Scale and Succeed with Global Capability Centers (GCCs) in India

In 1985 Texas Instruments set up its first India office in the city of Bangalore and it was one of the earliest case of a global technology company setting up its engineering center in India. India was already producing some of the best engineering talent in the world and multinationals started making a beeline to setup Global Capability Centers (GCCs) in India. Three decades later, the trend has not slowed down.

Just in the last few years, over 150 multinational companies have set up their engineering centers in India, not just in Bangalore but in many tier 2 cities. By 2025, the country expects to touch 1,900 centers reflecting a business of over $60 billion.

But it is not always smooth sailing for foreign companies to setup operations in India. So, what are the challenges facing GCCs in the Indian market and how can they be scaled to the next level? Let’s examine.

What are Global Capability Centers?

Previously referred to as global in-house centers (GICs), GCCs are dedicated units set up by companies in a foreign location to perform a specific business functions such as IT, Product Development, backed operations like finance or payroll processing etc. GCCs can range in size from small focused teams to multi-dimensional large-scale organizations. Today, GCCs in India have evolved from being just a cost arbitrage option to owning entire product lines, delivering cutting-edge innovation in business-critical areas.

Challenges facing GCCs in India

Here are some of the main challenges that continue to plague GCCs operating in India:

1. Incorrect Operating Models
Operating models refer to the organizational structure, end-to-end processes, and sourcing strategy. Without an efficient operating model and tight integration with the parent company GCCs can face several issues including

• Delivering expected outcomes at scale
• Cost overruns
• Talent retention
• Inability to align to organizational roadmaps

2. Talent Acquisition
According to Nasscom’s GCC 4.0 report, India-based GCCs will need to fill nearly 20,000 global roles by 2030. Independent GCCs have to compete with established IT and technology companies. These firms, over the years have built robust hiring teams, built strong relationships with universities that enable them to hire at scale and at speed.
 
3. Complex Regulatory Environment
India’s complex regulatory environment is still a major challenge for GCCs. The country lacks a single cohesive regulatory framework, thus requiring companies to navigate multiple government departments to setup operations in India leading to delays and inefficiencies. However, many state governments have launched single window clearance systems to fast track regulatory approvals - For instance, the Government of Maharashtra launched the 2023 IT/ITES policy that includes provisions for GCCs and focuses on setting up centers of excellence (COEs) in the state.

Establishing and Scaling up GCCs in India

Here are some effective steps to establish a successful GCC in the Indian market:

1. Define the business strategy
The first step is for parent companies to clearly define the objective for setting up the GCC in India. This includes answering questions like:

• What business functions or services will the GCC provide?
• What are the expected cost and efficiency improvements?
• How does the GCC fit into the company’s long-term goals and vision?

2. Conduct a feasibility study for the Indian market
The next step is to check the feasibility and risks of setting up a GCC in India. This includes performing location-based analysis including local factors like available talent, potential partnerships, cost of business, and ease of doing business.

Other factors include the initial setup costs, legal considerations, and the existing technology infrastructure.

3. Develop a robust business case & roadmap
Based on the findings of the feasibility study and location analysis, companies must develop a robust business case for establishing the GCC. The business case must include benefits, potential risks, implementation costs, and the overall return on investment. The final step is to create a detailed business roadmap for establishing the GCC. This includes milestones such as creating the legal entity, investing in infrastructure and hiring talent.

4. Create a business roadmap
To scale GCCs, companies need

• Flexible and Scalable Operational Model
  Implement agile methodologies and robust, scalable infrastructure to swiftly adapt to evolving business demands, ensuring operational resilience and the capability to scale up as opportunities for growth emerge.
   
• Effective Governance
  GCCs can reduce operational risks and improve outcome delivery by adopting strong governance practices. Robust governance mechanisms help ensure regulatory compliance, effective risk management, and alignment with parent company on business goals enabling sustained expansion.
   
• Build the Right Partnerships
  It is critical to create strategic partnerships with local businesses, academic institutions, and government bodies. These relationships in turn help in talent development, building a positive brand image and exploring new avenues for growth.
   
• Building Effective Hiring Teams
  Establish dedicated recruitment teams adept at identifying, attracting, and efficiently onboarding top talent, focusing on strategic hiring practices, competitive compensation, and fostering a culture that supports career progression and learning opportunities.

Setup Your GCC in India with Xoriant

With over 200 customers and 5000 employees spread across 18 global locations, Xoriant is a leader in digital engineering services enabling its customers to scale up their India operations.

With Xoriant, setup your India GCC in a matter of weeks – across technology areas – Cloud, Data and AI, Digital Engineering or Security. Our deep technology expertise, at scale hiring teams and flexible business models ensures a seamless experience for our customer in scaling GCCs.