Interest in offshore business centers, commonly known as global capability centers (GCCs), continues to rise as US companies across industries look to establish overseas offices and hire skilled workers to support critical business functions and technology services.
According to a recent New York Times article, in India alone there are more than 1.9 million people working for foreign companies at about 1,800 offshore corporate offices as of 2024. Continued growth is expected, with the potential for these GCCs to earn $100 billion or more by 2030. While most GCCs are established in India, they are also showing up in other countries, such as Mexico and Poland.
To build out and grow a GCC, companies have leveraged various models, including the build-operate-transfer (BOT) model, further detailed in our June 2024 post. This post highlights a variety of foundational questions and issues to consider when a company is exploring the set-up and use of a GCC in India.
Entity and Location Considerations
Entity Formation and Use
As an initial step, the company should assess its corporate structure and determine whether there is an existing entity in India that can be used for the GCC or whether a new entity will need to be formed. This is important for managing and mitigating permanent establishment risks (e.g., potential exposure of the company’s US revenue to taxes in India). It will be critical to involve subject-matter experts in tax, finance, and compliance to support the planning and analysis of the entity structure and formation.
On the other hand, if the vendor’s India entity is used to establish the GCC, then it will be important to plan out whose name any assets are held in. If the vendor’s entity is acquiring assets on the customer’s behalf, it may be necessary to establish transfer rights and mechanisms when the customer takes over the GCC. Finally, it is important to think about which entity is signing the agreement. If the company’s India entity is signing, then goods and services taxes (GST) may apply. In any event, it is important to engage local counsel in India to assist with supporting the analysis and decision-making with respect to each of these issues.
GCC Location and Facility
Has the company identified the geographic region or site where the GCC will be established? If the GCC will be built in a special economic zone (SEZ), there may be local compliance issues (e.g., bonding requirements) to address and build into the overall plan from a timing perspective. Who will hold the lease to the GCC premises? It is common for some companies to temporarily leverage a vendor’s existing location to expedite the process while the company builds out its own facility in India.
In either case, consider which entity will hold the lease and be responsible for negotiating the lease. Of course, if the lease is held in the vendor’s name and the customer plans to assume the facility as part of a BOT or similar model, then the lease may need to be transferable to the customer. Facility-related considerations will heavily depend on the model and structure of the GCC transaction, and local counsel may need to be engaged to assist with leasing and real estate issues.
Scope and Pricing
Design, Build, Operate, and Transfer
What is the scope of the services to be provided by the vendor with respect to the GCC? Will the transaction include the design of the GCC as well as the actual build and operation prior to any transfer of the GCC to the customer? If design is part of the scope, it is important to ensure that the design of the GCC complies with local laws, regulations, and requirements. Depending on the complexity of the chosen model, each phase of the project (e.g., design, build, operate, and transfer) may require unique considerations with separate workstreams and contract documentation.
For instance, a company may have specific needs with respect to the configuration of the physical space, IT infrastructure assets, and network connectivity. Additionally, the operation and support of the GCC itself need to be mapped out, including responsibility for facilities management services.
GCC Delivery Services
When the GCC is up and running, what functions will it perform for the company? Will it be providing services in support of the company’s business operations, such as IT or business process services? If the GCC personnel are initially employed by the vendor, then these GCC delivery services will likely look and feel more like traditional outsourcing or managed services, with service descriptions and associated service levels. Additionally, if business process services are in scope, there may be special licensing required for the location.
Pricing
The pricing structures for GCC-related services typically vary depending on the model and by phase. For example, in a BOT model, the design and build phases may be priced on a fixed fee basis, while the operate phase may leverage FTE-based pricing. Similarly, the GCC delivery services, if initially handled by the vendor, may use FTE pricing models or other common managed services pricing structures. Other considerations for transfer services include whether any employee transfer fees or facility usage fees apply.
Recruiting, Hiring, and Transferring GCC Personnel
Recruiting and Hiring
One of the most important aspects of a GCC transaction is the recruiting and hiring of the personnel who will work in and deliver services from the GCC. How will recruiting be handled? A well-established vendor will have strong processes in place to recruit the best talent in the local market—but will the recruiting be customer-branded? If so, the design phase will need to take into account the company’s established practices, requirements, and branding guidelines as part of the recruiting activities. Another key part of the recruiting and hiring process is the compensation for GCH employees. In order to mitigate risks upon transfer to the company, the compensation packages should be structured during the design phase to align with how the company would compensate its own employees and to comply with local laws (e.g., gratuity requirements).
Transfer
Many GCC models involve a transfer phase where the GCC or certain components of the GCC, including the people, are transferred to the company so that it can operate and run the GCC on its own. The contract will need to address employee transfer rights and obligations to minimize business case impacts with respect to compensation, as well as to satisfy local legal and regulatory requirements.
Please join us as part of our Data 2025 webinar series on Wednesday, May 21, 2025, as Chris Archer, Katherine O’Keefe, and Oliver Bell discuss these and other issues with respect to GCCs.