Global Capability Centers Based in India Can Provide Cost Savings of Up to 45% Over 3 - 5 Years, as Per Nexdigm

12 Sep 2020 admin

With an increasing focus on digital, over 75% of India-based Global Capability Centers (GCCs) are investing across analytics, cloud migration, and robotic process automation, and over 50% in artificial intelligence, machine learning, and Internet of Things (IoT) as discussed during Nexdigm’s webinar on "India – A Favorable Destination for Global Capability Centers." Nexdigm is a global business advisory organization serving clients from more than 50 countries leveraging its multifunctional, professional capabilities to help organizations set up Global Capability Centers (GCCs), manage and optimize existing GCCs, or provide outsourced services for their clients.

The webinar highlighted that 70% of India GCCs belong to US-headquartered companies, followed by 20% from Europe and 10% from the Asia-Pacific region. The session aimed to showcase the potential of GCCs in India and highlight how multinationals can leverage India’s sizable knowledge-driven workforce to their advantage. This can be in terms of business continuity, expanding their talent pool, strengthening their operations, and globalizing their back-offices.

“Indo-US enjoys a comprehensive strategic partnership that cements cross-sectoral links between them. With current trade of ~USD 142 million, the countries have complementary strengths and capabilities that can make the combined vision and ambition of USD 500 billion trade a reality. The liberalized atmosphere and large talent pool are attracting a lot of global companies, resulting in them moving their manufacturing units to India. I believe Indo-US trade will play an important role in boosting growth for industries in India,” said Dr. T. V. Nagendra Prasad, Consul General of India, San Francisco, at the Nexdigm webinar.

Mr. Peter Bendor-Samuel, Founder & CEO, Everest Group, said, “India has executives who have a deep-root level of understanding and are capable of driving operations on their own. Backed with digital transformation, matured market conditions, and cost-saving business models along with immense range of services and capabilities, GCCs have opened a gateway for not only global firms but also smaller players in India. I think that's really fuelling the next wave of growth and building investments in India due to the exhaustive ecosystem created by the government.”

“India as a country provides minimal business risk for companies due to suitable policy backing. Hence, I feel companies should not look at India as a makeshift set up but as a full-fledged business unit. Also, the talent here has exceptional leadership capabilities to lead strategic businesses, which enables companies to make collaborative investment in nurturing and building up right talent for future growth,” said Mr. Jerry Kinnick, President, Continuum Global Solutions at the Nexdigm webinar.

The Indian GCC market size is approximately USD 28.3 billion (as of 2019), with over 1,750 centers and over one million employees. India’s skilled talent pool across sectors is set to increase to over 600 million by 2025. At present, ~50% of all GCCs are located in India, and over 180 of these are not just capability centers but also innovation centers that belong to Fortune 500 companies. As per Nexdigm, with GCCs, there could be savings of up to 45% over an average time of three to five years.

Speaking at the Nexdigm webinar, Mr. Rajiv Kumar, Joint Secretary, Ministry of Electronics & IT (MeITY), said, “Over the years, India has changed its perception from being a cost-center to an innovation center for GCCs. Today, we have more than 4 million people in the workforce within the IT sector, and nearly 1/4th of them work in GCCs. With more than 1,300 GCCs currently operating in India, we are seeing businesses expanding in diverse sectors, such as automobiles, semiconductors, aerospace, industrial automation, engineering, energy, and healthcare. With the vast talent pool, upgraded infrastructure, and right government policies, we have shown the world that India is a great marketplace to invest for GCCs.”

“Today, 80% of companies, either B2B or B2C, are doing business digitally in India. We are setting up ‘Startup SETU’ to enable Indian and global startups to engage, create, and build a better ecosystem in the country. We have also opened 20 centers of excellence across Tier II and Tier III cities to boost local talent,” he added further.

Factors such as a large educated talent pool, young demographics, infrastructure requirements across metro and smaller cities along with well established intra-country connectivity, and appropriate policy support have enabled India to maintain its leadership position in GCCs. India’s cost to value proposition is approximately 3 to 4 times lower than the US. As discussed in depth during the webinar, there has also been ~250% increase in GCCs in India in the last 10 years. India has also been attracting global unicorns, eight of which have already set up operations in India.

The webinar highlighted that 43% of GCCs are singularly focused while 57% offer integrated services with a combination of IT, Business Processes, Engineering, and R&D from one cohesive center. A majority of GCCs in India are from sectors such as Software and IT, BFSI, Pharmaceuticals, Telecom, Electricals & Electronics, and Manufacturing. An interesting fact is that the Software plus Banking, Financial Services, and Insurance verticals account for almost 30% of the total installed talent base.

The webinar also stated that the southern and western parts of India have been the primary locations for most GCC establishments. States such as Maharashtra, New Delhi and the National Capital Region (NCR), Karnataka, Tamil Nadu, and Telangana house the majority of Indian GCCs. However, northern India has also emerged as a promising location for GCCs in recent years.

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