In recent decades, India has firmly established itself as a global hub for business process outsourcing, information technology, and innovation. One of the key contributors to this transformation is the proliferation of Global Capability Centres (GCCs) in the country. Also known as Global In-House centres (GICs), these centres play a pivotal role in enabling global enterprises to leverage India’s skilled talent pool, cost-effectiveness, and favourable business environment. As we transition from traditional offshoring models to the innovative concept of new-shoring, India stands at the forefront, shaping the future of global competency centres. This blog explores the dynamics of GCCs in India, their evolution, significance, and impact on the global business landscape, incorporating insights from recent whitepapers and industry reports.
Evolution and Growth of Global Capability Centres in India
The concept of Global Capability Centres in India has evolved significantly since the 1990s when multinational corporations began establishing offshore centres to streamline operations and reduce costs. Initially focusing on IT and software development, these centres gradually expanded their scope to encompass a wide range of functions, including research and development, finance and accounting, human resources, and customer support.
Today, India hosts a vast and diverse ecosystem of Global Capability Centres, spanning various industries such as technology, finance, healthcare, manufacturing, and more. According to NASSCOM, there are 1580 GCCs in India, generating a total revenue of $35.9 billion, which constitutes 14.60% of the total Indian IT market of $245 billion. This market is growing at a CAGR of 10.8%, with 640 GCCs falling within the revenue size range of $500 million to $3 billion. The growth of these centres can be attributed to India’s large pool of highly skilled professionals, proficiency in English, robust infrastructure, and a supportive regulatory framework.
Strategic Importance of GCCs
Global Capability Centres have become integral to the strategic objectives of multinational corporations. They are not merely outsourcing hubs but function as extensions of the parent companies, actively contributing to innovation, efficiency, and competitiveness. With access to a diverse talent pool and a collaborative work culture, these centers foster an environment conducive to creativity and problem-solving. the three key themes that emerged are Talent, Innovation, and Value.
Talent: With access to a diverse talent pool and a collaborative work culture, these centres foster an environment conducive to creativity and problem-solving.
Innovation: The proximity to the Asian and Middle Eastern markets gives India a strategic advantage for companies looking to expand their footprint in these regions. The time zone advantage allows for seamless coordination between global teams, ensuring continuous operations and faster time-to-market for products and services. For instance, India’s time zone (UTC +5:30) significantly enhances this capability. When teams in different parts of the world, such as the United States, Europe, and Asia, collaborate with teams in India, it creates a follow-the-sun model. As one team concludes its workday, another team in a different time zone, like India, can pick up and continue the tasks without interruption. This ensures that critical projects and customer support can proceed around the clock, reducing downtime and accelerating delivery timelines. Consequently, businesses can achieve a faster time-to-market for their products and services, maintaining a competitive edge in the global market.
Value: GCCs drive value by enabling cost optimization, speed, and productivity. These models do not require significant upfront investment, making them an attractive option for enterprises focused on cost-efficiency. According to ISG, almost half of the enterprises consider value as the primary benefit of their GCCs, highlighting the importance of cost-effectiveness in today’s competitive market.
Talent Pool and Skill Development
India’s education system has been a driving force behind the success of Global Capability Centres. The country produces a vast number of engineering, business, and science graduates annually, providing a rich talent pool for organizations to tap into. According to the All-India Survey on Higher Education (AISHE), India produces over 1.5 million engineering graduates and about 300,000 management graduates each year. Additionally, with a substantial number of science graduates, India’s talent pool is diverse and well-equipped to meet the needs of various industries.
The centres, in turn, invest in ongoing skill development programs to ensure their workforce stays abreast of the latest technologies and industry trends. For example, according to NASSCOM, over 80% of GCCs have established partnerships with academic institutions for upskilling initiatives. Companies like Tata Consultancy Services (TCS) and Infosys run extensive training programs to continually develop their employees’ skills, ensuring they remain competitive in a fast-evolving market.
The evolution of GCCs in India has been remarkable. Initially focused on IT and software development, these centres have now expanded their scope to encompass a wide range of functions. Today, GCCs are not merely operational entities; they serve as innovation hubs that contribute significantly to their parent companies’ global R&D efforts. The collaborative nature of these centres fosters a culture of continuous learning and cross-functional cooperation. Companies leverage the diverse perspectives within these centres to drive innovation, solve complex problems, and stay ahead in the competitive landscape.
Transitioning from Offshoring to New-Shoring and the Role of GCCs
The traditional offshoring models are undergoing a seismic shift due to rising costs, intellectual property concerns, and geopolitical tensions. Forward-thinking companies are now embracing new shoring, a strategic relocation of operations to new, promising countries. In this context, India stands out as a premier new-shoring destination in 2024, driven by several key factors:
- Economic Growth and Stability: India’s economy, the world’s fastest-growing major economy, is projected to grow at 6.8% for FY 2025. This growth is fuelled by strong domestic demand, favourable demographics, and a supportive policy environment.
- Youthful Demographic: With around half of the population under the age of 25, India’s youthful demographic is driving demand for a wide range of products and services, contributing to the growth of the digital economy.
- Technological Infrastructure: India’s advanced technological infrastructure and a regulatory environment conducive to innovation make it an ideal location for new shoring. The country’s rapid technological advancements create opportunities for businesses to leverage digital platforms and innovative solutions.
- Government Initiatives: Various reforms by the Indian government have improved the ease of doing business, making India an increasingly business-friendly environment. Initiatives like ‘Make in India’ and ‘Digital India’ aim to transform India into a global manufacturing hub and promote digital literacy and connectivity.
GCCs play a crucial role in this new-shoring paradigm. As multinational corporations look to relocate and expand their operations to India, GCCs serve as the backbone, providing the necessary infrastructure, talent, and strategic alignment to ensure seamless integration and operational success.
Future Trends Shaping GCCs in India
The future of GCCs in India is expected to be shaped by several transformative trends:
- Digital Twins: One of the defining trends for 2024 is the evolution of GCCs into dynamic “digital twins” of their headquarters, seamlessly mirroring all functions and operations. This will foster instantaneous collaboration, synchronized decision-making, and a unified organizational structure.
- Leadership Positions: Indian GCC leaders are increasingly rising to global leadership positions. Currently, India-based GCCs boast a workforce of over 5000 professionals holding global roles, with a projected expansion to 30,000 by 2030. This one-in-a-box style of leadership will place India’s GCC leaders at the forefront of overseeing core technology functions and various business operations.
- Collaboration with Startups: GCCs are expected to collaborate with startups to power innovation. With access to the third-largest startup ecosystem in the world, these centers will explore how startups can help achieve defined business objectives, driving groundbreaking advancements across industries.
- Technological Disruption: GCCs are set to become hotbeds for technological disruption. In 2024, GCCs will harness the power of GenAI, data analytics, and automation to create intelligent chatbots, streamlined vendor portals, and multiple other applications, pushing the boundaries of innovation.
Challenges and Future Outlook
While the growth of GCCs in India has been remarkable, challenges such as talent retention, regulatory compliance, and cybersecurity remain. The evolving global business environment demands a constant reassessment of strategies to address these challenges effectively.
Looking ahead, GCCs are expected to play an even more strategic role in the global operations of multinational corporations. As technology continues to evolve, these centers will be at the forefront of adopting cutting-edge solutions, contributing to their parent companies’ digital transformation journey.
India’s Global Capability Centers have not only transformed the country into a global outsourcing destination but have also become crucial components of multinational corporations’ growth strategies. With a focus on innovation, talent development, and strategic collaboration, these centers are poised to shape the future of the global business landscape, driving economic growth and technological advancement in the process.
As the world continues to evolve, India’s GCCs remain at the forefront, bridging continents and propelling progress into uncharted territories. The transition from traditional offshoring to new shoring is a testament to India’s strategic importance in the global business ecosystem. For businesses looking to expand and innovate, India offers a compelling destination that promises growth, stability, and a bright future.