The Shift from Cost-Centric Models to Capability-driven Structures: How GCCs Add Value

The Shift from Cost-Centric Models to Capability-driven Structures: How GCCs Add Value

By: Joy Abraham

Publish Date: March 22, 2024

India’s Global Captive Centers (GCCs) are emerging as transformative hubs, contributing far beyond the cost-efficiency paradigm. Once primarily focused on cost arbitrage, these centers are now pivotal contributors to innovation, technology adoption, and overall business growth. In this narration, we’ll explore the evolving landscape of GCCs in India and how changes in their setup are helping unlock value.

India’s Unique Advantages 

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According to a recent report, India’s political stability, powerful domestic consumption-based economy, and robust regulatory system drive the growth of GCCs. Meanwhile, global economic challenges, such as a tightening monetary policy, slowing growth, and rising inflation, have positioned India as a stable and attractive destination for multinational businesses.

The Reserve Bank of India’s monthly economic review highlights the significant role of GCCs in India’s service export growth. Boasting the most substantial number of GCCs globally, India’s focus is shifting towards web-based capabilities and management skills, with an eye on the future—notably, the digital delivery of healthcare, education, and recreational services. So, what makes India the GCC destination apart from those mentioned above? Experts say it is India’s standing as one of the top countries generating STEM graduates annually.

NASSCOM reinforces India’s position as a core technology hub for GCCs, specializing in Cloud, AI/ML/NLP, Cybersecurity, and more. These centers dominate in exploring emerging technologies such as Web 3.0, Digital Twins, and the Metaverse for their parent organizations.

Additionally, there is a steady progression of functions away from just engineering, now encompassing product management, design, and analytics. Newer GCCs increasingly view India as a global center capable of taking on leadership roles across various functions.

A Paradigm Shift: India as a Crucial Profit Center

With the number of hires increasing yearly and plans for continued growth, the businesses recognize India’s mature market, solid macro-fundamentals, and a deepening innovation ecosystem.

The projection of around 320 new GCCs in India by 2025, with a market jump of 33% to $60 billion, as per NASSCOM and Zinnov, further underscores India’s attractiveness for global businesses. How can these considerations reshape GCCs as we know them and help generate more value?

Strategic Reshaping for Enhanced Value

Alignment with Core Functions

Traditionally, GCCs have been siloed entities handling non-core activities. However, a reimagined approach involves aligning these centers strategically with the core functions of the parent company. By integrating them into the core operational framework, GCCs can contribute directly to the organization’s objectives.

Innovation Hubs

Transforming GCCs into innovation centers is a crucial strategy. Instead of restricting them to routine tasks, organizations can empower these centers to drive innovation, research, and development. This shift elevates their role from a cost center to a value-generating engine and a vital contributor to their parent organizations’ global R&D efforts.

Niche Specialization

Another avenue for maximizing value is to develop niche specialization in Cloud, AI/ML/NLP, Cybersecurity, Blockchain, and more within the GCC. Rather than being generalist service providers, these centers can focus on specific industry verticals or specialized services, becoming experts in their domain. These specializations add value and position the GCC as a knowledge hub.

Cross-Functional Collaboration

Breaking down departmental barriers is essential for a restructured GCC. Encouraging cross-functional collaboration fosters a culture of collective problem-solving and idea generation. This approach enhances productivity and promotes a holistic understanding of business processes.

Tangible Benefits of the Redefined GCC Model

Agile Response

An agile GCC, integrated with core functions, enables swift responses to market dynamics. By aligning closely with the parent company, these centers can adapt quickly to changing industry trends, ensuring the organization remains competitive globally.

Cost Optimization through Innovation

Contrary to the misconception that innovation drives costs, a redefined GCC optimizes costs through innovative solutions. Automation, AI, and advanced technologies can be harnessed to streamline processes, reducing manual effort and minimizing expenses.

Enhanced Talent Development

Shifting from routine tasks to specialized functions allows GCCs to attract and retain top-tier talent. Focusing on innovation and niche specialization provides employees with a challenging and intellectually stimulating environment, fostering continuous skill development.

Risk Mitigation

A redefined GCC becomes integral to the organization’s risk mitigation strategy by aligning closely with the core business functions. It ensures better control and governance, minimizing risks associated with outsourcing critical tasks to external vendors.

Digital Transformation Driving Growth

Multinational business giants have restructured their GCCs in India by transforming them into hotbeds of innovation, ensuring a surge in leading-edge solutions and patents originating from the GCCs. Companies now seek to ‘own’ digital capabilities rather than ‘lease’ them, and this movement will continue to drive the rise of GCCs in India.

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