What are Global capability centres?

Global Capability Centres (GCCs) have emerged as strategic hubs for multinational corporations (MNCs) looking to leverage talent pool, cost-effective operations, and favorable regulatory environment at offshore locations. These centres serve as extensions of global operations, providing a range of services and functions that support the parent company's business objectives. Let us look at the details of GCC and how they impact the Indian economy.

What are Global capability centres?

Global Capability Centres (GCCs) or Captive Centres, are offshore offices or subsidiaries set up by multinational corporations (MNCs) to handle various business processes and services. These centres are responsible for a wide range of tasks, including IT support, research and development (R&D), data analytics, finance, human resources, and other back-office functions. Over time, many GCCs have evolved from being simple support centres to becoming strategic hubs that drive innovation and high-value business functions.

Why are GCCs formed?

Here are some reasons why GCCs are formed:

Research and Development (R&D): Conducting research and development activities to support product innovation and development.
IT and Business Services: Provide IT support, software development, and business process outsourcing services.
Shared Services: Centralizing back-office functions such as finance, accounting, human resources, and customer support.
Engineering and Design: Designing and developing products or services for the global market.
Sales and Marketing: Supporting sales and marketing efforts in the Indian market or globally.

Evolution of GCCs in India

The concept of GCCs in India has undergone a significant evolution over the years, reflecting the country's growing prominence as a global business destination.

In the early days, GCCs in India primarily focused on offshoring back-office functions such as IT support and customer service. The initial appeal of GCCs was driven by the cost advantages offered by India's lower labor costs.

As Indian talent and infrastructure improved, GCCs began to expand their scope beyond basic services and offer more value-added functions like R&D, engineering, and product development. GCCs transitioned from being cost centres to strategic assets, playing a crucial role in supporting the global operations of MNCs.

As per the latest trends, GCCs have embraced digital technologies to enhance their capabilities and improve efficiency. Many GCCs are now positioned as innovation hubs, driving product development and research. Companies are investing heavily in talent development to ensure their GCCs have access to a skilled workforce.

Today, India is home to over 1,500 GCCs, with many global giants establishing large-scale operations. Amazon, Microsoft, Google, Goldman Sachs, Deloitte, JP Morgan, Citi, and HSBC are some of the global firms with large GCC operations in India.

Impact of GCCs on Indian economy

Below are some of the positive impacts of GCCs on the Indian economy:

Job Creation: GCCs have helped in both direct and indirect job creation. GCCs have created a significant number of high-quality jobs in India, particularly in the IT, engineering, and business services sectors. The growth of GCCs has also led to indirect job creation in related industries, such as real estate, hospitality, and transportation.
Skill Development: Working in GCCs has exposed Indian professionals to global best practices and advanced technologies, leading to enhanced skills and expertise. GCCs have invested in upskilling and reskilling their workforce to meet the evolving needs of the global market.
Economic Growth: GCCs have helped India increase its exports of services, contributing to the country's economic growth. The presence of GCCs has attracted foreign investment, boosting the Indian economy.

Strengths of GCCs

For MNCs, having GCCs in India presents them with below strengths:

Cost Advantage: India offers a significant cost advantage compared to many developed economies, making GCCs an attractive option for MNCs seeking to reduce operational costs.
Talent Pool: India boasts a large and skilled workforce with expertise in various domains, including IT, engineering, and business services.
Favorable Government Policies: The Indian government has implemented several policies to promote the establishment and growth of GCCs, such as tax incentives and streamlined regulatory processes.
Strategic Location: India's strategic geographic location makes it a convenient hub for serving both domestic and international markets.
Cultural Affinity: India's cultural similarities with many Western countries can facilitate effective communication and collaboration between MNCs and their GCCs.

Future of GCCs

The future of GCCs in India looks promising. As the country continues to develop and modernize, GCCs are expected to play an even more significant role in the global business landscape. The increasing focus on digital transformation, innovation, and sustainability presents new opportunities for GCCs to expand their capabilities and contribute to economic growth.

Additionally, the Indian government's continued support for the development of GCCs, coupled with the country's abundant talent pool, positions India as a prime location for these centres.

Conclusion

Global Capability Centres in India play a crucial role in helping multinational companies reduce costs, drive innovation, and enhance operational efficiency. India's highly skilled workforce, favorable business environment, and cost advantages have positioned it as one of the top destinations for setting up GCCs. As these centres continue to evolve, they are increasingly being recognized as strategic assets that can drive growth and global competitiveness for MNCs.