Global Capability Centers (GCCs) in India: Growth, Benefits, and Future Prospects

Global Capability Centers (GCCs) in India: Growth, Benefits, and Future Prospects

You are currently viewing Global Capability Centers (GCCs) in India: Growth, Benefits, and Future Prospects

In the era of global competition and rapid digital transformation, organizations are continuously on the outlook for innovative strategies that could help enhance their operational efficiency, maintain a competitive edge, and drive innovation. One such strategy that has gained a lot of attention is the start of Global Capability Centers also called GCCs. These centers have become a very important part of reshaping how multinational corporations are managing their operations, especially in emerging markets such as India. Let’s take a deeper dive into what is GCC, their impact on industries, and its crucial role in recent business strategies.  

Key Takeaways:

The Rise of GCCs in India: Market Overview & Growth Trends

GCC also commonly referred to as Global Compatibility Centers is a nearshore or offshore entity that is fully owned and operated by a parent company. These centers tend to provide a wide array of specialized services which range from information technology to research and development and even complex backoffice functions. GCCs tend to play a very important tole in driving innovation while enhancing cost efficiency and also helping access to a variety of talent pools.

There has been a significant evolution of GCCs in India over the past few decades. What initially started out as a cost-saving initiative has now transformed into a strategic solution for a lot of organizations. Let’s take a look at the various developments.

Initial Phase – Cost Arbitrage

In the earlier stages, organizations established offshore centers that would primarily capitalize on the labor cost differentials. The major focus was on transactional tasks, routines that could be performed at a fraction of the cost when compared to developed markets.

Second Phase – Process Excellence

As these centers tend to mature they begin to focus on process optimization and efficiency. This phase also saw the introduction of advanced quality management methods such as Lean and Six Sigma which has led to significant improvements in operational processes.

Third Phase – Value Creation GCCs

GCCs have started to take on more value-added and complex tasks. This also includes product development, advanced analytics, and specialized domain expertise. The emphasis has now shifted from cost saving to value creation and intellectual property development.

Final and Current Phase – Innovation and Digital Leadership

Today’s Global capability centers are at the forefront of driving digital transformation and innovation for the parent organizations. They are also actively involved in cutting-edge technologies such as Blockchain, Artificial Intelligence, and Machine Learning which often leads to global initiatives in these areas.

Why Global Companies Choose India for GCCs

The GCCs are now witnessing a huge shift. Companies are trying to harness talent cost-efficiency, and innovation on a global scale by strategically organizing Global Compatibility Centers. In this major landscape, India has become a frontrunner. Let’s take a look at why India is becoming a top choice.

Large and Skilled Talent Pool

India’s large, young population (over 600 million) is a significant attraction for GCCs. A robust education system produces a steady flow of STEM graduates, who possess strong analytical and problem-solving skills, making them ideal for complex global projects. English proficiency further also helps with seamless communication within multinational corporations.

Cost-Effectiveness and Operational Efficiency

Initially, cost optimization drove GCC establishment in India due to competitive salaries. However, the focus is shifting to value creation. They now contribute to complex digital transformation and act as strategic assets, driving innovation and developing solutions crucial for organizational success. Cost remains a factor, but value is prioritized.

Supportive Government Policies and Infrastructure

India’s mature GCC ecosystem offers a smooth operating environment. Streamlined processes, robust infrastructure, and established service providers covering IT, office space, talent, and legal needs ensure efficient GCC operations. Supportive government policies encourage foreign investment and create a transparent regulatory environment. This maturity enables rapid development, with new GCCs achieving operational efficiency and impactful results within 90 days, providing a significant time-to-market advantage.

Innovation Ecosystem and Technology Adoption

India’s rise as a GCC hub is driven by its innovative environment. A thriving startup culture and government R&D initiatives enable GCCs to access cutting-edge technologies and collaborate on next-gen solutions. India’s diverse culture provides unique problem-solving perspectives, allowing GCCs to effectively serve a global customer base with varied needs. It’s not just about talent, but the ecosystem supporting it.

Types of Global Capability Centers in India

Global capability centers could be set up in various forms to meet with the specific requirements of the organizations. Here are a few main types of GCCs that are usually established by organizations in India.

Centralized Business Support Centers

GCCs centralize shared services like finance, HR, IT, and procurement, providing key support for business transformation and innovation. Consolidating these functions improves efficiency and standardization across global operations. Leveraging economies of scale allows these shared service centers to reduce costs while enhancing service quality.

R&D and Engineering Centers

Innovation-focused GCCs are centers of excellence for product development, research, and technological advancement. They are crucial for driving innovation, achieving operational excellence, and maintaining competitiveness in dynamic markets. These hubs often partner with universities, startups, and research institutions to cultivate innovation and develop cutting-edge solutions.

Digital Transformation Centers

Technology-focused GCCs specialize in software development, data analytics, cybersecurity, and cloud computing, driving digital transformation and developing new technologies. They often house experts in AI, machine learning, and IoT. These centers are evolving beyond basic support to perform more strategic and innovative tasks for multinational companies.

Global Customer Experience Centers

These GCCs handle customer inquiries, complaints, and feedback, offering multilingual support across multiple channels to provide high-quality global customer service. They often utilize advanced technologies to improve customer experience and streamline support processes.

Advanced Engineering & Design Studios

Engineering-focused GCCs manage complex design and development for products and services, especially in industries like automotive, aerospace, and manufacturing. They typically employ highly skilled engineers and designers working on cutting-edge projects and prototypes.

Top GCC Hubs in India: City-Wise Strengths

Global capability centers in India have been distributed strategically in a lot of cities where each offers its own unique advantages and industry-specific expertise. These cities have also become some of the key hubs for GCC in India operations which enables multinational corporations to leverage their strengths more effectively.

Bengaluru – The Silicon Valley of India

One of India’s IT capitals Bengaluru is a leading services hub when it comes to GCC operations with a total of 40% of market share. Home to almost two million tech professionals it excels in both R&D and IT. The city’s thriving startup ecosystem and innovation in aerospace, retail, and semiconductors tend to make it an attractive location for GCCs. Karnataka’s upcoming GCC policy is also set to boost it further.

Hyderabad – The Emerging Tech Hub

Another one of the rising GCC hubs is Hyderabad where it contributes almost 21% to the leasing market. It is well known for life sciences, pharmaceuticals, and technology with the help of which the city benefits from efficient urban planning and proactive government policies. Its enhanced lifestyle and lower operational costs make it one of the ideal choices for GCC expansion in India.

Mumbai – The Financial and Business Capital

Mumbai, India’s financial capital, dominates BFSI and fintech GCCs. Leveraging its financial expertise and skilled workforce, it attracts global banking and insurance companies. Mumbai’s status as a financial hub makes it a prime location for finance-focused GCCs in India.

Pune – The Rising R&D and IT Destination

Known for automotive and manufacturing GCCs, Pune offers affordable real estate and a diverse talent pool, attracting global firms. Its proximity to major engineering clusters and growing interest from BFSI, engineering, manufacturing, and technology companies make it a prime location for GCC operations.

Delhi NCR – The Policy and Business Hub

Delhi NCR, a key player in e-commerce and retail GCCs, benefits from its strategic location and diverse talent pool. The region’s strong infrastructure and business-friendly environment attract global firms seeking to establish GCC offices in India.

Key Considerations When Setting Up a GCC in India

The establishment of a global capability center in India tends to require a lot of careful planning and consideration of multiple factors. Here are a few of the key considerations you might want to take into view before setting up a GCC in India.

Location Selection Based on Industry Focus

When selecting a city for your GCC, consider factors like industry focus, talent availability, infrastructure, and cost of operations. For example, Bengaluru is ideal for IT/ITeS and R&D, while Mumbai excels in BFSI and fintech. Emerging tier-2 cities like Ahmedabad and Kochi are also attractive due to their cost-effectiveness and growing talent pools.

Talent Acquisition Strategy

To tap into India’s skilled workforce, develop a robust talent acquisition plan. This should include partnerships with local universities, implementation of training programs, and competitive compensation packages. Prioritize building a diverse team with a strong blend of technical and soft skills to drive innovation and productivity within your GCC.

Regulatory Compliance

Ensure compliance with Indian laws and regulations related to foreign investments, labor, taxation, and data protection. Familiarize yourself with FDI policies, the Company Act, and other relevant regulations. Consider engaging local legal experts for effective navigation of the regulatory landscape.

Infrastructure Requirements

Assess and plan for the necessary infrastructure to support your GCC operations, particularly in the services sector. This includes office space, IT infrastructure, connectivity, and security systems. Ensure seamless operations by considering factors such as power backup, data centers, and disaster recovery plans.

Step-by-Step Guide: How to Set Up a GCC in India

Setting up a global capability Center in India means you need to carefully plan, understand the regulatory and legal requirements, comply with regulations, and then execute it strategically. If you are ready for such a dedication then here are a few key steps you need to note for setting up a successful GCC in India.

Business Plan and Strategy Development

You can start by creating a comprehensive business plan where it outlines your GCC’s objectives, growth trajectory, and scope of services. Define all the key performance indicators and establish a roadmap that helps scale-out operations. This plan should also detail how your GCC will contribute to your global business strategy that drives innovation.

Legal Entity Formation and Compliance

You can register your company with the Registrar of Companies and get all the necessary licenses. Choose the appropriate legal structure such as a wholly owned subsidiary or a limited liability partnership. Ensure there is compliance with FDI which is Foreign Direct Investment regulations, labor laws, and tax requirements that are specific to your industry and the location that you have chosen.

Office Space and Infrastructure Setup

Secure suitable office space helps align your operational needs and your growth plans. Consider factors such as power backup, connectivity, and scalability. Set up strong IT infrastructure, which also includes high-speed internet, data centers, and disaster recovery systems. You can also implement necessary security measures that protect intellectual property and sensitive data.

Recruitment and Onboarding

You need to develop a comprehensive recruitment strategy that will help attract top talent. You can also collaborate with local universities, job portals, and recruitment agencies. Create an efficient onboarding process that will help you integrate your new hires into your global company. Implement training programs to align your employees with the organization’s culture, quality standards, and processes.

Process Implementation and Quality Assurance

Establish a standardized process and workflow that will help integrate seamlessly with your global operations. You could also implement quality management systems along with obtaining multiple certifications such as CMMI or ISO to ensure that you provide high-quality service. Set up a robust reporting mechanism and performance tracking system that will also help monitor GCC effectiveness.

Scalability and Growth Planning

You could design your GCC with future growth being kept in mind. Develop a phased expansion plan that also aligns with your long-term business objectives. Consider various factors such as infrastructure expandability, talent scalability, and technological adaptability. You should also regularly review and update your growth strategy to focus on emerging opportunities in the Indian market. Establishing key performance indicators will also help measure growth and success which allows for data-driven decision-making in your expansion efforts.

Designing an Effective GCC Workspace in India

Creating a productive and efficient workplace is very important when it comes to the success of Global capability centers in India. Here are a few of the key elements you need to consider when you design an effective GCC workplace.

Flexible and Collaborative Spaces

You could design open floor plans with mobile workstations that encourage both creativity and collaboration. Including “jump spaces” for ad hoc conversation and multi-purpose areas could also turn into social hubs for break-out sessions or town halls. This flexibility will help with the diverse needs of GCC operations while also fostering innovation.

Ergonomic Workstations

Prioritizing employee health and well-being is very important when incorporating ergonomic design principles. Providing adjustable desks, suitable lighting that helps reduce strain, and ergonomic chairs to enhance comfort should be a priority. This focus on ergonomics will also help with employee satisfaction and sustained productivity of GCCs in India.

Technology Integration

Seamlessly integrate all the advanced technologies to support the GCC functions. You could also ensure reliable Wifi, state of the art audio visual systems along with providing collaboration tools. This tech-savvy environment could enhance communication with global teams and support the digital transformation agenda of GCCs.

Functional Zoning

You could implement a three-zone approach such as quiet, transitional, and interactive. This design principle helps manage acoustics and support various styles of work. The Quiet Zone helps with focused individual work whereas the interactive zone will help with socialization and collaboration. The transitional zone on the other hand bridges these two where you get spaces for less intense concentration.  

Branding and Cultural Integration

Incorporating elements that reflect both the company’s culture and local Indian influences will help attract better talent. This approach could also help in creating a unique GCC identity and foster a sense of belong among all the employees. It also displays a blend of both Indian and international cultures.

Challenges of Establishing a GCC in India

Setting up a global capability center itself consist of several challenges that needs to navigated by companies carefully. Here are a few of the key challenges that are faced when establishing a GCC.

Initial Setup Challenges

The initial phase of setting up a GCC is very important. If you setup a weak GCC structure including expecting the recruiting team or manager to handle both strategic and operational task, then it could leads to a bad start.

Regulatory Compliance

Navigating Indian regulations can be challenging for companies. This includes understanding pricing rules for inter-company services, adhering to zone-specific regulations, and complying with strict labor laws. Additionally, new data protection laws and foreign currency handling rules further complicate the regulatory landscape.

Talent Acquisition and Retention

Finding and retaining skilled professionals in competitive markets is a significant challenge for GCCs. They must compete with established IT and technology companies for talent, and high attrition rates can significantly disrupt operations.

Operational Model and Integration

Setting up an efficient operating model and ensuring seamless integration with the parent company are major challenges. Without proper alignment, GCCs may struggle to deliver expected outcomes at scale, face cost overruns, and may find it difficult to align with organizational roadmaps.

Government Initiatives and Policy Support for GCCs

The Indian government has been trying its best to help with the growth of GCCs in India. Here are a few of the initiatives that the government has started with to help with the growth of GCCs.

National Level Initiatives

The Ministry of Electronics and Information Technology (MeitY) is developing a comprehensive policy framework for Global Capability Centers (GCCs) in India.

Key Policy Focus Areas:

  • Long-term Talent Building: Prioritizing the development of a skilled workforce in emerging technologies like generative AI, healthcare, and financial intelligence.
  • Geographical Expansion: Encouraging GCCs to expand into tier-2 and tier-3 cities to drive regional development.
  • Dedicated Office Zones: Creating designated office spaces in areas facing space constraints to facilitate the growth of GCCs.

State-Specific Policies

Several Indian states have introduced or are developing GCC-specific policies:

  • Karnataka: A leading GCC hub, Karnataka offers proactive policies including tax incentives and streamlined regulations to attract and retain GCCs.
  • Uttar Pradesh: Uttar Pradesh has introduced policies to attract GCCs, offering incentives such as stamp payroll subsidies and duty exemptions.
  • Maharashtra: Maharashtra is actively developing policies to support GCCs, with a focus on investing in technology parks and Special Economic Zones (SEZs).

Key Support Areas

There are now designated areas that are offering tax incentives and simplified regulations for GCCs. These zones tend to offer a favorable environment for operational efficiency and foreign investment.

Infrastructure Development

Investments are being made in both digital and physical infrastructure, especially in emerging GCC hubs. This also includes improvements in real estate, transportation, and IT infrastructure.

R&D Promotion

Incentives for innovation and research activities within GCCs encourage the development of new technologies and products, aligning with the strategic objectives of many GCCs.

How Asanify Can Help You Set Up and Manage a GCC in India

Asanify, a leading Employer of Record in India, can help by supporting global companies in navigating the complexities of setting up and managing Global Capability Centers (GCCs). Our comprehensive suite of services is designed in such a way that it ensures a smooth transition and operational efficiency for your GCC in India.

Talent Acquisition and Management

Asanify specializes in end-to-end talent acquisition for Global Capability Centers (GCCs) in India. We develop effective strategies that help attract top professionals from India’s vast skilled workforce. Our team handles everything from resume screening, conducting initial interviews, and presenting qualified candidates for your final selection. We also provide comprehensive onboarding support to ensure new hires seamlessly integrate with your parent organization’s culture and operational standards.

Payroll and Compliance Services

Asanify provides comprehensive payroll services for your GCC employees, ensuring timely and accurate salary disbursements. Our team handles all aspects of payroll processing, including tax calculations and deductions. We also facilitate contractor payments for your contingent workforce, ensuring compliance with local regulations and timely disbursements.

Legal and Regulatory Compliance

Navigating India’s regulatory landscape can be complex. Asanify helps ensure compliance with Foreign Direct Investment (FDI) regulations, labor laws, and tax requirements. Our local expertise minimizes risks and ensures adherence to all necessary legal frameworks, allowing you to focus on your main business operations.

Infrastructure Setup

Asanify supports the selection of suitable office space for your GCC while considering factors such as location, cost, and scalability. We also assist in establishing the necessary IT infrastructure, including high-speed internet and data centers. Our team also implements robust security measures to safeguard your sensitive information and intellectual property.

Administrative Support

Asanify offers ongoing administrative support to ensure the smooth day-to-day operations of your GCC. This includes managing different administrative tasks and vendor relationships. Our team also facilitates equipment procurement, ensuring your GCC has all the necessary tools and technology to operate efficiently.

Ongoing Operational Support

Asanify helps by establishing efficient operational frameworks and standardized processes that integrate seamlessly with your global operations. We focus on quality assurance to ensure consistent high-quality service delivery from your GCC. Our team works closely with you to implement best practices and drive continuous improvement initiatives.

When you partner with Asanify you get access to local expertise while also getting a range of services that are designed to help with the successful establishment and operation of your GCC in India.

Faqs

1. What is a Global Capability Center (GCC)?

A Global Capability Center (GCC) is an offshore unit of a multinational company that provides specialized services such as IT, finance, HR, analytics, R&D, and customer support. These centers help companies optimize costs, drive innovation, and access skilled talent.

2. Why are companies setting up GCCs in India?

India offers a large and skilled talent pool, cost-effective operations, a strong technology ecosystem, and a business-friendly environment with supportive government policies, making it an attractive destination for GCCs.

3. What are the key functions of GCCs?

GCCs typically handle various business functions, including software development, data analytics, cybersecurity, back-office operations, HR services, and digital transformation initiatives.

4. How do GCCs contribute to business growth?

GCCs enhance operational efficiency, provide access to cutting-edge technology, support digital transformation, drive cost savings, and improve customer experience, helping businesses scale and remain competitive.

5. What industries benefit from GCCs?

Industries such as IT and software, BFSI (Banking, Financial Services & Insurance), healthcare, retail, telecom, and manufacturing benefit from setting up GCCs to optimize operations and enhance global capabilities.

6. How do GCCs differ from traditional outsourcing?

Unlike traditional outsourcing, where third-party vendors handle operations, GCCs are captive centers owned and operated by the parent company, ensuring greater control, data security, and alignment with business goals.

7. What challenges do GCCs face?

Common challenges include talent retention, evolving technology landscapes, regulatory compliance, cultural differences, and maintaining cost efficiency while scaling operations.

8. How do GCCs drive innovation?

GCCs leverage AI, machine learning, automation, cloud computing, and advanced analytics to develop innovative solutions, improve business processes, and support digital transformation initiatives.

9. What role does the Indian government play in supporting GCCs?

The Indian government provides various incentives, tax benefits, digital infrastructure, and policies that encourage foreign investments and ease business operations for GCCs in India.

10. What is the future of GCCs in India?

With increasing digitalization, adoption of AI/ML, and a shift towards high-value strategic work, GCCs in India are evolving into global hubs for innovation, product development, and business transformation.

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.