Why India is the Ideal Location for Your Global Capability Center

How GCCs Are Reshaping India's Corporate Future

Global In-house Centres (GICs) or Global Capability Centres (GCCs) represent offshore entities established by multinational corporations to provide essential services to their parent organizations. These centres function as integral components within the global corporate framework, delivering specialized solutions in areas such as IT, Research and Development (R&D), customer support, and various business operations. GICs and GCCs are vital in leveraging cost efficiencies, fostering collaboration between parent companies and their offshore counterparts, and tapping into diverse talent pools.

India's corporate ecosystem is transforming, driven largely by the increasing prevalence of GCCs. These centres have become fundamental to the operations of multinational corporations (MNCs) in India, managing critical functions such as business processes, IT services, R&D, innovation hubs, customer service, and other key business areas. Over the past two decades, GCCs have evolved from cost-saving centres focused primarily on exploiting lower labour costs, to strategic hubs that drive innovation and generate substantial value for the parent organizations.

India’s Strategic Advantage in Global Capability Centres

Several growth drivers continue to shape the rise of global captive centres in India, including:

• Talent Hub: India is globally recognized for its vast and diverse talent pool, particularly in sectors such as IT, engineering, analytics, and finance. This rich pool of skilled professionals has enabled GCCs in India to execute complex, high-value projects efficiently.
• Strategic Importance: Initially perceived as cost-saving entities, GCCs in India are now seen as strategic assets by MNCs. These centres not only drive growth but also enhance operational efficiencies, providing companies with a competitive edge in the global marketplace.
• Government Support: India’s government has played a pivotal role in fostering the growth of GCCs through several reform initiatives, such as the Digital India campaign and measures to ease the business environment. Policies focused on infrastructure development, skill enhancement, and innovation have created a conducive atmosphere for the establishment and growth of GCCs. Special Economic Zones (SEZs) have been set up to provide tax incentives and other benefits to these centres, further boosting their appeal. Additionally, government initiatives aimed at promoting R&D and innovation have empowered GCCs to develop cutting-edge technologies and services.
• Technological Advancements: The rapid adoption of advanced technologies such as Machine Learning (ML), Artificial Intelligence (AI), the Internet of Things (IoT), and blockchain has significantly contributed to the innovative capabilities of GCCs in India. This technological integration enables these centres to digitally transform their parent organizations and deliver state-of-the-art solutions.
• Cost Efficiency: One of the most significant advantages of setting up GCCs in India is the substantial cost savings. Operating expenses in India are considerably lower than in developed countries like the US and the UK, due to lower wages, reduced real estate costs, and favourable exchange rates. Indian cities also offer competitive rental rates for Grade A office spaces, with institutional landlords providing high-quality services and real estate, making India an attractive destination for MNCs looking to establish their global in-house centres.

Supporting Factors for Growth

• Engineering R&D: Several states in India have introduced policies aimed at fostering engineering R&D, along with the establishment of innovation and technology clusters. This initiative aims to capitalize on India’s existing strengths in IT services and its large talent pool of engineers, positioning India as a hub for high-tech R&D.
• China Plus One Strategy: The growing shift towards India as an alternative manufacturing destination, in light of geopolitical and supply chain considerations, is gaining momentum. The “China Plus One” strategy is being increasingly adopted by global manufacturers, further enhancing India’s role in the global supply chain.
• Production Linked Incentive (PLI): Launched in 2020, the PLI scheme aims to boost India's manufacturing sector by offering incentives across 14 key sectors. This initiative has greatly contributed to the “Make in India” campaign, attracting foreign investment and fostering domestic manufacturing capabilities.
• FDI Liberalization: The Indian government has implemented a liberal and transparent Foreign Direct Investment (FDI) policy, allowing most sectors to benefit from automatic route investments. This policy has been instrumental in attracting global investors, further boosting India’s position as a prime destination for GCCs.

In 2021-22, India recorded its highest-ever Foreign Direct Investment (FDI) at USD 83.6 billion, highlighting the country's increasing attractiveness as a business destination.

India’s thriving startup ecosystem, coupled with its evolving infrastructure and sustained growth across technology sectors, has positioned GCCs as a central engine driving the nation's economic growth. The tech sector, now employing over 5 million people, is particularly influenced by the establishment of GCCs, which account for a significant portion of this workforce. These centres leverage India’s highly skilled workforce, cost-effectiveness, and robust government policies to deliver high-quality services, contributing to global economic success.

As outsourcing demand continues to surge and the IT industry expands, the role of GCCs in India is set to remain a critical driver of economic development, further cementing the country’s position on the global business map.

Setting Up a Successful Global Capability Centre in India: A Strategic Guide

Define Strategic Objectives Establishing a Global Capability Centre (GCC) in India necessitates a clear understanding of the parent company’s overarching goals. Your GCC should align seamlessly with the vision of the parent organization, acting as an extension of this strategic vision. Craft a robust strategy that not only supports but drives the company’s objectives. Over time, it is essential to preserve the core values and corporate culture of the parent organization while ensuring local adaptations are made to maintain coherence.

Ensure Legal and Administrative Compliance While your GCC may not always be fully parent-owned—potentially existing as a Joint Venture (JV), Build-Operate-Transfer (BOT) model, or another structure—it is crucial to navigate the legal framework effectively. Key formalities include drafting a Memorandum of Understanding (MoU), Articles of Association, obtaining Director Identification Numbers (DIN), and other regulatory documentation. Fortunately, India’s digital ecosystem makes the completion of these formalities streamlined and efficient.

Choose an Optimal Location The location of your GCC plays a critical role in determining its success. Beyond selecting a city with a robust business infrastructure, the specific neighbourhood or zone is equally important. Consider factors such as proximity to transportation hubs, ease of access for employees, and alignment with your business model. Additionally, evaluate the accessibility of essential resources and the logistical convenience for executing your business strategy.

Adopt a Flexible Hiring Approach India offers a vast talent pool across various domains, making it an attractive destination for establishing a GCC. However, the challenge lies in managing a high employee attrition rate. It is crucial to create an inclusive work environment that not only attracts top-tier talent but also ensures high retention. Cultivating a positive workplace culture, coupled with attractive perks such as flexible working arrangements, remote working options, and differentiated HR practices, can significantly contribute to employee satisfaction and productivity.

Standardize Operational Procedures Standardizing your Standard Operating Procedures (SOPs) across various functions—from hiring to procurement, payments, and employee exit processes—ensures smooth operations and minimizes inconsistencies. A well-structured approach to these processes fosters transparency and operational efficiency, helping employees quickly acclimatize to the organizational culture and workflows, thus promoting a seamless and cohesive working environment.

Position Your GCC as a Hub of Innovation While establishing a GCC may initially serve as a process-driven unit, its long-term potential lies in its evolution into an innovation-driven hub. Over time, a well-established GCC can become the nucleus of transformation within the parent organization. These centres can act as catalysts for identifying emerging trends, experimenting with new business models, and conceptualizing innovative products and services. With the right talent and infrastructure in place, your GCC can not only contribute operationally but also spearhead strategic initiatives, driving growth and business evolution.

India offers a dynamic ecosystem rich with investment opportunities, cost advantages, and growth prospects. With the right foundation, a GCC in India can serve as a transformative engine, yielding significant global impact from a regional base.

Tecnova's Role in Transforming India's Corporate Landscape through Global Capability Centres (GCCs)

Tecnova plays a crucial role in assisting organizations in India as they establish and expand their Global Capability Centres (GCCs). These centres are vital to the corporate landscape, driving innovation, operational efficiency, and global competitiveness. Tecnova supports businesses by providing the following services:

1. Market Entry and Expansion Support: Tecnova helps global companies set up and scale their GCCs in India by offering in-depth market insights, local regulatory knowledge, and risk mitigation strategies.
2. Talent Management: Leveraging its expertise in human resources, Tecnova assists in the recruitment, training, and development of skilled professionals to staff these centres, ensuring they meet global standards of excellence.
3. Operational Excellence: Tecnova helps businesses optimize their operational processes, from technology integration to back-office functions, enabling cost-effective and scalable solutions for GCCs.
4. Strategic Advisory: With its vast experience in cross-border operations, Tecnova provides strategic advice to companies looking to establish or expand their GCCs, ensuring alignment with global business objectives.
5. End-to-End Project Management: From setting up to managing operations, Tecnova offers end-to-end project management services, ensuring smooth transitions and the establishment of high-performance centres.

By providing these tailored services, Tecnova plays a key role in transforming India into a leading hub for GCCs, enabling businesses to leverage cost efficiencies, access top talent, and drive innovation on a global scale.

Setting up a successful Global Capability Centre (GCC) in India requires aligning with the parent company's vision, ensuring legal compliance, selecting optimal locations, and adopting flexible hiring practices. Standardizing operations and fostering innovation within the centre can transform it into a strategic hub, driving growth and delivering global impact.