Global Capability Centers (GCC) in India: from basic outsourcing to an innovative, profitable branch

As India strengthens its position as a global hub for technology and innovation, it is time for medium-sized companies in these sectors to evaluate their global strategy. Is India already part of your GCC strategy? If not, read here why it should be and how you can maximize the value of  Global Capability Centers (GCC) in India.

Global Capability Centers (GCCs) have changed the way foreign companies utilize global resources. Initially seen as a way to cut costs, GCCs are now strategic business units that drive innovation, ensure scalability and safeguard the quality of critical business functions. But having GCCs also comes with challenges that can impact the success of your GCC strategy. Let’s explore.

Global Capability Centers in India: you can’t miss out on these benefits

1. Innovation in fast-growing sectors

GCCs based in India stimulate product development and innovation in fast-growing sectors, including artificial intelligence, engineering, data analytics, Internet of Things (IoT), robotics and technical services. With an increasingly technical and highly educated labor force, India’s GCCs are pushing the boundaries of technological progress, making it an excellent destination for companies committed to R&D and advanced engineering.

2. Shift from cost savings to profit creation

The current GCCs are not just about saving costs; they are profit-generating entities that create new revenue streams for their head office. By optimizing processes, reducing costs and creating new services, GCCs are now strategic components that influence the bottom line. The best performing GCCs are essential players in their company’s growth strategies and contribute directly to revenue and market expansion.

3. Access to a pool of highly educated talent

India has the brightest minds in engineering, AI, data science and other technology-driven fields, making it an attractive location for activities that require high and specific skills. Top talent and the growing start-up ecosystem contribute to a dynamic workforce that can develop innovative solutions. This pool of highly skilled professionals helps companies maintain a competitive advantage worldwide.

Challenges of the GCCs: what should you look out for?

1. Concerns about quality and consistency

Distance can create the perception of a lack of quality or consistency in output, often due to cultural differences in communication. These pitfalls can be easily avoided by establishing clear governance and communication structures to ensure that everyone focuses on the objectives of the parent company.

2. Start-up costs

GCCs, especially for support or non-core tasks, can require significant initial investment, especially in building infrastructure and recruiting top talent. Choosing the right mix of core and non-core tasks, complemented by strategic outsourcing, can ease this financial burden and offer growth potential.

3. Managing productivity at a distance

Managing from a distance brings challenges, especially when it comes to productivity. To overcome this, strong management models and clearly defined responsibilities are needed to effectively bridge the distance.

4. Cultural differences

Cultural differences can sometimes lead to misunderstandings and ambiguities, with negative consequences for efficiency. A successful GCC strategy must include cultural training and communication and feedback mechanisms to keep teams on the same page and prevent friction.

The evolution of Global Capability Centers in India: from cost savings to strategic drivers

Global Capability Centers in India have traditionally been cost-saving solutions for tasks such as back-office support, call centers and data processing. However, they have now evolved into strategic business units that enable innovation, expansion and transformation. For foreign companies active in sectors such as AI, biotech and fintech, GCCs serve as drivers of digital transformation.

The future of GCCs

Looking to the future, we see the following trends influencing the development of GCCs:

• Acceleration of digital transformation: GCCs will take the lead in digital initiatives and new technologies, developing operational efficiency within these.
• Hybrid models: Many companies may opt for a hybrid approach, combining internal centers for core activities with strategic outsourcing of specific functions.
• Focus on sustainability: As global ESG (Environmental, Social and Governance) priorities increase, GCCs will play a crucial role in helping companies achieve their sustainability goals.

Indian government support for Global Capability Centers

The Indian government actively encourages foreign investment through various initiatives. State governments are also investing in this and offer support to foreign companies through tax benefits and infrastructural support. The Make in India and Digital India campaigns, for example, are specifically aimed at stimulating sectors such as production, AI and data analysis, which align well with the capacities and focus areas of GCCs.