Understand these Partnership Models Before Kicking off your Indian GCC

Many international companies use Global Capability Centers (GCCs) to innovate, simplify processes, and leverage the abundant talent in India. GCCs also find India a premium location because of its excellent IT infrastructure and qualified workforce. However, organizations starting this journey must grasp the correct cooperation structures to ensure a smooth setup and ongoing growth.

Choose the correct partnership model to link the GCC's ambitions with the parent company's strategic goals, not just operational ease. Your collaboration approach will shape the GCC's India strategy, whether you want to reduce risks, use local skills, or maintain control.

This blog explores new GCC cooperation structures in India, as well as their pros, cons, and strategic value. 

Why India for GCCs?

Drawing companies spanning technology, banking, healthcare, and retail, India has grown to be a hub for Global Capability Centers (GCCs). Many strategic reasons help to justify its GCC supremacy.

• A Vast Talent Pool

Indian workers are extremely competent and diversified, with over 5 million IT professionals and continuous engineering and management graduates. Companies can more easily find excellent software developers and data analysts. 

• Cost Efficiency

Operating in India is much cheaper than in the West. Due to competitive salaries and lower infrastructure expenses, companies can save operational costs by 40-60% while retaining quality.

• Established Ecosystem

India has a mature IT service provider, technology park, and research institution ecosystem. Bangalore, Hyderabad, and Pune are perfect for GCC operations due to their world-class infrastructure.

• Government Support

The Indian government encourages international investment with "Make in India" and tax incentives. Special Economic Zones (SEZs) offer tariff exemptions and simpler compliance.

• Innovation Potential

India's vibrant startup ecosystem and growing emphasis on digital transformation provide GCCs with opportunities to collaborate on cutting-edge innovations. Many GCCs leverage India as an innovation hub for their global operations.

Types of Partnership Models for GCCs

Establishing a Global Capability Center (GCC) in India calls for careful choice of a collaboration arrangement. Here is a brief explanation of each type, such as benefits and challenges.

• Build-Operate-Transfer Model [BOT]

Under the BOT approach, a local business sets up and runs the GCC under a preset duration while the parent firm owns it initially.

Benefits:

• Faster setup with minimal operational risk.
• Leverages the partner's local expertise in compliance, hiring, and infrastructure.
• Offers a phased transition, allowing the parent company to assume control gradually.

Challenges:

• Potential dependency on the partner during the initial years.
• Misalignment of priorities between the partner and the parent company.

Joint Ventures

A joint venture involves shared ownership and operation of the GCC between the parent company and a local partner.

Benefits:

• Risk and cost-sharing between both entities.
• Access to the local partner's market knowledge and networks.
• Encourages innovation through collaborative efforts.

Challenges:

• Complex decision-making due to shared ownership.
• Potential conflicts in long-term goals or management styles.

Managed Services Model

Under the managed services approach, the GCC operations are contracted to a third-party provider specialized in particular areas such as finance, HR, or IT.

Benefits:

• Scalability to meet evolving business needs.
• Enables the company to stay focussed on core operations.
• Reduces the need for direct management of day-to-day tasks.

Challenges:

• Limited control over outsourced processes.
• Long-term cost implications due to vendor reliance.

Fully Owned Subsidiary with Local Consulting Partners

Under this arrangement, the parent company partners with local consulting companies for specific knowledge while setting up a wholly-owned subsidiary in India.

Benefits:

• Complete control over the GCC’s operations and strategies.
• Access to local knowledge and networks without compromising autonomy.
• Ideal for large-scale, long-term operations.

Challenges:

• Higher setup and operational costs.
• Complex regulatory compliance and governance requirements.

Merits and Demerits of Partnership Models

Selecting the right partnership model for your GCC involves weighing the merits and demerits of each approach. 

How to Choose the Right Partnership Model

Your GCC partnership strategy should be strategically assessed according to your organization's needs, resources, and long-term goals.  

1. Define Your Business Objectives

Clarify the primary goals for establishing the GCC, such as cost savings, innovation, or scalability. For example, joint ventures or fully-owned subsidiaries are ideal for innovation-driven goals, while BOT or managed services may better serve cost and time efficiency.

2. Evaluate Resource Availability and Expertise

Assess your internal capabilities to determine if external support is necessary. Managed services or BOT models are preferable for companies with limited resources or expertise, offering local support while the GCC gains operational stability.

3. Consider the Scale and Scope of Operations

The scale of the GCC significantly impacts the choice of model. Smaller-scale, non-core operations are well-suited for managed services, while large-scale, strategic hubs benefit from fully-owned subsidiaries, which ensure better alignment with corporate strategies.

4. Analyze Partner Expertise and Compatibility

Thoroughly vet potential partners for their industry experience, regulatory knowledge, and cultural compatibility. A reliable partner can streamline processes and reduce the complexities of setting up a GCC in India.

5. Plan for Long-Term Scalability

Choose a model that aligns with your growth plans. BOT models allow phased ownership transitions, while fully-owned subsidiaries offer unmatched scalability for large-scale, long-term operations.

Strategic Growth Path for GCCs in India

Establishing a GCC is just the first step, charting a clear path for sustainable growth is equally essential. Here are the key strategies for driving growth:

1.   Build Innovation Hubs: Use India's startup environment and qualified people to make your GCC an innovation hotspot. Collaboration with local technology partners, research institutes, and startups can advance AI, data analytics, and digital transformation. 
2.   Leverage the Partner Ecosystem: Businesses are scaled in India by a large partner network. Particularly in growing sophisticated operations like R&D and customer experience management, local consulting firms, IT service providers, and industry networks can offer specific knowledge and increase operational efficiency.
3.   Foster Talent Development: Staying competitive requires worker upskilling and reskilling. Develop a high-performing team that supports your worldwide goals through leadership, technical, and cross-functional training. 
4.   Stay Agile and Adaptive: GCCs have to adjust to the evolving corporate environment. This calls for following legal changes, adopting new technology, and adapting to the needs of the world market.
5.   Drive Operational Excellence: Continuously improve processes to save money. Use data-driven decision-making with automation and AI to improve workflows and operations.

Conclusion

The success of a GCC in India depends on selecting the right partnership model and aligning it with your long-term goals. Each model offers unique benefits and challenges, making it essential to evaluate your objectives, resources, and scalability needs. By leveraging India’s ecosystem and fostering innovation, GCCs can grow into strategic hubs that deliver exceptional value. Collaborating with experts like Gadgeon ensures a seamless journey toward success.