10 Reasons why GCCs are the future for MNCs

When pandemic hit, it caused an upheaval in the lives of many people and hence in organisations. The consequences have been dramatic to say the least with companies being forced to switch their entire setup from 6-days in office to work-from-home to now finding a balance with hybrid working. These changes in models has led to significant investments in understanding and building globally relevant teams. This is where GCC comes in also known as Global Capability Center or global in-house center (GIC). Right from hiring the right talent from across countries to ensuring they stick around once the company is in growth mode, it’s been a steep learning curve for companies. In all honesty, it is a challenging task for today’s leaders to lead from the front when they don’t have knowledge or experience to build the vision. However, with the advancement of tech there are several solutions which are enabling the organisations to make their vision an easy possibility.

In the simplest of terms, GCC helps create an infrastructure and can handle all important back-end operations, customer service centers, business support functions and IT support to ensure a sustainable growth. A lot of MNCs today take support of GCC’s to ensure seamless, cost effective remote working. For a lot of these companies, GCC is an offshore subsidiary or satellite office set up in a lower-cost location, typically in a different country. The purpose of establishing a GCC is to leverage talent, reduce operational costs, and access new markets while maintaining control over operations and intellectual property. To know more about GCCs read on here.

Pre-pandemic these GCC’s were close to the MNC and were not really saving as much as they are today. A lot of experts predicted the demise of GGC’s however persistent as ever, GCC’s evolved to offer remote support at locations which were much more cost effective than the previous locations. Nowadays, these centers are often established in countries with favorable economic conditions, such as lower labor costs, tax incentives, or a skilled talent pool. GCCs can handle various functions including IT services, research and development, engineering, finance, human resources, customer support, and more, depending on the specific needs and capabilities of the parent company.

As per Economic Times, “India’s data center industry is growing at a compound annual growth rate (CAGR) of around 40 percent and is expected to cross 1GW mark by 2024. This significant growth is driven by the increasing digitalization of businesses, the proliferation of internet-enabled devices, and the government’s push towards a digital economy. Further, with the rising demands of the IT sector and Global Capability Centers (GCCs), businesses are turning to colocation services as a strategic and financially advantageous approach to manage their IT infrastructure.”

The concept of GCCs has evolved considerably since their inception. Initially conceived primarily as cost-saving measures, GCCs have now transformed into dynamic centers of excellence, driving value across various functions within organizations. What started as back-office support for tasks like IT services and customer support has expanded to encompass a broad spectrum of functions, including research and development, engineering, finance, human resources, analytics, and more.

So what is the projected growth of GCCs specially in India?

As per Forbes, “Looking at the numbers, the trend is unmistakable. There are over 1,580 GCCs and a workforce of 1.6 million professionals currently active in India, and the projection is for the country to host over 2,000 GCCs by 2026 or 2027. These GCCs generate $33.8 billion in combined revenue, which is about 1% of India's GDP.”

This is huge right? Read on what Deloitte and EY have to say about GCCS.

The sheer potential of GCC’s is mind boggling. This raises the question of why is the growth that we’re looking at exponential?

Let’s deep-dive into this.

1. More control cost-effectively: GCCs enable MNCs to have greater control over their operations compared to outsourcing to third-party vendors. They can customize processes and workflows according to their specific requirements, ensuring alignment with corporate culture and standards. Additionally, GCCs provide opportunities for knowledge transfer, skill development, and innovation within the organization. Overall, Global Capability Centers play a crucial role in the global business landscape by enabling MNCs to optimize their operations, drive efficiency, and stay competitive in the marketplace.
2. Efficiency at the forefront: In today's fiercely competitive business landscape, multinational corporations (MNCs) are continually seeking ways to enhance efficiency, reduce costs, and tap into new markets while maintaining control over their operations. One strategy that has gained significant traction in recent years is the establishment of Global Capability Centers (GCCs), also known as Global In-House Centers (GICs) or Captive Centers. These offshore subsidiaries serve as strategic hubs for MNCs to leverage talent, drive innovation, and propel growth in an increasingly interconnected world.
3. Access to Diverse Talent: One of the primary drivers behind the establishment of GCCs is access to a diverse pool of skilled talent. By setting up operations in locations with abundant human capital, MNCs can tap into specialized skills that may be scarce or expensive in their home countries. This access to talent not only enables cost savings but also fosters a culture of innovation and collaboration. GCCs serve as talent hubs where employees from different backgrounds and expertise areas come together to solve complex problems and drive business objectives forward.
4. Driving Operational Excellence: GCCs play a pivotal role in driving operational excellence within MNCs. By standardizing processes, streamlining workflows, and implementing best practices, these centers help enhance efficiency and productivity across the organization. Moreover, GCCs provide MNCs with greater control over their operations compared to traditional outsourcing models. By maintaining ownership of key processes and intellectual property, companies can mitigate risks associated with third-party dependencies and ensure compliance with regulatory requirements.
5. Accelerating Innovation: Innovation lies at the heart of sustainable growth and competitiveness. GCCs serve as hotbeds for innovation, fostering a culture of experimentation, continuous learning, and knowledge sharing. With access to a diverse talent pool and cutting-edge technologies, these centers are well-positioned to drive breakthrough innovations that address market needs and drive business growth. Whether it's developing next-generation products, optimizing processes through automation and data analytics, or exploring emerging technologies like artificial intelligence and blockchain, GCCs serve as catalysts for innovation within MNCs.
6. Strategic Global Expanstion: In an era of globalization, establishing a presence in key growth markets is essential for MNCs looking to expand their footprint and tap into new revenue streams. GCCs provide an effective mechanism for companies to enter new markets while mitigating risks associated with market uncertainties and regulatory complexities. By leveraging local expertise and insights, GCCs help MNCs navigate cultural nuances, adapt their offerings to local preferences, and build strong relationships with customers and partners in new geographies.
7. Developing Skills and Leaders: GCCs are not only about leveraging existing talent but also about nurturing and developing future leaders within the organization. These centers provide employees with opportunities for career advancement, skill development, and cross-functional exposure. Through training programs, mentorship initiatives, and rotational assignments, GCCs empower employees to broaden their skill sets, take on new challenges, and contribute to the company's success in meaningful ways. This investment in talent development not only enhances employee engagement and retention but also ensures a pipeline of skilled professionals capable of driving innovation and growth in the long run.
8. Future-Proofing: In an increasingly volatile and uncertain business environment, GCCs provide organizations with the agility and resilience needed to adapt to changing market conditions. By establishing a global footprint through GCCs, organizations can future-proof their operations and remain agile in the face of disruption.
9. Strategic Partnerships: GCCs enable organizations to forge strategic partnerships and collaborations with local governments, academic institutions, and industry stakeholders in different regions. These partnerships can facilitate access to market insights, talent pipelines, and regulatory support, enhancing the organization's competitiveness and market presence.
10. Competitive Advantage: By leveraging the capabilities of GCCs, organizations can gain a competitive advantage in terms of cost efficiency, operational excellence, and market agility. This allows organizations to differentiate themselves from competitors and position themselves as industry leaders in their respective domains.

There is also a significant role that AI would play in the growth of GCCs. AI technologies empower GCCs to enhance operational efficiency, drive innovation, and deliver value-added services to organizations. Through AI-driven automation, GCCs streamline processes, optimize workflows, and reduce costs, thereby enabling organizations to scale their operations rapidly. AI-powered analytics enable GCCs to extract actionable insights from vast amounts of data, facilitating data-driven decision-making and strategic planning. Furthermore, AI-driven predictive analytics empower GCCs to forecast market trends, identify opportunities, and mitigate risks, thereby contributing to organizational growth and competitiveness. AI also plays a crucial role in enhancing customer experiences within GCCs through personalized services, proactive support, and intelligent chatbots. AI-driven chatbots and virtual assistants are deployed to provide round-the-clock customer support, handling routine inquiries, troubleshooting issues, and escalating complex queries to human agents when necessary. This enhances customer satisfaction while reducing response times and operational expenses.If we look at the big picture, AI serves as a catalyst for GCC growth by unlocking new opportunities, driving operational excellence, and fostering innovation across various functions and industries.

Global Capability Centers represent much more than just cost-saving measures for multinational corporations. They are strategic enablers of growth, innovation, and operational excellence in today's fast-paced business environment. By leveraging talent from around the world, driving operational efficiency, accelerating innovation, expanding into new markets, and nurturing talent, GCCs play a pivotal role in shaping the future success of organizations on a global scale. As MNCs continue to navigate the complexities of the modern business landscape, the importance of GCCs as strategic assets cannot be overstated. They are not just centers of operations but centers of excellence, driving transformation and propelling organizations towards greater heights of success and competitiveness.

FAQs for Global Capability Centers (GCCs) typically revolve around various aspects of their establishment, operations, benefits, and challenges.

Here are some common FAQs for GCCs along with brief answers:

1. What is a GCC?

A GCC, or Global Capability Center, is a centralized hub established by multinational corporations to leverage talent, resources, and capabilities in different regions around the world.

2. Why would a company establish a GCC?

Companies establish GCCs to access global talent pools, optimize operational costs, drive innovation, enhance scalability, mitigate risks, and expand their global footprint. Here are 5 reasons why companies are setting up GCCs.

3. What functions are typically managed by GCCs?

GCCs commonly manage functions such as IT services, research and development, finance and accounting, human resources, customer support, supply chain management, and data analytics.

4. Where are GCCs typically located?

GCCs can be located in various regions around the world, including offshore destinations such as India, the Philippines, Eastern Europe, and nearshore locations such as Latin America, Eastern Europe, and Southeast Asia.

5. What are the primary benefits of establishing a GCC?

The primary benefits of establishing a GCC include access to a diverse talent pool, cost optimization, scalability, operational efficiency, risk mitigation, innovation, and enhanced customer experience.

6. How does a company set up a GCC?

Setting up a GCC involves several steps, including market analysis, site selection, legal and regulatory compliance, infrastructure setup, talent acquisition, and ongoing management and operations.

7. What are the challenges associated with running a GCC?

Challenges associated with running a GCC include cultural differences, language barriers, talent retention, regulatory compliance, geopolitical risks, infrastructure limitations, and coordination across global teams.

8. How can a company ensure the success of its GCC?

Companies can ensure the success of their GCCs by investing in talent development, fostering a culture of collaboration and innovation, implementing robust governance and compliance frameworks, leveraging technology, and continuously evaluating and optimizing operations.

9. What role do GCCs play in driving innovation within organizations?

GCCs serve as hubs for innovation within organizations by fostering collaboration among diverse teams, leveraging local expertise, accessing emerging technologies, and driving continuous improvement and experimentation.

10. How do GCCs contribute to the overall strategic objectives of a company?

GCCs contribute to the overall strategic objectives of a company by enabling cost optimization, driving operational excellence, facilitating global expansion, enhancing agility and resilience, and driving long-term growth and competitiveness.