Global Capability Centres (GCCs) in India

Despite global economic concerns, India's strong economy and excellent environment are driving the creation of global capability centres (GCCs). With political stability, a growing domestic consumption-driven economy, and a strong financial regulatory structure, India provides a favourable climate for multinational corporations. These GCCs are progressively becoming centres of excellence for innovation and digital transformation, enhancing their position in the value chain. This growth is being fuelled by a number of factors, such as software exports, a competent tech workforce, expansion into tier-2 cities, government assistance, and improved infrastructure. These factors contribute to India's expanding GCC market, establishing it as a prominent player in the global business landscape. As of 2022, India accounted for 55% of the world's functioning GCC centres. The number of GCCs in India has reached 1,580 as of 2023, and it is expected to cross 1,900 by 2025 and 2,400 by 2030. Depending on India's capabilities, the maximum number of GCCs could even exceed 2,550.

As global organisations continue to shift to an AI-first paradigm, they are looking at their Global Capability Centres (GCC) partners to supply AI, Analytics, and Data Engineering expertise to help drive this change. AI and analytics have established a strong foothold in the GCCs, with their in-house deep capabilities fuelling intelligent data-driven decisions for their parent organisations. The next generation of GCCs will be expected to provide autonomous decision assistance and AI-augmented decision intelligence. Indian GCCs are hubs where a variety of an organization's operations are managed and are required to build competencies, cultivate global leadership, and monetize services.

Global Capability Centres (GCCs)

Global Capability Centres (GCCs), also known as global in-house centres or captives (GICs), are offshore centres established by firms to provide various services to their parent organisations. These centres operate as internal organisations within the global corporate structure, providing specialised capabilities such as IT services, research and development, customer support, and other business tasks. GCCs and GICs are critical in leveraging cost efficiencies, accessing talent pools, and encouraging collaboration between parent businesses and their offshore affiliates. These emerged in the early 1990s as offshore divisions of major multinational firms such as General Electric, Texas Instruments, Citigroup, and American Express. GCCs continue to play an important role for global organisations as they advance up the value chain to become centres of excellence for innovation and driving digital attitudes. By 2025, it's anticipated that 320 new GCCs would have opened in India, as many businesses take the risk of opening their first global centres outside of their home countries. Currently, India is expected to add 115 new GCCs every year, a huge rise from the current rate of 70 per year. India is now positioned as a major global hub for services and technology as a result of the increase in GCCs. With 1400+ GCCs and 2 new GCCs created every week, India is the nerve centre of global competence centres, employing close to 1.4 million people, accounting for 25% of India's technological workforce. India is expected to have 2000 GCCs by 2026, employing 2 million individuals with exponential technology skills and generating revenues of up to US$ 60 billion.

The growth of GCCs in India is primarily driven by engineering and R&D services, which account for 56% of total revenue. India's talented labour pool, supportive corporate and legislative climate, and developing infrastructure are the driving forces behind this rise. In India, GCCs act as key technology hubs for their headquarters, focusing on specialised knowledge in areas like cloud computing, artificial intelligence (AI), machine learning (ML), and natural language processing (NLP). They also have expertise in new domains such as cybersecurity, advanced analytics, blockchain, and the Internet of Things (IoT). As part of their parent organisations' innovation ambitions, these GCCs play an important role in exploring cutting-edge technologies such as Web 3.0, Digital Twins, and Metaverse.

Timeline

• Early 2000s (Captive Centres limited to BPOs)

Following the tech and outsourcing boom in the early 2000s, global businesses considered entering India to establish captive centres. The low-cost talent pool and low-cost real estate costs were major motivators for establishing their captive centres. GCCs concentrated on back office and business support tasks, as well as IT support services including maintenance and help centres. The majority of activities were limited to BPO functions such as data processing, document management, and customer service.

• 2005-12 (Growth of GICs)

Captive centres grew increasingly value-added in nature, pushing process efficiency by assuming end-to-end ownership of the whole global product lifecycle. The usage of the talent pool was increased with the goal of developing R&D skills and improving delivery and process excellence by establishing Global in-house centres. Global In-House Centres (GICCs) began to undergo a transformational change towards becoming GCCs, fostering digital transformation and innovation throughout the organisation's product and service capability ecosystem. 

• 2013-14 onwards (Opening of Centres of Excellence)

Increasing emphasis on high-value activities such as digitalisation, developing expertise in emerging new-age technologies such as artificial intelligence (AI), machine learning, data science, blockchain technologies, analytics, product conceptualisation, and vendor management. India is becoming considered one of the best available sites for global corporations to establish their Centres of Excellence (CoEs) across multi-function portfolios such as engineering research and development (ER&D), information technology (IT), banking and financial services (BFSI), and others.

Market Size

The CAGR growth from 2019 to 2023 is 11%, while the CAGR growth from 2023 to 2030 is 14%. The GCC market is predicted to exceed US$ 100 billion by 2030 and is most likely to reach around US$ 110 billion. It is anticipated that by the year 2030, India would have 2,400 GCCs, with the number perhaps exceeding 2,500 as India emerges as the world's technology and services centre.

New GCC Set-ups

With their sturdy infrastructure, access to talent, and supportive ecosystem, cities like Bengaluru, Hyderabad, Delhi NCR, Mumbai, Pune, and Chennai are the most attractive sites for global capability centres in India. However, tier-II towns such as Visakhapatnam, Jaipur, Vadodara, Kochi, and Chandigarh are becoming popular for new ventures due to improved infrastructure, advantageous state legislation, and lower real estate and manpower prices. Coimbatore, in particular, is emerging as the next major GCC centre following Chennai in Tamil Nadu. US-based corporations account for the majority of the operational GCC footprint in India's top six cities, followed by European enterprises (35%). The overall number of new GCC establishments each year could reach 115 by 2030. Collaboration with start-ups can operate as a springboard for new GCC establishments and expansion. This collaboration can assist GCCs expedite their innovation journey in India.

Source: JLL

Emerging trends

• Centres of Excellence (CoE)

It is taking centre stage to drive product development and innovation in areas like AI, cloud, engineering, data analytics, and cybersecurity.

• Moving from ‘cost’ to 'profit' centre

With a focus on generating extra revenue streams for the parent organisation by servicing external clients.

• Revisit Employee Value Proposition (EVP)

To expand on major areas of attention, including organisational culture, the nature of work, career advancement, and rewards and remuneration. As talent remains a competitive advantage, the GCCs must invest in their culture and improve the total employee value proposition. The GCC industry is estimated to employ more than 4.5 million people by 2030, up from the current base of 1.9 million.

• Expansion of functions

In areas that include legal, marketing, and procurement, with bigger investments (people, technology, infrastructure, etc.) to create these competencies and service external clients.

Types of global capability centres

Government Initiatives

• The Karnataka government's Spoke-Shore project intends to speed up the creation of GCCs across the state, with the goal of creating a large talent pool outside of Bengaluru. By focusing on the Mysuru, Hubbali, and Mangaluru clusters, the goal is to produce one million direct and indirect job opportunities by 2026. The project intends to boost development and encourage the smooth expansion of GCCs in certain areas.
• While Special Economic Zones (SEZs) to encourage the IT/ITeS industry have been established in Tier-2 cities, state governments are also rewarding enterprises that are establishing new centres or expanding existing ones into non-Tier-1 regions. For example, under Tamil Nadu's ICT policy 2018, new or expanded IT/ITeS industries located in B&C districts will be eligible for an additional capital subsidy of 10% and 25%, respectively, over and above the eligible limit.
• Union Budget 2022-23

  The idea to introduce the option of filing an updated/fresh return of income and deferring the filing of an appeal by the tax department when an identical point of law is pending is intended to reduce tax litigation.

  • As part of Ease of Doing Business 2.0, a focus on trust-based governance, a decrease in duplicative compliance, and the establishment of C-PACE to promote the voluntary winding up of firms, among other things, are positive moves.
  • The replacement of the Special Economic Zones Act with new legislation has been announced in order for states to become participants in the "Development of Enterprise and Service Hubs." Details have not yet been released.
  • Ease of doing business shall be facilitated through the national customs site for risk-based checks for SEZs.
  • The establishment of world-class universities in GIFT City may help train the workforce in the financial services sector. An international arbitration centre may help to strengthen the GIFT IFSC's dispute resolution mechanism and make doing business easier.
  • Increasing the emphasis on skill development while creating a powerful digital ecosystem. Various skilling initiatives will be reoriented to provide continual skilling opportunities, sustainability, and employability. These actions will improve the skill accessibility for the GCC sector.
  • Increased focus on R&D in emerging opportunities such as artificial intelligence, geospatial systems, and drones, among others, would improve GCC concentration in these sectors.

Road Ahead

Global Capability Centres (GCCs) play an important role in the Indian economy today. They contribute to employment generation, technology adoption, and skill development. GCC leaders and AI, Analytics, and Data leaders in the GCCs will need to harness the burgeoning power of AI to drive corporate decisions, innovate new products and services, reinvent business models for continued success in the new world, and trigger insights, intelligence, and recommendations hubs for amplified decision making. The prognosis for the GCC market remains positive, as corporations look to establish their GCCs in India. Furthermore, GCCs are growing their operations across different locations in India, while also exploring new areas of service and acquiring personnel with unique skill sets. The emergence of the GCCs has aided India's position as a prominent player in the global IT and business services industries. Year every year, India's GCC story becomes more compelling. By 2030, the GCC market is estimated to exceed US$ 100 billion, with 2500 GCCs across the country employing over 4.5 million people. With an increasing number of global leadership roles situated in India, the GCCs will continue to rise up the value chain through innovation, product development, and digital transformation.