Opportunities, challenges and transformation
- Global Capability Centers (GCCs), also known as Global In-house Centers (GICs), Centres of Excellence (CoES), IT Service Center or Global Service Centers (GSCs), are offshore facilities set up by multinational companies to centralize and manage various business processes. Originally started as low-cost back-office solutions, GCCs have evolved into innovation centers that handle complex tasks such as research and development, product innovation, IT services, and data analytics. These centers are now considered important sources of value creation as they contribute to the innovative strength of the parent companies and support their global growth strategies.
India as an established location for Global Capability Centers (GCCs)
India has been a focus for Global Capability Centers for several decades. Originally started as pure cost optimization models, GCCs have now become an important part of global corporate strategies.
Since the 1980s and 1990s, when companies such as Texas Instruments moved to India, this country has been considered an attractive location for IT services, software development and business outsourcing (BPO).
With around 2.000 GCCs of multinational companies and around 1,5-2 million employees, it is now considered one of the preferred countries for such business models - no longer limited to IT support services, but encompassing numerous different business areas such as business process management (BPM), research and development (R&D), finance, human resources (HR), banking and financial services (BFSI).
There are three reasons for this development:
- Availability of highly qualified personnel: India produces a large number of highly qualified graduates and professionals every year, especially in the fields of technology and engineering.
- Cost savings: Operating costs in India are significantly lower than in Western countries, and the Indian state is very interested in foreign GCCs – a clear locational advantage.
- Innovation centers: Many GCCs have evolved from pure cost-cutting strategies to becoming innovation hubs that design new products and services and drive (digital) transformations.
Current strong growth of GCCs in India
We are currently seeing particularly strong interest in the establishment of new GCCs worldwide, particularly due to the rapid development of Artificial Intelligence (AI) and the need to translate internal company processes into IT systems. Companies are focused on building teams that deal with the implementation of Artificial Intelligence (AI) in company processes in order to remain competitive in the future. In addition, many companies are relying on the integration of tools such as Microsoft 365 to optimize their production and supply chain processes.
India will continue to assert itself as a global leader in this area in the coming years. Estimates suggest that by 2025 there will be over 2000 GCCs in India, which corresponds to a market volume of around 60 billion US dollars.
Challenges in establishing GCCs in India
But we at WB also know the other side of the coin. Although India is obviously an attractive location for GCCs, it poses significant challenges for foreign companies. The main problems include:
- Employee turnover: Employee retention is a major challenge in India, as there is now a shortage of skilled workers in India and qualified talent often changes companies (See our blog post: Why there is so often a break with Indian management – Dr. Wamser + Batra (wb-indien.de)).
- Creativity gaps: While the performance competence of Indian employees is high, they often lack the creative skills to develop innovative solutions independently. Established employee management tools must be adapted for India so that a GCC can really grow as an innovation center.
- Cultural differences: Collaboration between Indian and European/American teams is often difficult due to different working cultures. Misunderstandings and a lack of intercultural collaboration lead to unnecessary friction.
For European and American customers who want to build GCCs in India, the Integration of local management personnel and the Promoting a culture of innovation therefore crucial success factors.
Benefit from our experience
We have many years of experience in setting up such competence centers and know not only the success factors but also the pitfalls. In addition to successful implementation, we have also been involved in crisis management projects and had to close GCCs. This experience and the knowledge gained from it are particularly valuable so that our customers can avoid potential mistakes right from the start and operate GCCs sustainably.
Are you thinking about opening a GCC? Are you dissatisfied with the performance of your existing GCC? Contact us without obligation. We will provide you with pragmatic support.
