India’s Global Capability Centers Market Estimated to Reach US$110 Billion by 2030

India’s resilient economy and favorable conditions are driving the growth of global capability centers (GCCs) despite global economic challenges. GCCs are becoming hubs of excellence for innovation and digital transformation, enhancing their role in the value chain.

With strong government support, a vast pool of talent in technology, engineering, and consulting, cost-competitive office rentals, modernizing infrastructure, improved connectivity between metropolitan hubs and tier 2 and tier 3 cities, a thriving startup and R&D ecosystem, and a robust financial regulatory system, India provides an ideal environment for multinational corporations looking to establish GCCs.

Cities like Bengaluru, Hyderabad, Delhi NCR, Mumbai, Pune, and Chennai are prime destinations for GCCs in India, offering robust infrastructure, access to talent, and a supportive ecosystem. According to real estate consultancy JLL, US-headquartered firms account for the majority of the operational GCC footprint in these top six cities, followed by European firms at 35 percent. Although the share of Asia-Pacific-based GCCs is currently smaller, it is increasing, driven by regional unicorns. Additionally, office space occupied by GCCs across these cities has surpassed 200 million square feet and continues to grow rapidly.

What are GCCs?

GCCs, previously known as global in-house centers or captives (GICs), are offshore centers established by companies to provide various services to their parent organizations. These centers operate as internal entities within the global corporate structure and offer specialized capabilities, such as IT services, research and development, customer support, and other business functions.

GCCs / GICs play a vital role in leveraging cost efficiencies, accessing talent pools, and fostering collaboration between parent companies and their offshore operations.

These originated in the early 1990s as offshore divisions of major multinational corporations like General Electric, Texas Instruments, Citigroup, and American Express. 

India’s GCC market outlook to 2030

GCCs have transformed in recent years to become the backbone of India’s IT and business services industry, as has successfully attracted top graduates from leading institutions in the country.

India hosts over 50 percent of the world’s GCCs and is the most preferred destination to set up these offshore business and innovation centers. Global consultancy EY predicts that India’s GCC market could reach US$110 billion by 2030, up from US$46 billion in 2023. Another report, the “GCC 4.0 – India redefining the globalization blueprint”, estimates an increase in market size of over 33 percent, to reach US$60 billion by FY 2025.

Market size and growth drivers

In 2022, India accounted for 55 percent of the world’s operational GCC centers. It is expected that India will witness the establishment of approximately 320 new GCCs by 2025, as many companies venture into setting up their first global centers abroad.

Per a February 2024 JLL report, the number of GCCs in India has reached 1,800 – employing 1.3 million people. Market analysts predict it to surpass 1,900 by 2025 and 2,400 by 2030. Depending on India’s capabilities, the maximum number of GCCs could even reach 2,550. Currently, India is estimated to add 115 new GCCs every year, a significant increase from the current rate of 70 per year. This growth in the number of GCCs positions India as a global hub for technology and services.

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The expansion of GCCs in India is mainly driven by engineering and R&D services, which contribute to 56 percent of the total revenue share. The factors behind this growth are India’s skilled talent pool, supportive business and policy environment, and advancing infrastructure.

In India, GCCs serve as central technology hubs for their headquarters, focusing on specialized expertise in areas, such as cloud computing, artificial intelligence (AI), machine learning (ML), and natural language processing (NLP). They also specialize in emerging fields like cybersecurity, advanced analytics, blockchain, and the Internet of Things (IoT). These GCCs play a crucial role in exploring cutting-edge technologies like Web 3.0, Digital Twins, and Metaverse, as part of their parent organizations’ innovation initiatives.

The workforce employed in the GCC industry in India is projected to grow to approximately 4.5 million. The compound annual growth rate (CAGR) from 2019 to 2023 is 11 percent, and from 2023 to 2030 is projected to be 14 percent. Moreover, the cost per full-time equivalent (FTE) is estimated to increase from the current amount of US$29,100 to US$37,760 by the year 2030.

Source: Above data is from the NASSCOM-Zinnov India GCC Trends Report. CAGR is calculated in the report from FY 2015 – FY 2023.

Types of global capability centers

Global capability centers can be of various types. The below table lists some common types of GCCs.

R&D services at present account for 56 percent of the overall GCC revenue share and in upcoming years, a substantial portion of GCC revenue is expected to come from ER&D and digital engineering. These sectors are projected to experience a CAGR of approximately 20 percent, indicating a strong upward trend in their contribution to GCC revenues.

Key players

Source: Analytics India Mag (AIM India)

Preferential hubs

There are six highly sought-after Indian locations that offer a suitable environment to facilitate the development of global capabilities centers. Common features of these locations include enabling infrastructure, presence of market leading companies, access to talent pool, and a supportive ecosystem – education, regulation and tax policies, research, and mobility.

Source: JLL Report

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Bengaluru has emerged as the top choice for setting up a GCC in India, followed by Hyderabad, Delhi National Capital Region, Mumbai, and Pune, in that order. Among these cities, Bengaluru is the most preferred destination, renowned for its thriving ecosystem and established infrastructure. The Delhi NCR, including capital Delhi and the suburb of Gurugram, offer a strategic location and access to a vast talent pool. Hyderabad and Pune are recognized for their technological advancements and supportive business environments, while Mumbai is commonly known as the financial hub of India.

The Karnataka government’s Spoke-Shore initiative seeks to accelerate the establishment of GCCs across the state, aiming to create a significant talent pool outside of Bengaluru. By focusing on the Mysuru, Hubbali, and Mangaluru clusters, the goal is to generate one million employment opportunities, both direct and indirect, by 2026. The initiative aims to enhance development and promote a fluent expansion of GCCs in these regions.

Tier-2 cities are now emerging as the preferred destinations for setting up these centers, primarily due to their cost advantages in terms of lower wages and rapidly developing infrastructure. Cities such as Visakhapatnam, Jaipur, Vadodara, Kochi, Bhubaneswar, and Chandigarh have gained traction in attracting the establishment of new GCC centers. In Tamil Nadu, following Chennai, Coimbatore is rapidly emerging as the next major GCC hub.

Key trends in the GCC/GIC sector

Key trends in the GCC sector this year involve:

• The establishment of Centers of Excellence (CoEs) in critical domains like AI, cloud computing, engineering, data analytics, and cybersecurity.
• Shift from being a ‘cost center’ to becoming a ‘profit center’, with a primary objective of generating new revenue streams.
• Business functional expansion in areas such as legal, marketing, and procurement, resulting in larger investment allocations to support these growth areas.
• Emphasis on Employee Value Proposition (EVP), which encompasses organizational culture, nature of work, rewards, and compensation, ensuring a more holistic approach to attract and retain top talent.

Benefits through start-up collaboration

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Collaboration with start-ups can serve as an opportunity for new GCC establishments and expansion. Start-ups benefit from market access, enterprise connections, mentoring, and investments from global capability centers.

On the other hand, GCCs can gain access to technology and tech-driven talent, allowing them to enter the market faster. The partnership has the potential to speed the GCCs’ innovation journey in India.

Setting up in India

India is swiftly emerging as a prime choice for GCCs due to its expansive workforce, R&D assets, and key service sector capabilities.

Although multinational companies in the IT and BPM sectors traditionally dominate the GCC industry in India, the engineering and manufacturing sectors are catching up, especially as AI and machine learning applications change how organizations function across geographies. Key considerations include:

• Legal and regulatory: Assessing the corporate structure most suitable for the GCC enterprise, capital requirements, management structure and corporate governance criteria, and mandatory and optional registrations. Based on the location of the GCC setup, these procedures and requirements may be more streamlined.
• Finance and tax provisions and compliance: These include having key financial controls in place, managing compliance obligations, developing a revenue model, identifying key costs, and establishing a budgeting system. Tax accounting processes adopted by the organization must be compliant with applicable regulations and facilitate global and India-specific reporting. GCC enterprises must also assess the actual tax rate and tap into any incentives for their industry or region-specific relaxations. Evaluating options such as Export Oriented Unit (EOU), Export Promotion Capital Goods (EPCG), Service Exports from India Scheme (SEIS), Special Economic Zone (SEZ), among others, periodically, may result in significant reduction in tax costs.
• Infrastructure: This involves, in simple terms, assessing where to locate your setup. IT corridors offer excellent infrastructure and strong connections to a talented workforce. For example, Hyderabad’s IT corridor, stretching from Hi-Tec City to the airport, encompasses 14 Special Economic Zones (SEZs). Most SEZs provide top-notch facilities classified as class A, while certain non-SEZs also offer world-class amenities. Examples include Bengaluru in the state of Karnataka and Delhi NCR suburbs like Gurugram and Noida that host several GCC setups – both in SEZ areas and beyond as they provide ideal rental and property options with necessary utilities, industry-specific subsidies, have a strong talent base, and benefit from advanced multi-modal logistics infrastructure. It is advantageous to identify space requirements and secure long-term arrangements.
• Talent management: Identifying key leadership roles, such as the hiring of an India Head, followed by building a sustainable leadership pool and leveraging the talent base in the region. Many states offer additional tax advantages for hiring from within its territory. GCC enterprises are also advised to establish strategic partnerships within the local ecosystem, including start-ups and centers of excellence, reputed universities, research institutes, besides tapping into value-oriented vendor networks. As in most sectors, competency and capacity building through upskilling opportunities and integration with global teams will be useful to control for attrition as India’s labor market is highly competitive in core functional areas.
• Information systems and cybersecurity policies: This is a top priority for any business interfacing with the digital economy and dealing with data and technology. Information security and controls are paramount to mitigate risks and ensure continuity of services. Measures should be implemented to safeguard information and maintain secure systems. GCC enterprises must pay attention to the regulatory and legal developments impacting this area.

(This article was originally published June 28, 2023. It was last updated July 18, 2024.)

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