Global Capability Centres – the oft non-market-facing offices of multi-national companies supporting global functions like technology, human resources, finance, or research and development – have scripted a story of success over the past three decades in India. Ever since Texas Instruments set up their first Global Capability Center (GCC) in 1985 to support their United States operations, GCCs have grown leaps and bounds in their importance both to the nation and the organisations they support. Today, almost half of all GCCs in the world are in India and they have evolved from being doers and optimisers to thinkers and influencers.

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Interestingly, GCCs today are categorised as a sector of sectors, an acknowledgement of the diversity in the functions delivered out of GCCs for sectors across the corporate function spectrum. According to the latest NASSCOM Strategic Review 2024, we have more than 1,600 GCCs in the country and 100+ Centres of Excellence (COEs) across verticals, providing employment to over 7.45 lakh people. The Deloitte GCC Value Proposition for India report articulates how they also have a cascading multiplier effect: a 3X on revenue (a rupee spent on GCC generates a total of three rupees for the overall economy), and a 5X multiplier effect on job creation (think office administrators, hospitality and security staff, drivers). This multiplier effect is of great significance to both central and state governments. Hence, it’s not surprising that there is a healthy competition between states to offer red-carpet welcome, provide tax incentives and support issue-less ‘landing’ to these GCCs.

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The increasing relevance of the India GCCs can be attributed to multiple global developments that serendipitously came together to work in India’s favour: An aging population in many parts of the world, economic slowdown in major economies, geopolitical de-risking prompting a diversification of work, a push for green technologies and sustainable solutions, and the rapid digitalisation of sectors; all of these directing more work to the able and willing Indian workforce. As a result, this ‘technology-led’ transformation of GCCs is seeing a modernisation in the portfolio of services and products they offer to their parent organisations and clients. One of the services rapidly growing in prominence within GCCs is the Engineering Research & Development (ER&D), which also encompasses digital engineering. According to Deloitte’s Global ER&D Pulse Survey 2022, more than 70% of companies polled were looking to ramp up their spend towards ER&D in their India GCCs over a three-year horizon, with 35% expecting to increase it by more than 10%. Majority of this spend is expected to go towards driving innovation and strategy in cutting-edge areas like industry 4.0 and other research and advanced engineering efforts, through establishing COEs.

While it might be difficult to predict the future trends in today’s times, we could hazard some bit of crystal ball gazing and anticipate four key trends.

Firstly, India will continue to get a lion’s share of GCC setups in the coming years, and the nature and scope of service will further diversify upstream beyond the traditional confines. Secondly, GCCs will be looking beyond the metros and percolate significantly into emerging tier 2 and 3 hubs across the country. Thirdly, various clusters will shape up – along the lines of what we see with life sciences in Hyderabad, financial services in Gujarat, and automobile in Chennai and Pune, and retail in Bengaluru – as states look to develop focused expertise and offerings to stand out from the crowd. Finally, we will see a strong emphasis within GCCs on inorganic growth through collaborations with startups, industry bodies, academia, and even competitors.

Of these, the success of the first three will strongly rely on the central and state governments defining policies that attract more GCCs through tax holidays, reimbursement of skill development expenditures, single-window GCC setup schemes, upskilling initiatives, and key infrastructure build out.

The next few years will be a bellwether of sorts for GCCs in India, as they look to increase their relevance to their parent companies and scale up to meet the growing demands of the global enterprises, especially in emerging domains like Artificial Intelligence (AI).

Like Jensen Huang, the CEO of Nvidia put it in his conversation with Prime Minister Modi recently, India has the potential to be the AI front office for the world. It goes without saying that GCCs can (and will) spearhead the technology charter for global enterprises, with many having already begun the journey.

This article is authored by Sumeet Salwan, partner and Harshith Bhat, associate director, Deloitte India.

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