Best Value For Your Money from RamaKrishnaVadlamudi: October 2024

Primer on Global Capability Centres: And India is World's GCC Capital

(This is for information purposes only. This should not be construed as a recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)

Global Capability Centres (or GCCs) are office establishments used by global companies (or multinational companies) that concentrate workers and infrastructure at GCCs and use them for a variety of functions, like:

back-office functions,
corporate business-support functions,
contact centers and help desks,
IT support functions like, app development and maintenance, and
remote IT infrastructure.

These are sometimes called as Centres of Excellence.

These GCCs are also used for automation, innovation and business analytics. The global practice of offshoring has enabled India as a magnet since the early 2000s.

After and during the COVID-19 Pandemic, the race for setting up GCCs has accelerated. The Pandemic disrupted several businesses globally forcing them to focus their efforts through GCCs in order to improve productivity, achieve economies of scale and efficient use of resources. GCCs are pivotal for business continuity.

India: World’s GCC Capital:

Countries like India, the Philippines, and Poland are popular locations for these centres due to their skilled workforce, cost efficiencies, and supportive business environments. India is a leader in GCCs and is considered as world’s GCC capital.

India’s prominence has been growing as a key destination for global business expansion.

As of March 2024, India has 1,700 GCCs and the total GCC units in India are 2,975. In 2019, India had 1,285 GCCs and 1,850 GCC units.

The break-up of GCC Units is as follows:

875 Bangalore
465 NCR
365 Bombay
360 Pune
355 Hyderabad
305 Madras
220 Others

Bangalore, National Capital Region of Delhi and Bombay are leading the pack. Tier 2 cities, like, Coimbatore, Ahmedabad and Baroda are emerging as key hubs.

Over 19 lakh workers have been employed in these centres.

Nearly 23 per cent of Global 2000 MNCs have set up their GCCs in India as of now.

Some of the global companies that have set up GCCs in India are: Accenture, Cognizant, IBM, Deloitte, EY, HSBC, JP Morgan Chase, Dell Technologies, Siemens, Wells Fargo and GE.

The US-headquartered hospitality firm Marriott International is establishing a new tech accelerator in Hyderabad, India which is expected to open in early 2025 and will be the company's first overseas global capability centre (GCC).

Last week, Karnataka state government unveiled a plan to double the GCCs by 2029 and it plans to offer a variety of incentives for MNCs (multinational companies). The government further wants to encourage setting up GCCs in tier 2 and 3 cities, like, Mysore, Hubli and Mangalore -- looking beyond Bangalore.

Uttar Pradesh state government is also drawing up plans for establishing GCCs in the state.

Gujarat state government’s Semiconductor Policy 2022-2027 has promoted physical and digital infrastructure – encouraging in setting up more GCCs.

A major portion of the growth of GCCs in India is accounted for by Engineering and R&D services. The main attraction for GCCs is India’s talent pool and cost advantages.

These centres typically focus on areas such as: Technology Innovation, IT Services, Finance and Accounting, Human Resources, Research and Development and Customer Support.

According to a report by Nasscom-Zinnov, 70 per cent of Fortune 500 companies will expand their presence to India by 2030.

The current revenue from GCCs in India is about USD 65 billion and it is expected to touch USD 100 billion by 2030.

And the number of GCCs is expected to rise from current 1,700 to 2,100-2,200 by 2030. The headcount in these centres is expected to grow from the current 19 lakh to 25-28 lakh by 2030.

MNCs that have set up GCCs in India between 2019 and 2024 are: Airbnb, Coinbase, KraftHeinz, Sandoz, truecaller, wayfair, H&M, UPS, Hitachi Energy and Zoom.

Conditions required for setting up a GCC:

Talent Pool: You need to attract skilled professionals; and you train and develop programmes for upskilling employees.

Infrastructure: Office space is needed with IT systems, cyber security apparatus and communication tools.

Government policy: Stable policies and incentives are required to encourage global firms to set up their shop.

It is expected that global capability centres will play a big role in India's economic growth in the next 10 years.

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Data source:

Nasscom-Zinnov Report Sep2024: India GCC Landscape Report

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Disclosure: I've got a vested interest in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.

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