In a recent interview, Suneela Thatte, VP and Head – Healthcare R&D for India, Merck KGaA Darmstadt discussed the evolution and strategic significance of the company’s Global Capability Center (GCC) in India, established in 2020. She highlighted that while the GCC was initially set up for cost savings in drug development, the focus has shifted to harnessing India’s vast talent pool, particularly in the scientific and medical fields, in an interview with Viveka Roychowdhury
India seems to have become a hub for pharma GCCs. Merck too set up its GCC in India in 2020. Was the strategy any different, given that it started a couple of years later than other pharma GCCs?
We see GCCs coming to India mainly for talent today. In all companies, Merck included, our initial thought process was to take some activities to India that allow us to save some costs as drug development is a very, very costly affair.
With a long gestation period.
Yes, exactly. You have to also account for the fact that you know not all drugs that you develop are going to make it. Essentially, the whole thought process was, let’s kind of create this as a saving case whereby we then plough that money back into our R&D and we can then have more shots at the goalpost, with more drugs in development.
But very quickly the organisation realised that it’s not just about the savings. There is huge untapped talent here, especially in the scientific and medical field. Therefore, the strategy needs to encompass a more holistic strategy whereby we get the hub to be part of the strategy. The R&D strategy has to be front and center to the hub and vice versa. We thought that we have to look at it from the point of view of going beyond the traditional “GCC rules.”
Therefore we started building more centers of excellence. I would say that this journey happened fairly quickly for us and we realised early on in the game, that if we have to really get disproportionate value out of the hub here, then we have to move very quickly into more technical, more strategic, more decision making rules and we are on that journey.
Have we reached our destination? Not quite. but I think we are moving in the right direction. We have created some centres of excellence already.
We are trying to see how we can constantly upscale our talent so that when these senior-level roles come to India they will be well-positioned to step into that role. If you look at our overall strategy too, we have invested a lot into developing the talent. The thought process was that this is a place where you have a lot of talent that can be groomed easily to work in a global setting and how can we get in here and leverage that talent.
This has been the journey since we started in a small way in 2020 in Bangalore. Every pharma company was looking at either Bangalore or Hyderabad but since we were familiar with Bangalore where we had our IT services centre, we started there. We realised there is tremendous talent available here and we can really zoom into really bigger and better. By 2021, we grew further in capacity and capabilities as a team. It was a 15–20-member team when we started in 2020. By the time I joined in 2021, we were about 100 people. Today we are close to 500 people, so it’s been a 5X scale up in three years.
It’s been an interesting journey and our philosophy has been to invest in the talent and let’s see how we can make the talent more global in the approach, whether it is working on a project or an initiative or delivering to a set of KPIs or SLAs.
We also expanded into many many things. We started mainly in certain regulatory roles, which can be easily centralised. Like regulatory submission management etc. But then we added pharmacovigilance, certain functions in clinical trial management, biostatistics, clinical measurement sciences, and some R&D strategy roles.
You mentioned that at the Merck’s GCC in Bengaluru, you are making the talent more global in the approach, which would mean you are getting global best practices into your GCC. How are you doing this?
Our approach has been that we never treated India as an off site. The remit was that we (the Bengaluru GCC) are part of global R&D and my message to people always was whether you are sitting in Bangalore, working remotely from any city in India, based in Germany, or the US, we work only to one standard.
What I have seen some GCCs doing is they treat the offshore locations like an internal vendor and the service level agreements (SLAs) and KPIs for the GCC are what you would typically have for your vendor.
The SLAs and KPIs we followed are exactly the team sitting anywhere would be following so there was no option but to be compliant with all the global norms with no process deviations. We didn’t encourage that right from day one. The message is your work is location agnostic, you are working for a global organisation as a part of global R&D. There is only one standard that we work to and that’s our global standard. We groomed our people right from day one from that point of view.
In addition to technical training, we also did a lot of cultural integration training because German culture and Indian culture are different. Letting people here know how to deal with stakeholders in other nations and vice versa is part of this training. It’s good to know that people are taking the cultural angle very seriously. I think this is very important for every GCC because while it’s the same process, SOP, and technology, people are people at the end of the day. How you read a piece of paper and assimilate it can vary from how I am doing it. The interpretation can vary due to my cultural background. Getting that kind of an integration was very important. That has helped us a lot also.
What I feel very strongly about, and we did this in Merck, is that when you are working for a clinical trial, you very easily develop a sense of purpose. You go to the hospitals, and even if you don’t see the patient yourself, you are reading patient records.
You get involved with the journey of the patient. Though you have never seen a patient you start feeling happy when the patient is improving. If the patient has any adverse event you also get as worried as them. Therefore, the sense of purpose comes in.
But in a GCC, in an office many steps removed, you are removed from the clinical reality. We did a lot of things to develop that sense of purpose. The first thing was having a vision statement which said that our vision is to leverage the talent and technological advances in India to contribute to Merck’s R&D efforts so that we can bring more medicines to more patients faster. We were very particular about the patient angle.
People may not be dealing with patients, but somebody who is doing case processing of an adverse event, must not look at it only as a document to fill in data. Having that sense of purpose has also helped us in terms of employee engagement. People get a better appreciation of how their work can impact so many other steps.
In fact we also tied up with a hospital in Bengaluru. We deal with clinical trial data all the time, but if you want to understand how a hospital works in a clinical trial, we need to go and talk to clinical trial coordinators to see how a day in their life looks like, when a patient comes for consenting, to understand what they have to go through. We encourage our people to do that on a voluntary basis. Many people came forward. You develop a more holistic angle. I think these things have helped us. We also focus big time on upskilling, not just looking at the technical skills. In every GCC 90 per cent of your population will be individual contributors. While everybody talks about managerial training, (but what about) the effectiveness of an individual contributor?
I don’t think people want to measure it at the end of the year. That also has to be builtand you need training. So we also have programs focused on personal effectiveness, simple things like communication, planning prioritisation, presentation skills etc. It’s an investment but it pays off and it’s much better to do this investment and give that sense of development to people. If you just go after experienced people, that’s not a very sustainable strategy. These things have helped us tremendously.
The general view is that GCCs replace jobs from other more expensive locations like Europe. We have seen a lot of pharma companies laying off staff, while hiring at their GCCs. Merck itself went from 5x in three years. Is that a concern or is that the reality?
I would say yes and no. The starting point was cost arbitrage but it did not stop there. You are following the IT model of BPO. Pharma went actually little ahead of the IT model of a BPO because in pharma, that value creation can be much more significant.
People started building teams here and obviously when it was cost arbitrage, jobs in the more ‘expensive’ geography had to be replaced but then consider that India is a large demography that needs to be represented in clinical trials and research.
India is a talent hub of the future given the demographic advantage and focus on skill building. You look at the number of MPharms, PhDs, medics that India churns out … you know that’s phenomenal. India has over 400,000 pharma students that graduate every year in India. India produces roughly 70,000 to 80,000 medical graduates with an MBBS degree each year. This estimate is based on the total number of seats and the typical graduation rate. India produces slightly over 24,000 doctoral graduates each year.
The typical geographies which are declining demographically cannot match it. So people realise that typically the access to talent in India is unmatched. Plus everybody speaks English. A medic in India has done all her education in English.
This is a language you use for dealing with the officials, whether it is regulatory authorities, whether it is office permissions and all that. That kind of global mindset because of the language advantage was already present here. So then people started seeing centralisation opportunities.
Centralisation always helps any process. This is very agnostic not just limited to pharma. What started as a cost arbitrage very quickly moved on and people said okay maybe I don’t have to actively lay off people in my other geographies but if my build up has to happen this is where it will happen because it’s easier to get the talent I want. I pull the right levers and the talent will stay.
Every GCC faces one challenge. When you look at typical European companies, the attrition is in single digits. In some companies, people join and they will only retire from that. That’s the very European mindset. Here it’s not like that. But there are ways in which it can be managed. They realise that and that’s where now the growth in GCCs is not dependent on layoffs in other locations.
That has been disconnected now. People now are growing here because you have centralisation opportunities. You can also run your transformation projects easily. Bengaluru is a very nice sandbox environment, when you run transformation projects like process improvement. Given the sheer cost of drug development or the kind of regulatory compliance we have to maintain for established products in pharma, You have to constantly think how to improve processes because otherwise your cost of operation will just go up. So GCCs provide a very nice sandbox environment where these initiatives can be piloted.
These advantages have started playing out. What has also helped is what’s happening in India today on the digital front and the digital innovation that we are seeing as a country. That is not limited to just things like GPay and other things that we do. The data and digital is again a force to reckon with when it comes to India.
If I’m going to have the digital capabilities, AI ML competencies are going to be good here and then I have the transformation and centralisation opportunities. This is the main reason.
Should you measure cost arbitrage? The answer is definitely yes because money matters at the end of the day. But that’s not the primary reason. It’s more of a secondary outcome.
Do the policies in India support this environment that Merck would like here? The GCC and beyond GCCs?
I think the policy definitely supports the general focus on talent. If you see, there’s been so much focus on education in the last few years. The number of IITs, IIMs, AIMs, NIPERS, have only gone up and they have grown. For so many years, we used to have one AIIMS. But now you have so many AIIMS. Similarly for IIMs.
Generally, there is that understanding which is very much in line with Indian philosophy. When we are saving money, our thought process is that I’m saving this for my children’s education. But that goes very well with the talent pool that GCC needs.
There are enough opportunities today supported by the government. The private organisations have also played their role. There are so many private universities which are offering very good, cutting-edge courses today.
The education scenario and the focus of government, semi-government and the private sector is on improving the quality of education. We see so many collaborations with the likes of Harvard here, which was never the case a few years ago. That has helped GCCs tremendously.
What needs to happen in my view, is that organisations have to really come forward and bring this to the fore, and probably there has to be some incentive. Organisations today are doing it because there is a talent arbitrage. There is also cost arbitrage which is not going to go away ) given the currency exchange factor and the inflation in other countries versus inflation in India etc. But it would be foolish of us to think that no other country will also be where we are today. For example, the Philippines is coming up very strongly as a global services hub. There is no reason why tomorrow they cannot be a talent hub.
The same scenario that the IT sector is facing today.
Exactly. They are going to South Africa, Mexico and all that. Even from a science point of view, there will be compelling locations.
Organisations will also want to do it. Again, it is not the right strategy to put all your eggs in one basket.
There has to be something to incentivise organisations to use India extensively for their global talent needs. What that incentive is, I think that the industry needs to come together and think through. But our approach is always very reactive.
If there has to be one thing that the GCC industry has to do proactively is to start thinking about what incentives an organisation can get, apart from the standard benefit of talent. That is important in my view. State governments are doing a little bit of that.
The Telangana government, for example, I believe has set up a GCC centre. State governments are doing this because this is a job creation opportunity. A lot of state governments are looking at it like any CEO of a company. Which is good.
I think Kerala and Andhra Pradesh are doing this. We will see a clear differentiator where that support is there. You will see GCCs thriving there. People will benefit because ultimately companies are there for talent. We also talked about India’s digitech infrastructure.
Digital innovation is going to impact drug development and the role of AI in drug development. It’s not going to be limited to headquarters today. So the GCCs will very much be part of that digital journey.
When you talk about the work that the GCC is doing, is it work on innovative technologies or is it still the generic part of it? What is your perspective?
Our team supports not just our established products but also our products in the pipeline. And I think this is the journey that every GCC goes through. You initially start with ‘low risk’ and then you gradually up the game. The other thing that we are really looking at is in terms of digital innovation, data and digital strategies. How can we really utilise the expertise in India? We are not keeping ourselves really limited to just doing the standard centralised roles but creating centres of excellence.
viveka.r@expressindia.com
vivekaroy.3@gmail.com