New recruitment trends like the great reshuffle from the pandemic and post-pandemic era have proven to be an epiphany for companies on the global talent problem. Companies needed to redefine their talent strategy to not only obtain but also retain employees in order to remain afloat and ahead. In many scenarios, teams across the globe confront a lack of reliable, long-term talent and steady declines in team sizes.
As the enterprises’ demand for skilled manpower continues to soar due to digital transformation, organizations need more sustainable and scalable workforce solutions to mitigate the talent challenge. Amid rapid digital transformation, companies are now taking note of more sustainable and scalable solutions to solving this problem.
An effective strategy to combat this is to set up a global capability center, which ensures de-risking of business as well as steady innovation. A Global Captive Center or a GCC is a business unit that is owned and operated by a parent company, in a different country.
Captive centers are often set up to take advantage of lower labor costs, access to skilled talent, or proximity to key markets. An enterprise, through setting up GCCs, can expand its horizons and can be known as a global business services provider organization with an international landmark.
Identification of these countries is premised on certain factors such as Ease of Doing Business, Tax Implications, Availability of Skilled talent, Regulatory System, Cost of Living, and Cost of Center Setup. Some of the key parameters are shared as below:
Cost: One of the most deciding factors during the setup of a GCC is cost implications. Over time, when the scale and the demand for specialized functions start rising, the business overhead needs constant monitoring and adjusting. Setting up a capability center in a low-cost location ushers in a range of cost-saving benefits. From labor arbitrage to efficient operational expenses, certain geographies have become GCC havens due to their reputation for cost optimization.
Ecosystem Compatibility: The second factor that must be taken into consideration is ecosystem maturity and compatibility. The robustness and efficiency of a business ecosystem play a crucial role in talent availability and growth for an organization. The existing landscape should be frictionless to operate businesses in, an ecosystem with vibrant technology start-ups and business units working with horizontal and vertical integration, a dynamic service provider community, and a higher number of universities and research institutes to further the skill levels across different roles. With these attributes in place, companies have a better chance of growing faster, expanding their offerings, and accelerating innovation.
Ease of Doing Business: Ease of Doing Business is another important facet that shapes the future of a capability center. Critical factors that a company needs to evaluate before choosing a location to set up its global center are geopolitical stability, security threat assessment, IP and data privacy index, cybersecurity index, tax implications, global language proficiency, easy access to amenities and infrastructure, and favorable regulations by the government.
Talent Availability: An abundance of talent plays a vital role in drawing multinational businesses to overseas locations. A common means to save recruitment and retention costs without cutting corners in quality and capability, GCCs usually pay significant attention to the availability of skilled talent for their expansion strategies. Talent availability is dependent on certain external factors, including research maturity, education quality of the academia, the zeal of people to learn, the overall technology and regulatory landscape, and most importantly whether people have access to the right resources for learning.
With these factors in mind, continue scrolling down to get to know the top 5 locations to set up your next GCC.
India has been a popular choice for Global Captive Centers due to its large pool of skilled and English-speaking talent. India is home to quality talent with a globally connected population and an ecosystem that is mature and optimally functioning. India is also home to over 100 unicorns, inviting an influx of capital. The developing digital infrastructure of India is capable of handling global operations and addressing the global talent shortage challenge.
The cost of living and operations is relatively low in India, making it a cost-effective option. Additionally, the Indian government has a number of policies in place to support foreign investment, making it a favorable environment for setting up a captive center. The Indian workforce is known for its dedicated approach and passion for finding solutions to the most complex problems with a bare minimum of resources. The talent pool is in line with the global workforce. A recent report, India Captivating, published by NLB Services revealed that multiple MNCs are setting up operations in India to create a superior talent pool (78% of the respondents), to assist the global demand for radical innovation (55%), to create business optimization strategies (49%) and not merely for labor arbitrage. Also, EY’s latest ‘Future of GCCs in India – a vision 2030’ report, has estimated that the domestic GCC market size will reach US$110b by 2030.
The overall conducive environment and momentum of economic growth that India has gained over the past few years has also resulted in making India’s position stronger than ever in the global market for setting up a Global Captive Center. As per an article shared on LinkedIn, 27% of US-based Fortune 2000 companies already have GCCs in India.
China is a well-known name in the global economy when it comes to setting up enterprise units and captive centers. Having a large pool of skilled talent gives it an edge as a favorable location for Global Captive Centers. Also, the cost of labor in China is relatively low which can be a cost advantage for some businesses. A Bloomberg report cited that countries like India (0%), China (12.5%), Brazil (15%), etc., won’t be affected by a recession which translates to a robust business environment.
However, enterprises must be aware of the challenges that come along with doing business in China, such as the stiff and complex regulatory environment. Additionally, geopolitical tensions and backlash that China has faced with its Western counterparts may be an obstacle for some.
Why should one choose China?
Canada is another popular choice for Global Captive Centers due to its highly skilled workforce and stable political and economic environment. The start-up ecosystem in Canada is booming and is forecasted to grow exponentially over the next decade. The regulatory environment in Canada is transparent and predictable, which can be a major advantage for businesses. Canada, being a neighbor, resembles the culture and lifestyle t of the US, making it easier for American enterprises to navigate the market conveniently.
Poland is another rapidly growing economy with a highly skilled and affordable workforce. Also, the Poland government offers numerous incentives for promoting foreign investments, making it a favorable environment for setting up capability centers. Adding to it is the geographical advantage, Poland is located in Central Europe, which offers it great connectivity to other European markets.
Mexico is another strategic location for Global Captive Centers due to its proximity to the United States. The cost of living and operations in Mexico is relatively cheap, making it a cost-effective option for enterprises. Additionally, the Mexican government has a number of policies to support foreign investment as a favorable environment for setting up a captive center.
In this blog, we have shared with you a few of the crucial factors to consider when choosing a location for a Global Captive Center. The best location for your organization will always depend on your specific needs, requirements, and the ultimate objective of what you wish to achieve.
When making your decision, it is important to carefully consider all of the factors involved, including the availability of skilled talent, the cost of labor and other operating expenses, the government’s policies and regulations, the infrastructure and connectivity in the location, the time zone difference between the location and home office, and the cultural fit between your organization and the local culture.
By carefully considering all of these factors, one can make the right decision about the best location for your next global capability center. Connect with the experts of staffing for more information and customized workforce solution offerings.
NLB Services helps organizations conceptualize and set up GCCs in India in a hassle-free way. NLB Services also helps already-entered companies to expand their business horizons across India. Visit our Global Business Services page and fill up the inquiry form for more information.
Vice President, Talent Solutions- Staffing, RPO & Perm