Global Capability Centers (GCCs) or Captive Centers as they were once known as, are the offshore delivery centers of global companies, that are owned, operated, and managed as subsidiaries – often in a low-cost, talent-rich location. As companies’ globalization journeys have evolved, so have these Captive Centers, which have transformed into Global In-house Centers (GICs) or Global Capability Centers (GCCs). More often than not, these GCCs build and scale a specific capability or a set of capabilities, hence the name. Over the last couple of decades, GCCs have become a critical part of how companies access global talent, drive innovation, de-risk business, and ensure business continuity.
By following tried and tested approaches that ensure a seamless setup and operationalization. In today’s hyperconnected and competitive business landscape, setting up a Captive Center has become a strategic imperative for global organizations. The Captive Center or GCC, serves as a hub for delivering various critical functions, such as IT Services, Finance, HR, and more, to support the global operations of a company. Captive Centers are pushing the envelope on cost, innovation, productivity, processes, efficiencies, technologies, and quality. These GCCs are increasingly driving organization-wide superior customer experience and providing customer insights that enable downstream data-driven decision-making.
To set up a successful Captive Center or Global Capability Center, careful planning and execution are critical. Here are the key steps on how to set up a Captive Center:
1. Define the Strategic Objectives
Before diving into the details of setting up a GCC, it is crucial for the company to define their organization’s strategic objectives. Consider the following questions:
2. Conduct a Feasibility Study
Once the company has outlined its strategic objectives, next comes a feasibility study. This study should assess the viability and potential risks associated with setting up a GCC. Key aspects to consider include:
3. Select the Right Location
Choosing the right location for setting up the GCC is critical. This choice will impact talent acquisition, operational efficiency, and overall success. India, Poland, Mexico, The Philippines, and Brazil are some of the top talent hotspots where companies can house full, scalable engineering teams. India has consistently been one of the top global talent hotspots for setting up Captive Centers. GCCs in India have a long and storied history. Over the last two decades, Captive Centers in India have definitively metamorphosed into innovation and transformation hubs for parent companies. A vast, digitally-skilled talent pool; higher ecosystem maturity with a dynamic technology start-up ecosystem, a vibrant Service Provider community, and academia; ease of doing business; and affordable costs are just some of the X factors that propel India to the top of the globalization list.
When selecting a location, companies need to consider the following factors:
4. Build a Robust Business Case
Based on the results of the feasibility study and location analysis, the company needs to create a compelling business case for establishing a GCC. This case should outline the expected benefits, potential risks, costs, and potential return on investment. A well-structured business case will help secure executive buy-in and funding for the GCC initiative.
5. Develop a Detailed Roadmap
With the business case approved, it is time to create a detailed roadmap for setting up the Captive Center. The roadmap should include the following key milestones:
6. Choose the Right Offshoring Model
Any company looking to set up a Captive Center needs to choose the right offshoring model.
The following table illustrates the salient aspects of each of these models.
7. Define the Organizational Framework
Define reporting relationships, span of control, roles, and responsibilities for the newly set up Captive Center. Balance local leadership for agility with integration with global teams. Plan team structures keeping end-state scale in mind. The following will be key considerations when designing the GCC organizational structure:
8. Focus on Talent Development
One of the primary advantages of setting up a GCC is access to a diverse and skilled talent pool. To maximize this advantage, the company must invest in talent development and retention strategies. Consider:
9. Implement Effective Governance and Communication
Effective governance and communication are crucial for the success of the GCC. Establish clear reporting structures, decision-making processes, and communication channels between the Captive Center and the parent company. Regularly engage with stakeholders to ensure alignment with strategic objectives.
10. Continuously Optimize Operations
Setting up a GCC is not a one-time effort but an ongoing process. The company must continuously assess the performance of the GCC against KPIs and identify areas for improvement. Consider automation, process optimization, and technology upgrades to enhance efficiency and cost-effectiveness. Define maturity roadmap. Set targets for center leadership, talent development, and portfolio expansion. Track progress periodically. Maintain active collaboration between global and GCC leaders to enable growth.
11. Ensure Data Security and Compliance
Data security and compliance are paramount in today’s dynamic business environment. Implement robust data protection measures, adhere to local and international regulations, and conduct regular audits to ensure compliance.
12. Manage Organizational Change
Proactively manage the cultural integration between global and GCC teams by –
13. Foster Collaboration and Integration
To fully leverage the capabilities of the GCC, the company must promote collaboration and integration with the parent organization. Periodic knowledge-sharing sessions, cross-functional collaboration, and alignment with corporate culture and values play a critical role in ensuring faster integration.
14. Govern Continuous Improvement
Define frameworks to track the GCC maturity across dimensions like leadership, talent, and technology. Conduct periodic assessments to monitor progress. Share best practices across centers. Stay aligned to the long-term strategic roadmap through active partnerships between global and local leadership.
A well-designed GCC can give any company access to new talent pools and innovative thinking. With careful planning and investment in people, companies can build global Captive Centers that create immense strategic value over time. But setting up a Captive Center can be challenging, due to the fact that there are multiple moving parts to manage. From location analysis to infrastructure, IT, talent acquisition and management, and other operational challenges, the journey to set up a GCC can be time-consuming. Without the necessary experience, companies that try to set up a Captive Center in talent hotspots such as Bangalore, Mexico City, or Warsaw, will run into operational challenges and frustrations that can potentially make an already-difficult process more challenging, expensive, and inefficient. These will take up a lot of executive bandwidth, while also potentially increasing the risk of failure. Hence, strategic intent, a robust approach, careful planning, effective execution, and a commitment to continuous improvement are key to successfully setting up a Captive Center.
The primary purpose of establishing a Captive Center or Global Capability Center (GCC) is to leverage offshore talent and resources to enhance operational efficiency, innovation, and cost savings. Captive centers enable organizations to have direct control over processes, intellectual property, and talent development while benefiting from a globally distributed workforce, as highlighted in Zinnov’s insights on setting up such centers.
A Captive Center differs from outsourcing or offshoring to third-party service providers because it is an in-house subsidiary of the parent organization, providing more control and alignment with the parent company’s objectives. This differentiation is highlighted in Zinnov’s resources on global business operational models.
Typical functions or services that can be centralized in a Captive Center or Global Capability Center (GCC) include IT and software development, research and development, customer support, finance and accounting, human resources, and data analytics. Zinnov’s insights on GCC setup emphasize these core functions as areas where organizations can achieve maximum operational efficiency and value.
Captive centers offer reduced costs, improved operational efficiency, greater control over quality and consistency, increased agility, accelerated innovation, and access to new markets and talent pools. Captive centers can also support digital transformation, improve customer-centricity, accelerate globalization, drive innovation, and mitigate risk.