.

One of the differentiators that we provide is through our industry-academy programs and we have a tie-up with seven or eight different colleges. We teach courses that would be technically useful for them when they enter the industry in the 5th and 6th semester, and then we go ahead and hire them in the 7th semester. What that does is we catch them young, they catch the technologies young, it becomes an extremely win-win-win cycle for everybody. The second is once they are in the company, we believe that ‘learn once, use for life’ life cycle is over. You have to get into a lifelong continuous learning phase and the academies that we have built inside of GlobalLogic keep upskilling people regularly.

We train about 1,000 people in our year-long academies and that really keeps people ready for the challenges that are getting faced. These are a couple of things that are cherry on the icing, but the cake itself is pretty well baked because the entire Indian academia is really able to cater to the demand that it is getting.

Piyush Jha: People operating from home pre-COVID was like a day in a week. Post-COVID, it has been like two to three days a week. We have been training ourselves for quite a few years, which is exactly why when COVID hit, we did not face any kind of outage. We were able to move almost all our operations online and remote in about a week. We did not miss a single customer release because there was COVID. I never had to stand up and tell anybody that since there is COVID, your release will be coming in a week delayed.

The game is changing for the entire industry today, and in prep for the game as it evolves, we are thinking of various models. One of them, of course, is to keep being a hybrid workplace, which means that people operate out of homes as they wish to, at times two days a week or three days a week or a week at a stretch, and they spend next week in office, etc. Some people are remote for much longer times because they are not in the core cities where we are developing in. But when there is a need, if there is a customer release or there is a requirement gathering session or there’s a customer workshop that we have to conduct and everybody’s here, we demand and have everybody in the room and that has never been a challenge. In addition to that, we are trying to explore ‘hub and spoke’ models. For example, at this point, we are we are trying to see if we could base smaller centres in tier 2, tier 3 cities, closer to the centres that we have. We are exploring Nizamabad or areas around Hyderabad for one of te trial runs where we would have people based out of there, maybe 200-300 there and operating. That gives people the best of both worlds, meaning they stay close to their home towns, stay close to their parents and still are able to get an office infrastructure where they can come and work.

Milind Patwardhan: Whatever COVID forced us into should also be leveraged for competitive advantage, for ourselves and for our clients. If we explore Tier 3 cities and opportunities there, it will be by design so that we can at least create office hubs where people can get together locally. If the entire core team is in Noida or in Bengaluru of our existing setups, then we should also make sure that there are logistics in place for them to travel over, as and when required, during certain important engagement milestones. Customers have also got fairly used to this idea. For example, GlobalLogic in the US has mandated Tuesdays and Thursdays as work-from-office days...one floating day that anybody can choose depending on their preference, so, making it three days out of the entire week, depending on the job function.

Milind Patwardhan: The current macro market is very conducive to good valuations, or practical valuation and expectations. For example, outside of India, just to give you the context, we were rapidly able to make a 1,400-people-company acquisition in Romania because we wanted to further derisk our Ukrainian operations. This happened in the September quarter last year and we were able to close a deal with another 1,200-people-company based in Latin America to enhance our presence there which also gave us additional footprint in Colombia and Peru outside of our organic footprint in Argentina and Mexico.

Now, we are actively scouting and looking for similar kind of ticket sizes in India. There is opportunity within India to consolidate. We will double down on that opportunity.

Piyush Jha: We focus more on value, than on size or cost. From the perspective of acquisitions, we would not focus on becoming larger just because you know we want to be larger. We will not acquire possibly a $500 million company just for the sake of becoming larger. We will continue to look at wide spaces where we want to fill in or buffer up.

In India, for example, we are looking at pockets around embedded or auto or MedTech technologies where we can buffer up our strength, go double string in front of the customer and we become agile to serve customers.