4 strategies for launching a successful global capability center
'A GCC is a recent business concept; it's basically a wholly owned subsidiary of a large corporation,' explains Jay Bhatty, CEO and founder of NatGasHub.com, an automation software company serving the oil and gas industry. 'A decade ago, the main goal was cost arbitrage. Companies in the U.S. would create a GCC like a call center to outsource individual functions. But now they are using them for entire groups of functions. IT services, finance, and HR can all operate in one global capability center. GCCs are becoming more common in oil and gas, but they were already popularized in many other industries; for example, banking and technology.'
India is home to the majority of GCCs, and the country's footprint is expected to grow in the coming years. By 2030, the market size of India's GCCs is projected to reach $100 billion by 2030, with 2400 GCCs employing over 4.5 million people, a jump from around 1.9 million in 2023. India is a top source of tech talent worldwide, offering a talent pool with both breadth and depth.
Companies are using GCCs to support core business functions, led by finance, HR, data management and analytics, and IT, but they are also starting to expand their reach to include areas such as marketing, legal, customer service, and energy, research, and development.
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Bhatty's company operates a GCC in Delhi dedicated to AI research. Around 75 GCC employees focus on how to incorporate AI into NatGasHub.com's suite of client products.
'The labor costs are low, currency exchange rates are favorable, and technology knowledge and labor availability are high,' says Bhatty. 'All of these factors come together. Some companies have even started creating innovation hubs in their GCCs. As visa restrictions in the U.S. have been growing, there is a shortage of skilled talent. A lot of developers come from countries in South Asia, so it helps to source the labor locally, instead of trying to get a visa and getting them to come to the U.S. Setting up innovation hubs in India is also easier because the environment is very business-friendly with incentives for foreign investments.'
4 EXPERT TIPS FOR ESTABLISHING A GCC
1. Define your operating model.
Identify your business needs to determine your GCC's focus area. Get clear on what you want the GCC to do for your business and how you will measure success.
'Have a good idea of what your operating model will be,' says Bhatty. 'Is it focused on innovation or software development or R&D? Or do you want it to do all your back-office processing? You may have your U.S. employees doing administrative tasks when they can be done better, cheaper, faster in a GCC. You can set up a GCC in one country for all your business units, and it can serve all of your offices all over the world in one centralized place.'
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2. Be aware of the challenges.
Creating an effective extension of your organization—with a new office in a new country—is no small feat. Research the geographic area and business function area extensively before getting too far into the project. Talk to other leaders who have started GCCs in the same region. Understand the common obstacles you're likely to encounter.
'While the Indian regulatory system is favorable, and there's a lot of labor available, there are still issues to deal with when you're running a business unit outside of your country,' says Bhatty. 'Compliance complexities, language barriers, company registration. All of that is time consuming. Talent retention is also a challenge because, as more GCCs are set up, you are competing with other companies for the same workers.'
3. Enlist local expertise.
The DIY approach might seem more cost-effective at first glance, but it's crucial to calculate the total costs—time and money—of setting up a GCC. Consider working with a local service provider that can help your company find an office space, navigate bureaucracy, and recruit talent.
'Setting up our GCC was a bigger challenge than I expected,' says Bhatty. 'A lesson learned is that trying to do it yourself might take longer and be more costly in the long run. Local service companies are very knowledgeable about the area and can advise you on where to site your GCC—location is so important in choosing real estate. They will expedite paperwork, secure furniture and supplies, and get your internet connection set up. Some of the government regulations are cumbersome, and you may not be familiar with them. There may also be cultural and language barriers. These people can help you find English-speaking talent or translators.'
4. Prioritize people management.
A GCC is only as effective as the people who operate it. Make people management your top priority. Put the right people in place to recruit, train, develop, and lead your GCC team. Create service-level agreements that formalize expectations for tasks and timelines. For example, you may require your GCC employees in India to send deliverables by 9 a.m. Eastern time for the team working out of your U.S. headquarters.
'Managing a GCC is like managing a separate company,' says Bhatty. 'Hiring, retention, and training can be challenging because many employees aren't initially well-versed on how business is done by American corporations. But after COVID, the workforce really became global. Companies figured out that people can work from other countries with people in different countries, despite the time difference. GCCs are proving that this model works, and that's why it's accelerating.'
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