How Global Capability Centers (GCC) Have Enhanced the Functioning of Businesses

Global Capability Centers (GCC) have enhanced the functioning of businesses. With specialized talent pools, cost arbitrage, and streamlined operations, GCCs are significantly empowering businesses to compete in the global landscape.

This article explores GCC, its benefits, its core functionalities, and India as a growing GCC hub.

What is the Global Capability Center (GCC)?

Referred to as Global In-House Centers (GICs) and Global Technology Centers, GCCs are offshore establishments of multinational corporations. Think of GCC as a smaller office with a dedicated talent pool focusing on specific tasks assigned by a bigger office, in a different country.

GCCs are generally set up by multinational companies in strategic offshore or inshore locations for a specific range of functions. Earlier, GCCs were established for back-office processes, however, GCCs of today have evolved into hubs of innovation & product development.

Why set up GCC?

GCCs help the parent companies concentrate on their core functionalities with captive units focusing on research, development, and other routine tasks. Here are the major benefits of setting up a GCC:

1. Cost Arbitrage: One of the prime reasons for setting GCC is cost-effectiveness. Operating in locations with lower labor and operational costs significantly saves marginally for companies.
2. Diverse Talent Pool: Companies tap into local talent pools accessing highly skilled professionals in fields like technology, finance, analytics, research, and more.
3. Geographical Diversification: Setting up GCCs in multiple locations reduces risk and ensures smooth business operations with diversified operational sites.
4. Streamlined Operations: GCCs centralize functions and reduce redundancy. They also help in standardizing processes making operations more consistent and efficient.
5. Round-the-clock Operations: GCCs in different time zones help companies provide 24×7 support, understanding the regional nuances and offering localized help.

Core Function of Global Capability Centers

Starting as just back-office assistance, GCCs have developed over the years into core-functionality segments including IT, R&D, and more.

1. Information Technology (IT): GCCs cover major IT segments like software development including designing, developing, and testing of software, and IT support including technical support and helpdesk. Alongside, they also implement and maintain security measures and IT infrastructure including servers, databases, and networks, providing complete Cybersecurity solutions.
2. Finance & Accounting: GCCs help parent companies in preparing financial statements and reports, managing the process of paying suppliers and receiving customer payments and payment processing. They also manage financial activities ensuring compliance with local and international tax regulations.
3. Human Resource (HR): Captive Centers manage the hiring process, organize training programs for employee upskilling and career development, and maintain employee relations. GCCs also manage payroll and employee benefit programs.
4. Research & Development (R&D): Global Capability Centers conduct market research to understand market trends and changing consumer preferences. They also lead in the innovation and development of new products and services, by establishing dedicated spaces for brainstorming and developing innovative solutions. Alongside, GCCs create and test prototypes to ensure product functionality.
5. Data Analysis and Business Intelligence: GCCs analyze data to generate insights and support decision-making. They also create dashboards and reports to track performance, use data modeling to predict future trends, and handle vast amounts of data to extract valuable information.
6. Compliance and Legal Support: GCCs draft and manage contracts and management, ensure adherence to local and international regulations, and identify and mitigate potential risks to organizations. They also provide legal advice and support for various business activities.
7. Innovation & Transformation: They identify and implement process improvement to enhance efficiency. The centers also look after strategic planning and execution by incubating and identifying new business models focusing on continuous improvement and operational excellence.

Some key facts about GCCs:

• Total Number of GCCs: 1600+
  – Nearly 78% of these have established operations in India to augment or create a superior talent pool.
• 65% of GCCs are headquartered in the US
• Market Size of GCC is $46 Billion for FY 2023
• ER&D (Engineering, Research & Development) accounts for USD 25.6 billion
• The GCC market has been growing at a CAGR of 11.4%
• 1.66 million+ talent employed by GCCs.
• 42% of this talent is in ER&D, which has been growing at a CAGR of 10.7%

Global Capability Centers in India

India is home to over 1600 GCCs employing over 1.6 million people. GCCs have played a significant role in India’s economic development contributing to 1% of Gross Domestic Production (GDP).

Bengaluru, Hyderabad, Delhi NCR, Mumbai, Pune, and Chennai have become the most popular destinations for capability centers with supportive ecosystems, world-class infrastructure, and access to some of the best talents in the world. India boasts over 50% of GCCs in the world. The space occupied by GCCs in the major cities has crossed 200 mn sq ft and is significantly growing over time.

Why is India a Major GCC Hub?

India has become one of the most popular locations for Global Capability Centers primarily because of the following reasons:

1. Talent Powerhouse: India produces over a million engineers each year and is a talent powerhouse. 1 in 10 analytics professionals worldwide are from India. GCCs leverage this talent pool to provide a wide range of services to their clients worldwide.
2. Cost-Efficiency: Reasonable cost is another advantage for Global Capability Centers in India. Operating in India is much more economical when compared to other developed countries as well as developing countries with the same infrastructure and ecosystem as India. Rentals in top cities in India are 50% lower when compared to other preferred Asian hubs, as well as 60% lower when compared to European cities.
3. Government Support: The Indian Government provides various incentives and facilitates various initiatives to attract foreign investment. The government has set up Special Economic Zones (SEZs) where GCCs can set up their operations and can avail of various tax benefits. With the 2024-25 union budget, Tamil Nadu has become the first state to provide subsidies for Global Capability Centers.

Along with these major factors, India’s booming startup ecosystem, and consistent development of technology and infrastructure have helped GCCs flourish in the Indian landscape. IT industry has been of major focus for GCCs with 50% of the total 5 million IT sector employment accounted by GCCs.

Inductus Global Capability Center (GCC)

Inductus with its state-of-the-art Global Capability Center in Noida, Delhi NCR is one of the GCC pioneers in India. The capability center provides comprehensive solutions in the fields of ITAS, Consulting & Advisory, Legal Services, Finance & Accounting, Staff Augmentation, and Research & Development (R&D). With several new Global Capability Centers set up in India, Inductus’ GCC aims to create an environment that is innovative and agile.

One of the key highlights of the Inductus capability center is its support and guidance to SMEs. Inductus helps small and medium enterprises set up their operations in India with low capital, allowing them to function with the workforce as per their needs, with a pay-as-you-go pricing model, paying only for the services they use.

Inductus aims to empower India’s economy by boosting GCC development in India, along with helping offshore companies of all scales to set up their Global Capability Center in India.