Global Capability Centres emerge a viable operating model for global organisations: Report

Global Capability Centres (GCC) have emerged as a viable operating model for global organisations. A majority of them are set up in India (much like the delivery capabilities of most outsourcing providers) due to the scale of talent, the availability of specialised skills and the cost advantages.

A report by global IT research firm ISG says that nearly half of the GCC leaders plan on expanding staff in the next 24 months. What’s interesting is that a similar number also plan to scale back or even exit their GCC in the same time frame. “This is consistent with what we wrote about the different challenges and plans for GCCs depending on when they were established,” says ISG.

There are over 1,600 GCCs in almost 2,800 locations across India, employing over 1.6 million people directly and an equal number indirectly. Almost 85 per cent of the GCCs are in the big cities.

• Also read: TN woos GCCs with payroll subsidy

Sustained strength in GCC activity from 2023 was one of the trends expected to shape the IT and business services industry in 2024. So far, that’s holding up. While interest in setting up new GCCs and scaling existing ones remains high, we are seeing equal interest from enterprises looking to transform their GCCs to better align with their parent organisations and the macroeconomic environment.

Towards the end of 2023, ISG surveyed more than 300 leaders from global 2,000 firms about their GCC plans to date and what they plan to do in the next 24 months.  “When we combine their responses with our on-the-ground experience, helping enterprises make these important decisions, it provides some interesting insights on this subject,” says ISG.

Benefits from GCCs

There are three primary benefits GCC leaders are realising today from their GCCs. A third of the companies that ISG talked to say the primary benefit of their GCC was access to strategic talent; 20 per cent indicate strategic innovation; and nearly half indicate value (which could include cost optimisation, improved productivity or streamlined operations for the parent organisation). 

Focussing on the GCCs set up in the last two, ISG found that nearly half of these GCC leaders plan on expanding staff in the next 24 months. A similar number also plan to scale back or even exit their GCC during the same time frame, ISG said.

Ramkumar Ramamoorthy, Partner at Catalincs, a growth advisory firm, said in the first two waves, GCCs came to India for cost and talent. The first wave was largely financial services, semiconductor, and software companies. Examples include Intel, Motorola, Citibank, Bank of America and American Express. Most of these companies were from the US and from the Fortune 200 bucket. In the second wave, more companies across financial services, as well as those from manufacturing and telecom from the US and Europe from the Global 500 category, arrived.

• Also read: Growth of GCCs in India’s tier-2 to be driven by smaller GCCs

“Today, we are witness to a broad canvas of companies in the Global 2000, across industries such as financial services, telecom, health sciences, retail, consumer goods, energy, utility, transportation, and media, and across the US, Europe, and APAC regions,” he said.

The GCCs are here for innovation and digital transformation. GCCs in India are launching newer products, developing newer as-a-service platforms, and are the powerhouse of all new technology-enabled solutions in the areas of data and AI, IoT, mixed reality, cloud, cybersecurity, among others, he said.

Balasubramanian Sankaranarayanan, President and CEO, Thryve Digital, said GCCs have emerged as a viable operating model for global organisations, given the twin advantages over third-party service providers -- intellectual asset protection and additional cost arbitrage. Many of the GCCs are set up in India due to the scale of technology and operations talent, availability of specialised skills, supportive policy framework, and the foundational cost advantages.

“I don’t see GCCs ramping-down over the next few years. On the contrary, I clearly see increasing global awareness of the value that GCCs deliver to the enterprise - and expect the inherent GCC advantages on domain depth and parity on technology skills (viz. third-party service providers) will continue to accelerate GCC growth in India over the next few years,” he said.

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