GCCs and skill development: Enhancing India’s competitive advantage in global business services
Over the years, GCCs have transitioned from back-office units into centres of excellence, expertise and innovation.
Few may be aware that the story of GCCs (global capability centres) began in India in 1985 when Texas Instruments established the first centre to support its US operations. Decades later, almost 50% of the world’s GCCs are in India. Initially, GCCs operated as offshore offices capitalising on the cost advantage by outsourcing IT and routine back-office functions. Thanks to this model, companies could optimise operations by reducing labour costs without compromising their support service quality.
Over the years, GCCs have transitioned from back-office units into centres of excellence, expertise and innovation. As a result, GCC operations are now wholly integrated into the core enterprise strategies of parent entities while driving technological advances, innovation and strategic growth. This marks a paradigm shift, positioning GCCs as key players in the global business universe.
The growing relevance of Indian GCCs can be credited to several global developments. These include ageing populations across geographies, an economic slowdown in large economies, an attempt to de-risk operations via diversification, the swift rise in digitalisation of myriad segments and a shift towards sustainable solutions and green technologies.
Besides, India’s large talent pool of workers, many of whom are tech-savvy and proficient in English, ensures easier collaboration and communication with their multinational partners. Thanks to its vast domestic market and strategic location, a GCC in India allows firms to penetrate the local market while also exploring opportunities for overseas growth and expansion.
As per NASSCOM, more than 1,600 GCCs employ approximately 1.6 million people while generating revenues above $46 billion.These numbers have had a major impact on India’s economy, trade and foreign investments. Recently, some key spheres that have seen strong growth include automotive, semiconductors, retail, healthcare and industrial manufacturing.
Promoting the culture of innovation and upskilling
GCCs function as hubs of innovation and upskilling while enhancing enterprise operations and providing global insights. By leveraging tech tools, GCCs are facilitating seamless knowledge transfer and exchange of information between local and overseas entities, which also ensures the upskilling of local talent.
Rather than being mere service providers, GCCs act as value-added delivery centres. The ongoing transfer of knowledge fosters a fertile ground for continuous learning in the GCC ecosystem, elevating the skills of the local workforce. In turn, this constant knowledge transfer and upskilling of talent propel more innovation and greater market dynamism, boosting business operations.
However, to maintain its position as the leading location for GCCs, the nation must keep leveraging its strengths by increasing the local talent pool, promoting excellent work ethics and ensuring adequate outlays to spur innovation. The talent pipeline can only be sustained via an industry-aligned academic system that prioritises sunrise technologies while streamlining value creation costs.
Realising the significance and contribution of GCCs in the economy and foreign investments, the Centre has been implementing policies to create an enabling ecosystem. For example, the creation of SEZs (special economic zones) and STPIs (Software Technology Parks of India) have been pivotal in providing tax incentives on export revenues to multinational companies. Such measures have been encouraging MNCs to set up talent centres in India.
Current challenges
Nonetheless, new GCCs are facing some challenges in India. Some of these have been highlighted in a recent survey of 255 GCC leaders of firms based in the US and the UK.[2] Commissioned by consulting services provider CaptiveAide, the survey was held in collaboration with the research firm Feedback Insights.
The survey studied new GCC entrants in India to understand their top challenges. Overall, the firms revealed that cultural integration (84%) and regulatory compliance (55%) were the main hurdles.
Consequently, investments had to be made in cultural training programmes, empowering the local leadership and setting up a vibrant compliance framework.
The report said language barriers, cultural nuances and diverse work practices hindered cohesion and collaboration within the organisational ecosystem. Given the robust legal framework in India, the report stated that organisations should prioritise regulatory due diligence by hiring efficient legal resources to manage the complexities of the domestic regulatory landscape.
Measures to create a conducive market environment
Aware of these issues, apart from SEZs and STPIs, the Centre has introduced other supportive policies. For instance, FDI norms have been relaxed so MNCs find it easier to invest or expand GCC operations in India. Additionally, initiatives such as Start-up India, Digital India and Make in India benefit GCCs.
By encouraging start-ups and innovation, Start-up India offers GCCs a dynamic environment to innovate and collaborate. Digital India has improved the digital technology infrastructure that supports GCCs while Make in India promotes the nation as a manufacturing hub, complementing the tech and service segments and improving the entire business ecosystem.
Overall, these initiatives have helped in creating a stable, conducive environment that benefits GCCs. By incentivising MNCs to set up GCCs in the country, these measures could act as a catalyst for global economic advancement while positioning India as the world leader in outsourced business services.
By Rohit Arora, CEO and Co-founder, Biz2X