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GCCs in India – Building resilience for sustainable growth

May 29, 2024 3403 0 GCC nasscom insights

GCCs in India – Building resilience for sustainable growth

As organizations navigate the complexities of the modern business landscape, the Global Capability Centre (GCC) ecosystem in India has emerged as a beacon of growth and innovation due to unprecedented expansion. The GCC landscape has witnessed the establishment of over 1,580 centres by FY2023, with many new GCCs being established and existing ones expanding every quarter. Several factors such as access to a wide pool of digitally skilled talent, the drive to adopt new technologies and the imperative to make greater customer impact are driving the growth of the GCC ecosystem in the country. This growth trajectory over the next two-three years is expected to continue with the growing number of global players across sectors establishing deep capabilities, building technology centers and transformation hubs. However, this rapid growth and scale of GCCs has also brought to the forefront some associated challenges and considerations that need to be addressed as organizations continue to evolve. The paper identifies and delves deep into four considerations for GCCs as they move up the value chain and offers mitigation practices, case studies and best practices. These include talent management, strategic emerging technology adoption, navigating regulations, and de-layering the concentration concerns.

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Key Highlights

  1. Managing talent remains a key priority for GCCs in India
  • Over 72% of GCC leaders identified talent management as a key priority for GCCs.
  • Key talent related considerations include talent availability, capability, and employability, attracting and retaining talent, growing need for leadership talent and maintaining cost arbitrage.
  • Mitigation measures to address talent related considerations include investing in future talent availability, deployability, and capability, attracting and retaining top talent, and cultivating a strong leadership pipeline and also understanding the nuanced narrative around cost arbitrage as GCCs are moving up the value chain and embracing complex, specialised functions. 

 

  1. Leverage emerging technologies to become strategic transformation hubs
  • 96% of the interviewed leaders cited adoption and leveraging of emerging technologies (ET) as a crucial priority for achieving sustained growth.
  • Various considerations regarding emerging technologies which need to be addressed and mitigated include-
    • External considerations related to third party, regulatory and compliance considerations, and tech landscape and cyber threats.
    • Internal considerations include quality and reliability of content, data, considerations related to governance and ethics.
  • Mitigation measures include rethinking the skills of the future service delivery models and governance structure; redefining the customer experience, partner ecosystem, and delivery models and reimagining the value proposition, solution design etc.

 

  1. Ensuring regulatory compliance is paramount for GCCs operating in India
  • 81% respondents mentioned transfer pricing as the top regulatory priority for GCCs in India. More than half of the respondents highlighted SEZ laws and STPI regulations (67%) and labour laws (60%) among key regulatory priorities.
  • For the CXOs surveyed, the top 5 regulatory considerations include corporate tax especially transfer pricing, SEZ and STPI
  • compliance, labour laws, DPDPA, and FEMA.
  • Regulation specific best practices for continued compliance include-
    • For transfer pricing, maintaining robust, clearly defined inter-company agreements(ICA), establishing and documenting pricing models, and assessing and evaluating the benefits and costs are necessary.
    • For SEZ compliance, establishing processes for statutory declaration development and compliance tracking, developing SOPs for SEZ specific documentation, and regular audits of SEZ specific documentation and compliance processes are needed.
    • For Labour laws, implementing internal controls for background checks, implementing compliance tools to monitor periodic updates on regional and central regulatory changes, and tracking applicable statutory timelines need to be implemented.
    • For DPDPA related considerations, designing and implementing privacy policies and procedures in line with DPDPA requirements, performing data mapping exercises and maintaining record of processing activities (RoPA), and assessing third party vendors before onboarding and ensuring privacy by design principles to be implemented.
    • For corporate tax and FEMA regulations, documenting to support foreign tax credit claims and treaty benefits, assessing access to tax treaty for favourable taxation, and validating secondment arrangements are some common best practices.

 

  1. Address concentration concerns in India
  • 44% of the interviewed stakeholders expressed the view that it is imperative to delayer concerns around concentration. Only 20% of survey respondents view the concentration of GCCs in India as perceived risk.
  • By adopting a variety of metrics, GCCs can accurately identify critical exposures, thoroughly assess potential vulnerabilities, take proactive measures to mitigate the concerns and provide comprehensive reports to global organisations.
  • The metrics include scope and volume of work from the global perspective, strategic and functional objectives of the global organisation being fulfilled by Indian GCCs, criticality of the activities, number of centres in India, global presence and capabilities, reliance on the Indian ecosystem and offerings, third party and supply chain resiliency, technology landscape, business continuity plans (BCPs) and contingency planning, and cultural integration and ethical practices.
  • Some of the mitigating measures include understanding the concern by conducting joint workshops to arrive at a shared understanding of ‘concentration concern’, assessing through a multi- pronged approach of a combination of qualitative and quantitative to assess whether concentration consideration exists and evaluate its severity.

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