Why do GCCs flock to India?

India is witnessing a shift in its role as the global destination for Global Capability Centers (GCCs). Once perceived as cost-effective back offices, GCCs in India have now evolved into strategic innovation hubs driving technological advancements and global business outcomes. This transformation underscores the country’s growing prominence in the global digital economy.

A Hub for Innovation, Not Just Costs

Initially seen as cost-saving back offices, GCCs have evolved into innovation powerhouses. Companies like Amadeus, Eastman Chemical, and British retail giants are leveraging their Indian centers for AI-driven solutions and advanced platforms like GPT. Bengaluru remains the epicenter, contributing 39% of GCC revenue, followed by Hyderabad and Pune. The rise of Tier 2/3 cities underscores the growing geographic diversification and potential for inclusive growth.

GCC Revenue Contribution by City

•            Bengaluru: 39%

•            Hyderabad: 20%

•            Pune: 15%

•            Others: 26%

Additionally, there is a growing trend of GCCs establishing operations in Tier 2/3 cities such as Ahmedabad, Kochi, Thiruvananthapuram, and Coimbatore, contributing to the diversification of the GCC landscape in India.

India stands out among low-cost destinations due to its educational alignment, skill availability, government support, language proficiency, R&D capabilities, and robust infrastructure.- DD Mishra, VP Analyst at Gartner

Why India is a Preferred Destination for GCCs

Global enterprises are navigating turbulent economic conditions and are under pressure to reduce costs while enhancing customer experiences. For many, India provides a solution with its robust ecosystem for GCCs. Key factors drive India’s dominance in this space:

1. Talent Pool and Ecosystem Advantage

India boasts the world’s second-largest pool of STEM graduates and a dynamic workforce with niche skills in emerging technologies. Saurabh Gupta, President of Research and Advisory Services, HFS Research emphasizes that “no region in the world comes close to India’s ability to develop talent at scale.” This is complemented by India’s thriving startup ecosystem and its alignment with global trends in AI, blockchain, and IoT.

Amadeus, for example, leverages India’s talent pool to contribute to 40% of its global product development, focusing on AI-driven travel solutions. “By fostering a culture of continuous learning, our GCC ensures agility in adopting cutting-edge technologies,” shares Sreejith AR, Head of Creation Platform and Shared Services, APAC, at Amadeus.

Highlighting India’s strength, DD Mishra, VP Analyst at Gartner, said, “India is a lucrative destination for GCCs, supported by several factors: talent availability, government support, infrastructure, physical connectivity, language proficiency, cost advantages, cultural and operational flexibility, and productivity. The diverse pool of professionals in fields such as IT, finance, engineering, data science, and customer service enables GCCs to offer a broad range of functions and services. With a strong emphasis on STEM education, India produces many engineers and IT experts proficient in the latest technologies.”

2. Favorable Policies and Infrastructure

India’s central and state governments have proactively supported GCC growth through policies that promote innovation and R&D. The Karnataka government, for instance, introduced a policy targeting $50 billion in economic output by 2029, attracting 500 new GCCs and creating over 350,000 jobs.

Talent is one of the main drivers behind the expansion of India’s GCCs as India’s deep reservoir of skilled IT professionals combined with a steady influx of STEM graduates promises to deliver cost-effective innovation at scale. - Saurabh Gupta, President, Research and Advisory Services, HFS Research

Moreover, government incentives such as tax benefits and the creation of global innovation districts (GIDs) ensure a conducive environment for GCC operations.

Strategic Shift in Operations

Sreejith AR points out that GCCs are no longer merely operational hubs but have become “instrumental in developing and deploying next-generation technologies.” GCCs like Amadeus have redefined their India-based operations as strategic centers for engineering and innovation, focusing on AI, cloud computing, and big data analytics.

India vs. Other GCC Destinations

India holds significant advantages over competitors like Southeast Asia and Eastern Europe. “As India edges closer to becoming the world’s third-largest economy, its GCCs have evolved into strategic innovation hubs,” Gupta explained. With a mature talent pipeline, superior infrastructure, and existing partnerships with global service providers, India offers a seamless operational ecosystem for enterprises.

Notably, the availability of mid to senior-level management further enhances India’s competitiveness, ensuring effective leadership for global operations.

As Mishra noted, “The transition to GCCs has been gradual, evolving from former captive centers that transformed into GICs (global insourcing centers) and eventually into more innovative and disruptive GCCs and GSSCs (global shared services centers). India stands out among low-cost destinations due to its educational alignment, skill availability, government support, language proficiency, R&D capabilities, and robust infrastructure.”

Challenges and Opportunities in

Smaller Cities

While Tier 2/3 cities offer cost advantages and untapped talent pools, they face challenges like inadequate infrastructure and difficulty attracting senior-level talent. Bridging these gaps will require a collaborative approach involving government incentives, private sector investments, and improved urban planning.

Challenges in Tier 2/3 Cities

•            Inadequate infrastructure

•            Limited senior talent availability

•            Slower adoption of advanced technologies

Success Stories

India’s GCCs are setting benchmarks for global innovation. Saurabh Gupta highlights examples where GCCs have developed AI-enabled platforms with transformative effects.

Indian GCCs have demonstrated their ability to develop standalone digital and AI-enabled products with enterprise on-site support. For instance, a GCC of a British retail multinational built an in-house GPT platform that effectively answers queries for procurement teams to make decisions on the buying process with 90–96% accuracy while putting guardrails and governance in place to eliminate hallucinations. This helped reduce mundane tasks and freed up resources for more strategic work.

Similarly, a global specialty chemical manufacturer, Eastman Chemical, developed a digital platform in collaboration with an on-site industry expert, Fluid Genius. This AI-powered platform monitors heat transfer fluid data and predicts fluid life span. It prioritizes safety, minimizes plant shutdowns, and reduces maintenance expenses for systems worldwide. The platform offers analytics, degradation kinetics insights, forecasting, and maintenance recommendations tailored to specific fluids. Also, Amadeus Labs Focuses on AI-led customer experiences.

One major trend is the shift from cost-centric operations to value-driven innovation hubs. GCCs are increasingly becoming centers of excellence for emerging technologies like AI, Machine Learning, and cloud computing. - Sreejith AR, Head of Creation Platform and Shared Services - APAC, Amadeus

Such breakthroughs underscore how GCCs are transitioning from cost-focused centers to value-adding strategic hubs.

These examples illustrate the transition from cost efficiency to value creation, with a focus on digital transformation and innovation.

The Growth Trajectory and Key Drivers

HFS Research forecasts a robust double-digit growth trajectory for India’s GCC sector. The numbers are set to soar—projected to exceed 4 million employees by 2029. Annual GCC spending is expected to nearly double within five years, crossing $50 billion in 2024.

Key growth drivers include:

•            Talent Advantage: India’s steady influx of STEM graduates and IT professionals ensures a cost-effective and skilled workforce.

•            Integrated GCC Models: Successful GCCs are deeply aligned with their parent organizations’ goals, enabling them to act as innovation hubs.

•            Shifting Industry Perception: GCCs are reversing the trend of talent preferring startups or global technology providers by offering competitive salaries, challenging roles, and exposure to cutting-edge technologies.

As Mishra pointed out, “Many GCCs in India are transforming into innovation hubs by leveraging emerging technologies such as AI and cloud computing. Consistent infrastructure improvements further facilitate the expansion of GCCs, positioning the market for impressive growth over the next four to five years.”

A Roadmap for Sustainable GCC Growth

For sustained growth, GCCs need to embrace transformative strategies:

•            Shift to AI-Driven Models: Leveraging AI will position GCCs as innovation hubs rather than execution engines.

•            Adopt Hybrid Models: Integrating in-house and third-party services ensures scalability and flexibility.

•            Influence Corporate Innovation Agendas: By shaping rather than merely implementing innovation strategies, GCCs can secure their role as indispensable global partners.

Expanding GCCs to Tier 2/3 Cities

As GCCs look to expand beyond metropolitan hubs, smaller cities like Coimbatore, Vizag, and Jaipur are emerging as attractive options. These regions offer untapped talent pools, lower operating costs, and opportunities to make a localized economic impact.

However, challenges persist. “Building reliable infrastructure, fostering innovation ecosystems, and attracting senior talent to smaller cities are critical hurdles,” Gupta emphasized. Companies must partner with governments and academia to address these challenges while creating career pathways for local talent.

Collaboration and Future Outlook

Collaboration between GCCs and Indian startups is fostering innovation across industries. Initiatives like Amadeus’ Travel4Impact program empower startups to tackle sustainability and digitalization challenges, driving economic growth and societal benefits.

HFS Research predicts that India’s GCC workforce will grow to over 4 million by 2029, with annual spending projected to double to $100 billion. Saurabh Gupta cautions, however, that complacency is the enemy: “To sustain this trajectory, GCCs must evolve and continue to lead in global technology services.”

Policy and Private Sector Focus

For sustained growth, Gupta highlighted six key focus areas for the government and private sector:

1.           STEM Education: Incorporating arts into STEM disciplines to foster creativity and innovation.

2.           Talent Upskilling: Large-scale training programs in AI, cloud, and leadership skills.

3.           Infrastructure Development: Investments in world-class facilities, particularly in smaller cities.

4.           Ease of Doing Business: Streamlining regulations and offering tax incentives.

5.           Public-Private Partnerships: Collaboration to build a robust R&D ecosystem.

6.           Sustainability Initiatives: Promoting green infrastructure to attract environmentally conscious enterprises.

The Future of Indian GCCs

India’s GCCs have emerged as engines of innovation, blending talent, technology, and favorable policy to reshape global business landscapes. By addressing challenges and leveraging opportunities, India is poised to solidify its position as the premier destination for GCCs, driving transformative impact on a global scale.

This cover story celebrates the journey of India’s GCCs from cost centers to innovation hubs and explores their role in shaping the future of technology and business. India’s GCCs are poised to lead the global technology landscape. By focusing on innovation, collaboration, and long-term value creation, Indian GCCs can solidify their position as indispensable partners for multinational corporations, shaping the future of global operations.

As Gupta aptly summarized, “The growth of GCCs in India isn’t just about cost-saving; it’s about becoming the epicenter of innovation and strategic decision-making for global enterprises.”

“The future of GCCs in India is being shaped by key trends such as digital transformation, a focus on innovation, enhanced customer experience, and the growing emphasis on sustainability,” said Sreejith. “At Amadeus, we are strategically positioned to capitalize on these opportunities by leveraging India’s robust talent ecosystem and fostering a culture of continuous learning and collaboration.

One major trend is the shift from cost-centric operations to value-driven innovation hubs. GCCs are increasingly becoming centers of excellence for emerging technologies like AI, machine learning, and cloud computing. At Amadeus, our India GCC plays a pivotal role in developing cutting-edge solutions that enhance travel technology and drive exceptional customer experiences. By aligning our operations with global business priorities, we ensure that our teams remain agile and deliver impactful outcomes.

Another key trend is the integration of advanced analytics and automation to optimize efficiency and decision-making. Amadeus actively invests in these areas to streamline operations and empower our workforce with the tools needed to stay ahead in a competitive market.”

aanchalg@cybermedia.co.in