Over the last 20 years, there have been unprecedented changes in the Indian captive centers or Global Capability Centers (GCCs) or Global In-house Centers (GICs) – you can name any of these! Initially known as captive centers in the 1990s, these units were viewed as a money-saving strategy or low-cost delivery units.
Under this captive model, multinational companies (MNCs) used to assign active development tasks to parent centers and give customization and enhancement-related tasks to captive centers.
However, with time and rapid digital transformation, we have seen drastic changes in the way GCCs operate their functions in India and contribute to their parent organizations.
Along with cost arbitrage, now captives centers or GCCs are also responsible for enhancing automation, driving business innovation, and empowering the implementation of cutting-edge technologies.
In this article, we will explore in-depth on how does hosting captive centers in India look like, what are the various significant factors that have influenced the changes in the functionalities of Indian captive centers, and what are the parameters MNCs should keep in mind while planning to create a GCC in India.
The overview of Captive Centers in India
According to the NASSCOM report, the total number of captive centers in India in 2021 was over 1430, with a revenue of $35.9 billion. The same report claimed that MNCs are likely to establish more than 2000 new captive centers in India with a revenue growth of more than $61 billion by 2025.
These captive units will be associated with multiple domains, such as Information Technology (IT), Information Technology Enables Services (ITES), Business Process Management (BPM), and Research and Development (R&D).
Given the facts and figures, hosting captive centers in India is a profitable affair. It has contributed tremendously to parent companies, sky rocketed the numbers in a few years, and now will create a vibrant environment for the future.
With the understanding of the overview of captive centers in India, let’s explore the factors responsible for hosting captive units in India.
Integration of Talent Pool with Global Companies
With the rise in the employable talent in India from 46.2 percent to 50.3 percent, the country has become a hub for existing GCCs and the establishment of new captive units. According to the NASSCOM report on the Future of GCC in India, captive centers employed 1.38 million people in India in 2021. The number will increase to 1.8 - 2 million by 2025.
Realizing the situation, GCCs have become more active than ever. They are taking necessary steps to cultivate a culture of well-being, develop robust organizational significance, and flexible and hybrid work practices along with a financial bonus for their workforces. Moreover, these captive centers have started grooming upcoming managers by providing necessary training and exposure, thus developing a flexible workforce for global integration.
Technical Skills and Innovation Enabling Captive Centers Growth
According to the 2021 Ecosystem survey, the COVID-19 pandemic has led 14% of companies to embrace digital transformation and 13% to speed up their digital transformation efforts. Besides this, the uncertainty made 40% of companies reconstruct their digital marketing initiatives.
Moreover, due to the pandemic, companies have accelerated tech adoption, especially cloud adoption. Businesses moved their services and infrastructure from in-house to cloud environments to enable employees to work remotely.
GCCs became active during this period and helped parent companies shift their in-house applications to the cloud without disrupting their ongoing operations. By enhancing knowledge of analytics, machine learning (ML), and process automation, GCC in India managed these tasks and supported their parent center.
What Should Companies Do to Establish Captive Centers in India?
Before planning and establishing captive centers in India, multinational companies (MNCs) must understand that India is changing rapidly. Hence, they must reform their strategies by keeping the following four factors in mind:
Modern Infrastructure
Infrastructure is no longer the same as it was a decade ago. Now every Tier 1 city has quality infrastructure, including reliable electricity and internet connectivity, which opens a wide range of opportunities for companies to form captive centers across various parts of the country.
Exposure to Talent Without Location Restriction
Due to the pandemic, the talent hunt is no longer limited to a particular location. It’s now available in smaller cities also all across the country. Hence, if captives can facilitate remote working for employees, they can fill the talent gap by hiring employees from low-cost locations. Moreover, they can boost employee engagement by enabling them to stay close to their families and lower the cost of living in the form of significant incentives.
Involvement of State Government
Now there is an involvement of the state government too. Several state governments launch programs where they offer incentives to multinational companies for launching captives in underdeveloped parts of their states and boosting employment opportunities.
Updated Policies
The country has also modified its FDI, income tax, and GST regimes to make India competitive in the marketing and business-oriented.
Captive centers play a pivotal role in expanding and growing businesses. With the emerging talent, innovations, and technologies, India is a rapidly growing hub for hosting captive centers. However, there are some factors that influence the process of establishment.
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