The Next Decade of Global Capability Centers (GCCs) in India: Strategies, Opportunities, and Challenges

Introduction

India’s Global Capability Centers (GCCs) have solidified the country’s position as a global offshoring powerhouse. With over 1700 centers employing over 1.9 million professionals, GCCs have become essential hubs for their parent organization driving innovation and complex functions across diverse industries. With India projected to become the third-largest economy by 2028, the next decade presents opportunities and challenges for GCCs. In this blog, we will explore the factors shaping the future of India’s GCC landscape, the strategies organizations must adopt, and the potential impact of India’s economic rise.

India’s Rise as a Global Offshoring Powerhouse

Over the past decade, India has become the go-to destination for organizations looking to establish Global In-house Centers (GICs), now called GCCs. In 2023, the country hosted over 1,580 GCCs operating across 2,740 units. Major tier-1 cities like Bengaluru, Hyderabad, and Delhi-NCR are leading the growth of GCCs, attracting businesses due to their skilled STEM talent pool, government support, and strong infrastructure. These cities, along with others like Chennai, Mumbai, and Pune, house 90% of the GCC workforce.

Bengaluru alone accounts for 34% of the GCC talent, making it a global leader in engineering, research, and development (ER&D), while cities like Mumbai and Delhi-NCR specialize in Business Process Management (BPM).

Macroeconomic Factors Affecting GCCs

Several macroeconomic factors, particularly currency fluctuations and inflation, significantly influence the operations of GCCs in India. Over the past decade, the Indian Rupee has depreciated against major global currencies such as the US dollar and the Euro. While this depreciation reduces operating costs for foreign clients, it also leads to inflationary pressure within India, making it essential for GCCs to navigate this economic complexity.

Currency Fluctuations

 Between 2013 and 2023, the Indian Rupee’s depreciation enabled Indian GCCs to offer competitive pricing globally, attracting more foreign investments. However, the rise in inflation has increased operational costs, presenting challenges for GCCs.

Inflation Trends

 India has historically had higher inflation rates than developed nations. This inflation rate, combined with the country’s economic growth, has created a dual effect. While it increases operational costs for GCCs, the devaluation of the rupee makes services more affordable for foreign clients, ensuring India remains a competitive player in the global market.

Projected Economic Growth and its Impact on GCCs

India is projected to surpass Germany to become the world’s third-largest economy by 2028, driven by steady and strong GDP growth. This economic scaling offers GCCs both opportunities and challenges. While the growing middle class and increasing consumer demand create new growth opportunities, rising labor costs and infrastructure expenses could erode India’s traditional cost advantages.

Companies operating in India’s GCC space must recalibrate their strategies, shifting from cost arbitrage to value creation by leveraging India’s innovative ecosystem, growing workforce, and technological advancements.

Key Strategies for GCCs Over the Next Decade

To thrive in the evolving global business landscape, GCCs need to adopt specific strategies that align with emerging trends. The four critical areas for growth include:

1. Embracing the Generative AI Revolution

Generative AI is poised to transform GCCs, particularly in the software engineering domain. A recent study by Zinnov and Ness highlights how AI-driven solutions can significantly boost productivity, with a 70% reduction in task completion times for existing code updates. AI not only improves efficiency but also fosters collaboration and innovation, positioning Indian GCCs as global leaders in advanced technology solutions.

To fully leverage AI, GCCs must focus on upskilling their existing workforce while actively recruiting top AI talent. By doing so, they can stay competitive in an AI-first world.

2. Leveraging India’s Manufacturing Potential

India’s growing manufacturing sector presents a compelling opportunity for GCCs. In recent years, the country has seen increased interest from global organizations seeking to leverage its manufacturing capabilities, particularly in the semiconductor sector. As global supply chains shift, GCCs can tap into this market to drive growth.

By focusing on manufacturing capabilities, GCCs can serve both local and global markets, offering services that go beyond traditional IT and BPM functions.

3. Fostering Intrapreneurial Leadership

As the number of global roles in India is set to rise from 5,000 in 2022 to 20,000 by 2030, fostering intrapreneurial leadership will be essential for GCCs. Intrapreneurial leaders are those who drive innovation, identify new market opportunities and lead process improvements from within the organization. These leaders will be key in helping GCCs adapt to global market demands while maintaining their competitive edge.

Developing leadership talent will help GCCs retain top-tier professionals and ensure continued growth in a competitive global market.

4. Becoming a Gateway to the Asian Market

India’s strategic position as a bridge between the East and the West makes it an attractive destination for multinational corporations (MNCs). European and American companies can use India as a base to expand into the rapidly growing Asian market. By establishing a strong presence in India, MNCs gain access to a large talent pool, a thriving consumer market, and a dynamic innovation ecosystem.

GCCs in India are well-positioned to help these companies capitalize on the region’s economic opportunities and expand their influence across Asia.

Challenges Facing GCCs in India

While India’s GCC sector offers immense growth potential, it also comes with its own set of challenges:

1. Technological Advancements: Staying ahead of rapidly evolving technologies like AI and automation is crucial.
2. Regulatory Environment: Navigating India’s complex regulatory landscape can be challenging for global companies.
3. Cultural Diversity: Managing a diverse workforce spread across multiple cities requires a thoughtful approach to employee engagement.
4. Infrastructure Constraints: While India’s infrastructure is growing, GCCs must invest in state-of-the-art facilities to remain competitive.

Conclusion: The Future of GCCs in India

The next decade represents a critical period for GCCs in India. As the country’s economy grows and technological advancements redefine industries, organizations must adapt to stay competitive. By embracing AI, nurturing leadership, and leveraging India’s strategic position, GCCs can continue to drive global innovation and growth.

GCCs that proactively invest in new technologies and talent development, while staying adept to macroeconomic factors, will be at the forefront of the industry’s evolution. As the global market continues to shift, India’s GCCs stand poised to lead the way.

To learn more about how your organization can leverage India’s GCC potential and chart a course for success, contact us today at ho@inductusgroup.com.