Moving Up the Value Chain: How Global Capability Centers (GCC) in India Drive Innovation and Benefit the Economy?
Publish Date: June 29, 2023In recent years, global corporations have shown a growing interest in establishing centers in India to leverage the country’s highly skilled workforce, favorable business environment, and lower operating costs. These captive centers, entirely owned by global corporations, are now evolving into strategic partners for their parent companies as they move up the value chain. This blog aims to provide an insightful analysis of the reasons behind this trend, its benefits to GCCs, its impact on the Indian economy, and its implications for the global business landscape.
Why are Global Capability Centers moving up in the value chain?
GCCs in India continue to move up in the value chain by developing advanced technologies and expanding their capabilities to drive innovation and efficiency across their global operations. For example, Bosch Engineering and Business Solutions, the captive center of Bosch in India, launched an R&D center focusing on Automotive Engineering and Digital Enterprise in Hyderabad. [1] Similarly, JP Morgan’s Global Service Center in Bengaluru is expanding its capabilities to include the development of cloud-based technologies and digital transformation solutions for JP Morgan’s global operations. [2]
According to a recent survey by NASSCOM, it is expected that by 2025, multinational corporations will establish 500 new GCCs in India, a significant increase from the approximately 50 centers established annually just two years ago. [3] This trend highlights the continued attractiveness and growth of India’s large talent pool.
Global corporations face many challenges, including changing consumer preferences, globalization, operational complexity, and intensifying competition. In response, they seek ways to streamline operations and remain ahead of the curve. Captive centers in India are well-positioned to help their parent organizations meet these challenges by assisting access to a highly skilled workforce who can handle complex tasks such as research and development, data analytics, and product design.
Furthermore, these centers offer cost advantages too, which could prove beneficial. By leveraging the expertise and resources of their captive centers in India, global organizations can innovate, reduce costs, and stay ahead of the competition.
Another reason captive centers are moving up in the value chain is that companies across the Indian technology landscape are making significant progress in building their technology infrastructure, including process optimization and automation, scaling on data-driven decision-making capabilities, navigating the nuances of cloud computing capabilities, and taking center stage in becoming digital transformation enablers. This makes it easier for captive centers to access and utilize the latest technologies, enabling them to develop cutting-edge products and solutions for their global operations.
Benefits for GCCs to moving up the value chain
Moving up the value chain can provide several advantages for global companies
- It allows them to tap into India’s highly skilled workforce, increasingly becoming a hub for innovation and research. It means they can access talent that may not be available in their home markets.
- It allows them to leverage their captive centers as strategic partners. Instead of being perceived as a cost-saving construct, captive centers can now provide real value to their parent companies by helping them improve their operations, increase efficiency, and stay ahead of the competition.
- Moving up the value chain can help GCCs build stronger relationships with the Indian government and local businesses. This can be particularly important in sectors such as technology, where GCCs may face regulatory hurdles or cultural barriers.
- India is rapidly becoming a leader in sustainable business practices, focusing on renewable energy, waste reduction, and environmentally responsible manufacturing. Multinational companies can align with these practices by operating captive centers in India, enhancing their sustainability credentials, and improving their corporate social responsibility (CSR) image.
Impact on the Indian economy
The trend towards moving up the value chain by captive centers in India benefits the global parent organizations. It impacts the Indian economy as captive centers contribute to India’s IT business revenues. As a result, the captive center industry is transforming into a hub for technological innovation, and global corporations are leveraging India’s highly skilled workforce to drive further growth and development in areas such as R&D and emerging technologies.
Moreover, the trend toward moving up the value chain creates more high-skilled jobs in India. Captive centers employ highly skilled professionals who can handle complex tasks such as research and development, data analytics, and product design. This has led to the creation of high-quality jobs in India, which is particularly important in a country where the workforce is rapidly expanding, and the need for skilled workers is growing. Developing these high-skilled jobs also contributes to India’s economic growth by increasing the people’s consumption power and creating a demand for goods and services.
Another impact is the boosting of the Indian start-up ecosystem. As captive centers collaborate with local start-ups and invest in them, they help foster innovation and entrepreneurship in the country. This collaboration allows start-ups access to resources and expertise and enables captive centers to tap into emerging technologies and business models. This collaboration can further contribute to the growth of the Indian economy by creating more jobs and driving technological advancement.
YASH Technologies’ Commitment to Sustainable Growth in India’s GCC Industry
YASH Technologies is one of India’s leading technology services and consulting providers to Global Capability Centers (GCCs). As the demand for GCCs continues to rise, YASH Technologies is well-positioned to leverage India’s highly skilled workforce and drive further growth and development in the industry. However, YASH recognizes the importance of sustainable growth and is committed to ensuring its operations benefit all stakeholders. This includes providing excellent working conditions and opportunities for local talent and addressing any potential environmental or social impact of its activities. By prioritizing sustainability and responsible business practices, YASH contributes to the growth and development of the Indian captive center industry while ensuring that its operations benefit clients and the local community.
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