Exploring Global Capability Centers (GCCs) for Success
In today’s rapidly evolving business landscape, many multinational corporations have established Global Capability Centers (GCCs) in countries like India to tap into a vast pool of talent and gain a competitive edge. These centers play a pivotal role in driving innovation, offering cost-effective solutions, and delivering operational excellence. In this enlightening Q&A blog, we sit down with GowriShankar, an experienced professional with 2 decades worth of experience, someone who has spent years working within GCCs, to gain insights into the dynamics, challenges, and successes of these centers.
Vinay
How are GCCs Different from Traditional Indian Companies?
GowriShankar
GCCs and traditional Indian companies differ significantly, especially in terms of their cultural dynamics. GCCs often offer a more global and diverse work culture. They focus on creating a global workforce with exposure to various working styles and practices. In contrast, traditional Indian companies tend to have a more hierarchical structure, where obedience is often valued over questioning authority. Additionally, traditional Indian companies may be more action-oriented, prioritizing quick results, while GCCs often invest more time in analysis and preparation before execution.
Vinay
What Motivated You to Join a GCC and How Has Your Journey Been?
GowriShankar
My journey in the GCC space began when I joined Royal Bank of Scotland, and it has been an exciting ride since then. I’ve had the opportunity to work with diverse organizations, including Amazon and Maersk, which have exposed me to different working styles and cultures. My role has evolved from software development to strategic positions, and I’ve had the privilege of setting up startup collaboration outfits, among other things. This journey has allowed me to work with people from various backgrounds and expand my horizons, which I cherish the most.
Vinay
How Do GCCs Settle in the First Few Years in India?
GowriShankar
Setting up a GCC in India involves several steps. Initially, companies focus on establishing connections with local government entities, industry bodies like NASSCOM, and existing players in the market. They research and identify the right location, decide on the type of talent required, and choose between tier 1 and tier 2 cities based on their needs. The first six months to a year are spent on ground research and infrastructure setup. Talent attraction becomes a crucial aspect, especially if the company is not a well-known tech brand in India. After this initial phase, it’s all about showing value and generating business outcomes with the talent pool.
Vinay
How Is Decision-Making Handled Within GCCs?
GowriShankar
Decision-making in GCCs is often a distributed process that involves input from both local and headquarters teams. The power center for decision-making can shift based on the nature of the decision and its impact. For instance, when it comes to strategic decisions related to sales or regional operations, the power might lie with the local teams because they have the ground reality insights. On the other hand, decisions related to enterprise architecture or cybersecurity might be more influenced by headquarters.
Vinay
Are GCCs Just About Cost-Cutting, or Do They Serve a Broader Purpose?
GowriShankar
If we look back about a decade and a half, GCCs were predominantly driven by cost considerations, at least in the context of the Indian market. However, recent statistics shed more light on the evolving landscape.
In the past two years, 70% of the GCCs established in India have incorporated Research and Development (R&D) setups, IT infrastructure, and Business Process Management (BPM) capabilities. This marks a significant change from the days when GCCs were primarily comprised of execution teams.
This means that GCCs are no longer just centers for cost savings. They have evolved into hubs for accessing talent and knowledge, which is particularly viable and feasible in a country like India. Additionally, we’re seeing newer geographies emerge with a stronger focus on cost benefits. European hubs, for instance, are being established, with Poland becoming a prominent choice due to its cost advantages. While they may not have abundant talent, the cost advantage is compelling. The Philippines is another evolving geography for cost benefits.
However, when considering India as a GCC destination, there is a significant emphasis on developing these centers as talent and capability hubs, driven by factors beyond cost. Take my own experience, for example; our GCC was strategically established to collaborate with startups and drive innovation. Many other organizations within our ecosystem have set up Centers of Excellence in Innovation, IoT, and AI, all based in India. While it started as a cost-based decision, costs have steadily increased for GCCs in India. At one point, the Indian market was operating at an average of $15,000 – $17,000 per full-time employee (FTE). Now, it’s at USD 29,500 and is expected to rise to USD 39,000. This significant increase shows that cost savings are no longer the primary motivation.
People are drawn to GCCs primarily for access to talent, knowledge, and language skills that are not easily found in other geographies. This is why GCCs have become increasingly popular as a setup. The current GCC market in India is estimated to be around USD 46 billion, and predictions suggest it will surpass USD 100 billion by 2030. These numbers indicate that the growth is driven by more than just cost advantages. It’s about the broader value proposition that GCCs offer.
Vinay
How Do Multinationals Decide Between GCCs, Outsourcing, or Expanding Operations?
GowriShankar
The decision between GCCs, outsourcing, or expanding operations often depends on the specific needs of the multinational company. Companies may start with outsourcing certain tasks to reduce risk and cost. However, many eventually move towards GCCs when they realize the value of having their own talent pool aligned with their strategic goals. The ability to align ambition and strategy within GCCs makes them attractive. It’s often driven by experiences and the need for a more integrated and value-driven approach.
Vinay
How Is the Success of GCCs Measured?
GowriShankar
The success of GCCs is no longer solely measured by cost savings or the number of employees. It has shifted towards outcome-centered measurements. GCCs are evaluated based on their contributions to customer experiences, revenue generation, and strategic outcomes. Metrics such as Net Promoter Score (NPS) and revenue metrics play a crucial role in assessing the success of GCCs today.
Vinay
Should India Be Concerned About Competition From Other Countries for GCCs?
GowriShankar
India still holds a significant advantage in terms of talent pool and expertise. While other countries like Poland and the Philippines are emerging as cost-effective options, India’s access to diverse skill sets remains unmatched. However, it’s essential for India to focus on value creation rather than just cost-cutting to maintain its competitive edge in the GCC space.
Vinay
When and How Are Budgets Allocated Within GCCs?
GowriShankar
Budgets within GCCs are typically allocated on an annual basis. These centers follow internal charging, where they charge their parent organization. Budgets are distributed monthly or quarterly based on the allocated amount. This helps in managing expenses and ensuring that the GCC operates within its financial limits.
Vinay
How Does Planning Work Within GCCs, and How Far in Advance Is It Done?
GowriShankar
Planning within GCCs is similar to any other organization. Teams plan for the upcoming year, setting goals and objectives. They often align their plans with the headquarters’ strategic priorities. Planning typically happens a few months ahead, and it involves getting approvals and buy-in from headquarters.
To Conclude
Global Capability Centers (GCCs) are no longer just cost-saving entities; they have transformed into strategic hubs that drive value for multinational companies. Gauri’s insights shed light on the evolving role of GCCs, their impact on business outcomes, and the importance of aligning ambitions and strategies within these centers. As GCCs continue to play a pivotal role in the corporate world, staying informed about their inner workings is crucial for businesses and professionals alike.
