Authored by - Ajit Pethkar, Head of Solutions -Xoriant

In 1985, Texas Instruments took a bold step by opening its first office in Bangalore, laying the groundwork for global tech companies to establish engineering hubs in India. Recognizing the abundance of world-class engineering talent, many multinationals soon followed, setting up Global Capability Centers (GCCs) across the country. Decades later, this trend has only intensified.

Recently, over 150 multinational corporations have launched engineering centers in India, expanding beyond Bangalore to tier-2 cities. Projections indicate that by 2025, India will host nearly 1,900 such centers, contributing over $60 billion to the economy.

While the potential for growth is immense, foreign companies still face hurdles in setting up operations in India. Let’s explore the challenges and strategies for scaling GCCs successfully in this dynamic environment.

Understanding Global Capability Centers

Global Capability Centers (GCCs), formerly known as global in-house centers (GICs), are units established in foreign countries to manage key business functions like IT, product development, and back-office operations such as finance and payroll. These centers range in size and complexity, from small specialized teams to large, multifunctional hubs. In India, GCCs have evolved from a focus on cost savings to taking ownership of entire product lines and delivering innovation in business-critical areas.

Key Challenges for GCCs in India

Here are some of the primary challenges that GCCs encounter:

1. Ineffective Operating Structures Without a well-defined operating model that integrates closely with the parent company, GCCs may face:

   • Difficulty in achieving scalability and delivering on expectations
   • Cost inefficiencies
   • Issues retaining skilled talent
   • Misalignment with the company’s broader strategic goals

2. Competition for Talent According to Nasscom’s GCC 4.0 report, India-based GCCs will need to recruit around 20,000 professionals for global roles by 2030. These centers must compete with well-established IT and tech firms that have developed strong hiring strategies and relationships with universities, enabling them to recruit quickly and effectively.

3. Navigating Regulatory Complexities India's regulatory framework can be challenging for companies establishing GCCs, as businesses must often work with multiple government agencies. This fragmented regulatory process can lead to delays and inefficiencies. However, some states, like Maharashtra, have made strides to streamline approvals through initiatives like the 2023 IT/ITES policy, which aims to accelerate the setup of GCCs by simplifying regulations and promoting Centers of Excellence (COEs).

Steps for Building and Growing GCCs in India

To successfully establish and expand GCCs in India, companies should follow these key steps:

1. Clarify Business Objectives The first step is for the parent company to define the specific goals for the GCC. This involves determining:

   • Which business functions the GCC will handle
   • The anticipated gains in efficiency and cost savings
   • How the center will align with the organization’s long-term vision

2. Assess Market Feasibility Next, companies should conduct a detailed market feasibility study, considering factors like talent availability, potential local partnerships, and business setup costs. This analysis should also account for the ease of doing business, local regulations, and the quality of existing infrastructure.

3. Create a Comprehensive Business Plan Based on the results of the feasibility study, companies should develop a robust business case that outlines expected benefits, potential challenges, implementation costs, and projected returns. This should be complemented by a detailed roadmap that covers critical milestones, such as establishing a legal entity, investing in infrastructure, and recruiting talent.

4. Implement a Scalable Operational Framework To ensure long-term success, GCCs need to:

   • Adopt Agile Operations: Leverage agile methodologies and scalable infrastructure to remain flexible and responsive to changing business needs.
   • Focus on Governance: Effective governance practices help manage risks, ensure regulatory compliance, and maintain alignment with the parent company’s objectives.
   • Foster Key Partnerships: Building relationships with local academic institutions, businesses, and government agencies can support talent development, enhance brand visibility, and open new growth opportunities.
   • Develop Strong Hiring Teams: Establish recruitment teams dedicated to attracting top talent through competitive compensation, a focus on career development, and a workplace culture that promotes learning and growth.

About Author:

Ajit Pethkar is the Head of Solutions at Xoriant. He has nearly three decades of experience in IT and software products, having held numerous leadership roles including CTO and CIO. With deep expertise in technology and a track record of working with global customers, Ajit is now at the forefront of leveraging AI and cognitive technologies to transform business and IT operations.