GCC for Global delivery – higher value chain

GCC for versatile Global delivery

Global Capability Centers (GCC) search on the internet will inundate you with many explanations and definitions by various players. GCC is not a new phenomenon; it has been in existence since the late nineteen eighties in India. For example, Texas Instruments and Motorola have their GCC in Bangalore, India.

The Evolution of Indian GCC space

Before the advent of the term GCC, the various terms were in use over the period as the progression kept on achieving higher value added.

Each of these had a focus on service. ODC was primarily in an era when the majority of work was software development projects, Software maintenance, etc.  Back-office became popular as onshore businesses discovered that other non-core business could also be done in India, and this gave rise to offshore Shared Services Centers (SSCs). SSC aims to achieve a uniform process across enterprises, improve efficiency and cut costs.  GIC is much like a GCC with a focus on in-house or in-sourcing of entire services rather than outsourcing to a third party. GCC is a new terminology that emerged from an increased focus on acquiring and scaling Global capability by multinationals for a higher value add. One short and simple way to define the Global Capability Centers is that “they are 100% subsidiaries of a company set up in a remote geography for conducting varieties of operations and services”.  The subsidiary so set up is the GCC of the parent entity, which gains by adding up global capability in the GCC in terms of capacities, talents, lower costs, efficiency and markets.  There is no restriction on what activities can be taken up by a GCC. However, some trends have prevailed over periods of time. These trends are shown in a GCC maturity curve below in Figure 1.  In the present day time, GCC services offerings have moved up the value chain, such as product engineering and design, R&D and Market-oriented services, which were traditionally formed the core activities of a business and limited to parents in headquarters. This transition of GCC from non-core back-office, tech services and SSC to core activities is illustrated as a progression in the Indian GCC landscape over a period of time. Fig. 1 – GCC Maturity model. Some players took early risks on the higher end of the value chain, and others took time. However, slowly this is becoming a trend to build global capability across a broad spectrum of services in the GCC and achieve higher value gains.  The Indian GCC landscape has an estimated 1800+ GCC in India by 2024, employing over 1.5 million employees, engaged in various areas covered above and sectors including technology, retail, consulting, banking and manufacturing. It served as a fertile ground for global organisations for digital transformation, technology transitions and strategic hubs for growth. The Indian GCC ecosystem is now envied as it provides cutting-edge Technology, Innovation or production hubs to the parent, providing services not limited to back-office but higher value, such as engineering service, product design and R&D.

Our Global Delivery Center Approach

At StepIndus, we extend this further to terminology called Global Delivery Centers (GDC). We believe that the GCC can perform any service as mentioned above for a higher value-added.  However, GCC can be extended to manufacturing services in a remote geography as well.  This will truly cover the entire value chain and integrate the GCC presence into the local market and regional export, thereby empowering an integrated play of Global delivery centers Manufacturing centers when distributed globally, can provide the efficiencies required for distribution and also capture the global resources pool allocation advantages. StepIndua is poised to offer end-to-end consulting and on-ground set-up services for Manufacturing Centers.

India is a top destination for GCC

India has been the top choice for the Global Capability Centers for the last 3 decades and still occupies the top slot. India is now also a hot destination for manufacturing, targeting both the large domestic Indian market as well as the exports to the region. The diversity and quality of talent available and sustained cost advantage are two big attraction points. India now offers an advantage for the GCC + Manufacturing, making it a powerful Global Delivery Center destination.  According to the Economic Survey 2024 of the Government of India, in 2023, GCCs employed nearly 2 million, with over 42% of them working in engineering, research, and development (ER&D). The ER&D segment of GCCs grew by 30% to $25 billion in 2023. The IT segment of GCCs grew by 30% to $9.7 billion, while the BPM segment grew by 27% to $10.7 billion.  The Economic Survey projects that GCCs will contribute 3.5% to India’s GDP by 2030, which is roughly $121 billion in revenue.  Even states are unveiling GCC-focused policy now. At least two states have announced their specific GCC policy. This lead has been taken by Karnataka, the state where Bangalore, the silicon city of India, is located and Uttar Pradesh, where a large cluster of northern India, Noida, is located.  India’s Union Budget 2024-25 announced the creation of 12 industrial corridors, or industrial smart cities, under the National Industrial Corridor Development Programme (NICDP), thereby giving a further boost to the Infrastructure. The Government policy is directed towards promoting India further as a destination for GCC and GDC by emphasising harnessing India’s demographic dividend through a strong focus on education, innovation, skills, and research. The foreign trade and Industrial policies are focused on attracting FDI in manufacturing and making India a product nation.  India is poised to offer immense opportunities in the next two decades for enabling global businesses to operate from India, including Manufacturing centers for their growth and

Legal Disclaimer:

We have been practitioners in this field of Offshore Advisory, Global Captive Offshore Center or Global Delivery Centers ever since 1993. The industry is replete with several terminologies. We contextually agree with all these. We write our blogs purely based on our practice and experience. Whereas we follow general trends, we do not follow a particular firm for content, knowledge, work and business model.