The rise of Global Capabilities Centres in India
Ushering organizations into the next stage of evolution
- Samantak Das
- Rohan Sharma
- Anita Subramanian
Over the last few years, India has made its reputation as the hub for innovation and R&D. Given its long standing and established credentials as an outsourcing/offshoring hub, especially in the technology sector, more and more global companies have looked at tapping into India to drive the next stage of their business growth.
With the services sector rapidly evolving and driving the country to the forefront of tech-driven innovation, global capability centres have emerged as key nodes for transformation, business strategies and new technologies, helping organisations be agile in a highly dynamic environment.
Global capability centres, also known as GCCs or GICs, are offshore units of multinational corporations that operate across the globe. These centres are responsible for providing various support services, such as IT, finance, human resources, and analytics, to their parent organizations. Earlier, these units were primarily established to offshore back-office processes, but that is not the case today. GCCs of today handle more complex line items across the organisation’s value chain. They have become centres of operational excellence, product development and innovation hubs.
India is home to more than 1,800 global capability centres, which employ over 1.3 million people. These centres have played a significant role in India's economic growth, providing high-quality employment opportunities, and contributing to the country's GDP. These GCCs, that represent global companies in India, are spread across sectors including technology, engineering, consulting and many more. In fact, the country’s large pool of talented and skilled professionals, cost-effectiveness, and supportive government policies have made India the preferred destination for many such innovation hubs.
Cities like Bengaluru, Hyderabad, Delhi NCR, Mumbai, Pune, and Chennai are the most popular destinations, offering a conducive environment for global capability centres in India, with their robust infrastructure, access to talent, and supportive ecosystem. US-headquartered firms account for majority of the operational GCC footprint in the top 6 cities of India, followed by European firms (35%). The share of APAC-based GCCs is currently quite less but is ramping up, backed by regional unicorns. In addition, office stock occupied by GCCs across the top six cities has crossed 200 mn sq ft and is growing rapidly with time.
How India benefits global capability centres?
There are many growth drivers that have and continue to impact the rise of global captive centres in India. These include:
Easy and effective talent
One of the significant advantages of global capability centres in India is the availability of a highly skilled workforce. India produces millions of graduates each year, many of whom are trained in engineering, computer science, and business management. These graduates are highly motivated, possess excellent technical skills, and have a good understanding of international business practices. Global companies in India are therefore able to leverage this talent pool to provide a wide range of services to their clients across the world.
Facilities to match expectations at reasonable cost
Cost-effectiveness is another advantage of global capability centres in India. The cost of operating a captive centre in India is much lower than in developed countries, such as the US and the UK. This is due to lower salaries, lower real estate costs, and favourable exchange rates. Global companies are, therefore, able to reduce their operating costs significantly by establishing a GCC in India. Indian cities offer occupiers relatively lower rentals for Grade A offices while institutional landlords driving the push for improved services and quality of real estate, making it attractive for MNCs to set up their global inhouse centres.
The Indian government has been supportive of setting up global capability centres, providing various incentives and initiatives to attract foreign investment. The government has set up special economic zones (SEZs) where companies can set up their GCCs and have access to various tax incentives and other benefits. The government has also implemented policies to promote innovation and research and development, which has helped captive centres in India to develop cutting-edge technologies and services.
In addition to these, India’s robust startup ecosystem, bustling infrastructure and consistent development across technology and sectors have helped GCCs emerge as a key driver of the country's economic growth. Majority of the global companies in India today cater to the tech industry and the sector now employs over 5 million with GCCs accounting for a significant 50% share of this number. These centres have been able to leverage India's talent pool, cost-effectiveness, and supportive government policies to deliver high-quality services to their clients across the globe. With the increasing demand for outsourcing and the growth of the IT industry, global capability centres in India are expected to continue to play a significant role in the country's economic development.
So, what do you need to set up a successful global capability centre in India?
Here’s your step-by-step guide
Define your goals
As a parent company, you may have several reasons for wanting to set up a new global captive centre in India. But what’s vital is vision. Your GCC should share or be an extension of the parent company’s vision and you need to have a strategy that drives that same vision. Over time, you also need to ensure that adequate attention is paid to keeping the culture intact.
Get your paperwork in place
Your global capability centre may not be 100% parent owned. It could be a JV, BOT (Build Operate Transfer) or a new business model. But, to set up you need to complete a range of formalities, including a Memorandum of Understanding (MoA), Articles of association, Directors ID (DIN) and more. The good news? In India, this is all a digital process.
Accessibility is key
For maximum business, your global capability centre not only has to be in the right city but also the right neighbourhood. Assess your location based on how simple it would be to incorporate your business strategy, procure material, implement support etc. Additionally, ensure the people who work within your GCC can access it with ease.
Hire with flexibility
When it comes to the high demand for talent, India has the solution. But this solution comes with a high attrition rate. You need an inclusive work culture that recruits and retains the best. In addition, perks like remote working, differentiated HR practices also ensure employee happiness and a productive environment.
Standardize your SOPs
Be it hiring or retiring, procurement or payment, standardizing processes means a smoother transition. Employees also get used to a way of working and it promotes an environment of transparency.
Make it a hub of transformation
You may look at starting a captive centre as a process hub, but you should also plan for its subsequent growth. Over the years, your GCC can become the epicentre of innovation. They become the ideal places to spot new trends, try new business practices and ideate on new products or services.
With the right talent, infrastructure, and support, you can make your GCC the transformation hub of the parent organisation. With the country presenting continuous opportunities for investment, cost arbitration and growth, GCCs can deliver global impact from regional levels.