Global Capability Centres are Transforming India's Corporate Landscape

Global In-house Centres or Captives (GICs) or Global Capability Centres (GCCs), are mainly offshore centres established by global level firms to provide various services to their parent organisations. These centres operate as internal organisations within the global corporate structure, providing specialised solutions such as IT services, Research and Development (R&D), customer support and other business tasks. GCCs and GICs are important to take the benefit of cost efficiencies, encouraging collaboration between parent businesses and their offshore affiliates and accessing talent pools.

India’s corporate landscape is going through a shift, that is mainly driven by the rise in the number of GCCs. These centres have proven to be an integral part of units set up by various Multi-National Corporations (MNCs) in India. GCCs in India mainly handle verticals of MNCs such as business processes, IT services, R&D centres, innovation hubs, customer service centres and other key functions. GCCs have evolved from being cost-saving centres that were largely set up to gain from lower labour costs to becoming strategic hubs that encourage innovation and lead to value creation, over the past couple of decades. As per EY, India consisted 55% of the world's GCC centres in 2022, 1,580 centres in 2023. It is projected that the GCCs in India will cross 1,900 centres by 2025 and 2,400 centres by 2030.

Evolution of GCCs

Earlier, GCCs were established in India primarily to reap cost benefits. Customer support, data processing and IT services that these centres mainly focused on. Due to its abundant skilled labour force and lower operational cost, India proved to be an ideal location for setting up GCCs. However, GCCs have evolved over time to expand massively and now include critical business functions such as R&D, analytics, digital transformation, and innovation. The timeline below provides a brief idea about the evolution of GCCs in India.

• 2000-05: Business Process Outsourcing (BPO) phase

After the outsourcing boom, MNCs started to consider India as a preferrable destination for establishing BPOs/captive centres, largely due to favourable factors such as low-cost labour and real estate. During this phase, MNCs focused on back-office and supportive operations such as customer support, IT services, maintenance and help centres.

• 2005-12: Progression of GICs

Over the years, captive centres grew to take up processes that were more impactful in terms of the value added to the parent organisations. This was achieved with the help of increased process efficiency and providing end-to-end services for the product lifecycle. The employed workforce was trained by developing R&D skills, which aided the overall efficiency and process excellence and let to the creation of GICs. This enhancement of GICs further transformed into GCCs that focused on processes including digital transformation and innovation.

• 2014-till date: Founding of GCCs

Since the beginning of this phase, there was a special emphasis on high-value operational activities such as digitalisation and developing expertise in emerging new-age technologies such as blockchain technologies, Artificial Intelligence (AI), data science, Machine Learning (ML), analytics, product conceptualisation and vendor management. With a politically encouraging and stable environment, India is being considered an ideal destination for MNCs to establish GCCs for multiple functions such as R&D, IT, banking, and financial services.

Market Dynamics

With over 1.6 million professionals currently employed, the GCC sector is growing. The upward trajectory of GCCs is expected to continue as EY projects this sector to grow to 2,400 GCCs in India by 2030 from 1,580 in 2023, creating employment for more than 4.5 million people.

The CAGR of GCCs from 2019 to 2023 was 11%, while that from 2023 to 2030 is projected to touch 14%. The GCC market in India is anticipated to beat US$ 100 billion by 2030 and to reach around US$ 110 billion.

As per EY, the overall number of new GCCs established each year could reach 115 by 2030. In addition, collaboration with start-ups can prove to be a driving factor for new GCC establishments and expansion. This collaboration in turn can assist GCCs accelerate their innovation journey in India.

At present, Bengaluru, Hyderabad, Chennai, Mumbai, Pune, and Delhi NCR are the major focus areas for setting up GCCs in India. However, there has been a growing trend observed in the number of GCCs set up in tier-2 cities, such as Jaipur, Visakhapatnam, Kochi, Vadodara, and Chandigarh, owing to favourable state policies, improving infrastructure, and affordable real estate and talent acquisition costs.

Drivers of GCC Growth in India

Serval factors contributed towards the transformation of GCCs in India, some of which are outlined below.

• Talent hub: India is known globally for its diverse pool of talent with expertise in domains ranging from IT, engineering, analytics, and finance. This availability of skilled workforce has enabled GCCs to implement high-value and complex projects in India.
• Technological innovations: ML, AI, Internet of Things (IoT) and blockchain are some of the advanced technologies that have been adapted rapidly. This in turn has enabled GCCs in India to deliver innovative solutions and digitally transform their parent companies.
• Strategically focused: From being known as a cost-saving centre to becoming a strategic hub, over the years, MNCs have recognised the potential of setting up GCCs in India. These centres are now viewed as a strategic asset that enables businesses to drive growth, improve operational efficiency and gain competitive advantages.
• Government support: Various reforms of the Indian government, such as the Digital India Campaign aimed at enabling ease of doing business, have contributed to making a favourable environment in India for the growth of GCCs. To fuel this growth further, policies have been implemented to promote innovation, infrastructure development and skill development.

Impact of GCCs on India’s Corporate Landscape

The growth of GCCs in India has had a remarkable impact on its corporate landscape. Some of the impacts are mentioned below:

• Economic boom

By creating high-value jobs and fostering innovation, GCCs have enabled economic growth in the country and are contributing notably to the Gross Domestic Product (GDP). According to NASSCOM, the GCC sector in India generated revenue worth over US$ 33 billion in 2020 and currently employs more than 1.6 million professionals.

• Employment generation and skill enhancement

By providing opportunities to Indian professionals to work on various global projects and acquire new skills, GCCs have enabled millions of jobs in the country. This has helped in the development of highly skilled workforce that is capable of delivering innovative solutions and driving economic growth.

• Innovation and R&D hubs

Developing new products, services and solutions has been the primary function of many GCCs that have set up their R&D centres in India. This has helped India become a global innovation and R&D hub, thereby attracting investments and encouraging a culture of R&D. For example, Microsoft established its R&D centre in Hyderabad in 1998, which has now become one of the largest R&D centres of the company outside of the US.

• Enhancement of business practices

GCCs in India have adopted global best practices in terms of business operations, governance and compliance. Indian companies have leveraged exposure to these practices, leading to enhancement in efficiency, productivity and ultimately competitiveness. For example, Goldman Sachs set up its GCC in Bengaluru in 2004 primarily for IT support. However, it has now transformed to include functions such as risk management, data analytics and financial modelling, becoming a critical asset of the company’s global operations. 

• Regional development

The growth of GCCs in India has enabled companies to set up their units in tier-2 and tier-3 cities, facilitating regional development and reducing economic differences between regions. The creation of new business ecosystems, better quality of life and improved infrastructure are some of the positive effects of setting up such centres in India.

Opportunities for GCCs in India

While there has been a significant transformation in the corporate landscape in India, with the establishment of GCCs, several challenges have emerged that present opportunities for this sector to grow and improve further. With India being known for its vast and diverse workforce, talent retention can be done through competitive compensation, career development and promotion of a positive work environment. Navigating India’s complex regulatory environment offers an opportunity for MNCs to collaborate with the government bodies, leading to the development of a more business-friendly atmosphere. With a focus on tier-2 and tier-3 cities, investment in physical and digital infrastructure will support the expansion of GCCs and regional development. Lastly, the collaboration between various industry players and government bodies can enhance the innovation ecosystem, leading to better research capabilities, entrepreneurship and application of new technologies that help position India as a global innovation hub.

Summing up

Global capability centres have transformed the landscape for corporates in India by shifting the perspective of global powers of viewing India as a cost-saving medium to a hub of innovation and strategic value. GCCs in India have enabled economic growth, job creation and regional development by utilising the country’s skilled workforce, technological advantage, and supportive government policies. As the country packs more potential for further growth as a global business hub, the future of GCCs in India looks promising. GCCs can drive sustainable growth and contribute to India’s goal of becoming a US$ 5 trillion economy through continued innovation, collaboration, and investment in talent and infrastructure.