What is the average cost of setting up and running a GCC in India compared to other countries?

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Setting up and running a Global Capability Center (GCC) in India offers significant cost advantages compared to other countries, making it an attractive destination for multinational corporations (MNCs) looking to optimize their operations. Here's a detailed overview of the cost considerations:

Initial Setup Costs

1. Facility Acquisition and Infrastructure Development: The cost of acquiring office space in India is notably lower than in developed countries. For instance, Grade A office spaces in cities like Bengaluru, Hyderabad, and Pune are available at competitive rental rates, often 50-70% less than similar spaces in cities like New York or London. This includes security deposits, rent, fit-out costs (renovations and furniture), and ongoing maintenance fees.

2. Talent Recruitment: India boasts a vast pool of skilled professionals, particularly in IT, engineering, and finance. The average salary for a software engineer in India is approximately $15,000 per year, significantly lower than the $100,000 in the US or $70,000 in the UK. This cost differential allows companies to scale their teams without proportionally increasing their budgets.

3. IT Infrastructure: Setting up IT infrastructure involves hardware, software licenses, internet connection, and dedicated IT support staff. While these costs are substantial, they are generally lower in India due to favorable exchange rates and lower hardware costs.

Ongoing Operational Costs

1. People Cost: The people cost has been on an upward trend, growing at ~9.9% in FY 2017-18, driven by the demand for niche skill talent and the growing importance of 'pay for performance'. However, India GCCs continue to provide cost arbitrage to HQ, primarily due to the depreciating rupee value.

2. Infrastructure Cost: While infrastructure costs have increased, GCCs have taken measures to keep them in check by moving to tier-2 locations, resulting in 30-50% infrastructure cost savings. Additionally, seat utilization rates have improved, and rent increases in tier-1 cities have slowed down to 4-5%.

3. Travel Costs: With India leading the charter for emerging markets and next-gen products, there has been a significant rise in travel costs as more global roles are based in India. However, this is offset by the overall cost savings in other areas.

4. Vendor and Regulatory Costs: These costs include expenses related to third-party services and compliance with local regulations. While these costs exist, they are generally lower in India compared to developed markets.

Cost of Setting Up and Running a 30-Member GCC Team
Cost Category India (USD) USA (USD) UAE (USD) Germany (USD)
Labor Costs (Annual) 450,000 2,550,000 1,890,000 1,239,600
Real Estate Costs (Annual) 36,000 338,000 314,211 85,020
Operational Costs (Annual) 240,000 1,200,000 100,000 300,000
Total Annual Costs 726,000 4,088,000 2,304,211 1,624,620

Cost Savings Compared to Other Countries

1. Labor Cost Savings: India offers a highly skilled workforce at a fraction of the cost compared to developed markets. For example, a software engineer in India earns approximately 30-40% less than their counterpart in the US, with no compromise on skill or expertise.

2. Real Estate and Infrastructure Savings: Real estate costs in India are significantly lower, with premium office spaces costing 50-70% less than similar spaces in cities like New York or London.

3. Operational Efficiency and Consolidation: GCCs enable businesses to consolidate operations, reducing inefficiencies and duplication of efforts. This results in economies of scale and cost savings.

4. Government Incentives: The Indian government provides various incentives, including tax holidays in Special Economic Zones (SEZs), reduced corporate tax rates, and exemptions on import duties, further reducing setup and operational costs.

5. Favorable Exchange Rates: The Indian Rupee's favorable exchange rate against currencies like the US Dollar amplifies cost savings for foreign companies.

How Wisemonk Can Help You Optimize Costs for Your GCC in India

Wisemonk, as an Indian payroll and employer of record (EOR) expert, can assist you in maximizing cost savings for your GCC:

Strategic Planning: We provide insights on structuring your GCC to leverage cost advantages, ensuring you benefit from lower labor costs, real estate savings, and government incentives.

Talent Acquisition: Our extensive network and partnerships with educational institutions help you source and onboard top talent at competitive rates, reducing recruitment costs.

Infrastructure and Operations: Wisemonk assists in finding suitable office space, setting up IT infrastructure, and managing ongoing operations, ensuring cost efficiency.

Compliance and Documentation: We handle all legal formalities, including company formation, registrations, and compliance with local labor laws, reducing setup time and costs.

Cost Optimization: By leveraging our established infrastructure and local expertise, you can eliminate upfront capital investment and optimize operating costs by up to 15%.

By partnering with Wisemonk, you can focus on leveraging India's talent pool and business-friendly environment while ensuring your GCC operates within a cost-effective framework, reducing the risk of non-compliance and fostering a positive work environment.