Overview
Recent trends indicate that nine out of ten global capability centres (GCCs) established in India are utilizing external partners. This represents a notable shift from previous years when large multinationals typically managed these setups independently.
Changing Landscape
The landscape of GCCs is evolving, with a mix of both traditional and non-traditional players entering the market. This transformation is a departure from the prevalent do-it-yourself (DIY) model that dominated the 1990s and early 2000s.
Current Trends
- Approximately 40% to 50% of new GCCs are being established through assisted build-out models.
- Another 30% to 40% are opting for build-operate-transfer structures.
According to Manoj Marwah, a leader in financial services GCC consulting at EY, the DIY approach is now limited to companies with significant experience in India or those entering through acquisitions.
Emerging Partnerships
The rise of non-traditional players is contributing to this shift. For instance, CARE Ratings and Vestian Global have formed a joint venture named Operus to provide comprehensive GCC services, highlighting the expanding interest from firms outside the conventional IT services sector.
Benefits of Partner-led Models
- Reduced setup timelines, with new centres being operational within 9 to 18 months.
- Cost savings of up to 30% compared to Western markets.
New entrants, particularly regional firms lacking a strong presence in India, are increasingly favoring partnerships to minimize risks and expedite their market entry.
Financial Implications
The financial stakes are rising, with early advisory work potentially generating $2 to $5 million before a final decision is made. Following this, the design and build phase can yield an additional $5 to $20 million. If a centre grows, the potential returns can be substantial, with a 500-seat GCC possibly evolving into a $5 to $10 million annuity opportunity.
Future Directions
Currently, 60% to 70% of new centres are being established with partners, while 30% to 40% still follow the DIY approach, primarily among large multinationals. Vikram Ahuja, co-founder of ANSR, notes that partnerships have evolved; companies now seek partners who can assist in building fully integrated capabilities from the outset.
Operational Focus
The competition is shifting beyond mere setup. The true value now lies in operations and scalability. GCCs are becoming essential for advanced work, requiring a distinct operational framework. While the setup process is becoming more standardized, the institutional knowledge gained from numerous deployments remains invaluable.
Conclusion
With around 1,700 enterprises currently operating GCCs in India, this number is expected to grow. The establishment of GCCs is viewed as a strategic move for building long-term relationships, despite the potential for deflationary pressure when clients bring work in-house. As global companies increasingly enter the Indian market, the emphasis is on the efficiency of establishing these centres and the long-term strategies for their development.
