Set up Your Global Capability Center

A Global Capability Center (GCC) is a centralized hub that tech product companies establish to deliver critical business functions and manage key areas like HR, IT, customer service, finance, and supply chain across multiple regions. In recent years, the global capability center operating model has been gaining momentum, with an estimated number of 10,000 GCCs worldwide in 2024. Could this model be the key to scaling your tech business globally?

I’m Dmytro Ovcharenko, CEO at Alcor, a software R&D accelerator offering  GCC as a Service. As a Global Capability Center provider, Alcor helps Western tech product companies build their own R&Ds across Latin America and Eastern Europe. By giving access to global Silicon Valley-caliber tech talent, a complete package of Employer of Record (EOR) services, and necessary back-office support, my company offers its clients a cost-wise expansion from 0 to 100 skilled developers in a year.

In this article, I’ll answer the question, “What is a Global Capability Center?”, explain how it works, highlight its advantages, and share which tech giants have already succeeded with the GCC model. Additionally, I’ll provide a clear guide on how to set up a Global Capability Center, the best locations to consider, and, in the end, reveal why a Global Capability Center for product companies is a smarter choice than traditional outsourcing. So, let’s dive in!

How the Global Capability Center Operation Model Works

As we highlighted earlier, GCCs are offshore divisions crafted by multinational corporations to handle a variety of strategic services, such as:

• IT and Software Development: Building and maintaining software applications, managing IT infrastructure and support services, and providing cybersecurity and data protection.
• Business Process Management (BPM): Handling back-office operations like finance, accounting, payroll, and procurement, managing customer support and contact center services, and streamlining supply chain and logistics processes.
• Human Resources (HR) Management: Recruiting, onboarding, and training employees, managing employee benefits and performance, and ensuring compliance with labor laws and regulations.
• Risk Management and Compliance: Monitoring regulatory changes and ensuring compliance, managing enterprise risk and internal audits, strengthening disaster recovery and business continuity planning.
• Marketing and Sales Support: Providing content creation, digital marketing, and SEO support, managing CRM tools and customer databases, and assisting with lead generation and market outreach.

Thus, a GCC is essentially the same as an R&D center but operates on a more global scale. While R&D centers are specialized facilities dedicated solely to innovation, product development, and engineering, GCCs are multi-functional hubs that manage a broader range of business operations, focusing on centralizing and optimizing processes across regions.

But what specific advantages could setting up a global capability center bring to your business?

Global Capability Center Benefits

Cost optimization 

GCCs provide access to more affordable regions where the cost of living is lower than in the US. This leads to significant savings not only on developer salaries but also on infrastructure and operational expenses, allowing you to allocate resources to more critical areas and projects. For example, when using the global capability center model for expansion in Mexico, the annual salary of a senior Full-Stack Software Developer ranges from $40,000 to $66,000, saving you up to 50% compared to hiring in the US.

Access to global talent 

A GCC opens doors to the best specialists worldwide, tackling the issue of talent shortages in your company’s operational country. Using global capabilities and hiring engineers with the needed technological skills without geographical limitations results in high-performing software development teams. These teams become the catalyst to drive transformation and fuel growth for your business.

Full operational control

With global capability center services, businesses can oversee all operations independently. Direct supervision of product development, seamless communication with engineers, and the alignment of processes with company goals ensure both quality and efficiency. This level of control in GCCs empowers businesses to make swift decisions, maintain consistency across operations, and adapt quickly to global market changes.

Risk mitigation

Building on the previous point, setting up a global capability center platform lets you maintain complete control over IP rights and prevent the leakage of critical data. Additionally, choosing a reliable GCC provider guarantees full compliance with the legal regulations in your selected location.

Global Capability Center Examples

Want to see how Global Centers work in practice and the results they can deliver? Here are a few success stories from the global capability center companies:

• Airbnb: Since 2010, Airbnb Hosts in Georgia have earned a total of $1.2 billion, contributing significantly to the company’s revenue. With the opening of its new Atlanta Tech Hub, which serves as a GCC, the company is driving regional development. At the same time, it aims to significantly boost its income by leveraging local talent and streamlining operations to support global growth.
• Warner Bros: By establishing its GCC in Hyderabad, the company has gained access to highly skilled professionals and is planning to grow the team to  2,000 members. Moreover, the Hyderabad team is enhancing AI analytics for streaming platforms, enabling better consumer preference predictions. By integrating these advancements into its GCC operations, the company significantly optimizes its processes and reduces infrastructure costs.
• Digi-Key: By opening its own GCC and transitioning certain services to Bengaluru, including sales, IT, design engineering support, and supply chain operations, Digi-Key optimized resource allocation and enabled its headquarters to concentrate on core activities.
• GSK: With GCCs in Poland, Costa Rica, India, Malaysia, the UK, and other countries, GSK has significantly boosted its innovation efforts. Since 2017, it achieved 11 major product approvals and doubled its Phase III assets. Driven by the pursuit of even greater results, in 2023, GSK invested $7.81 billion in R&D, marking a 13% increase at actual exchange rates (AER) and 14% at constant exchange rates (CER) compared to 2022.

GCCs can do more than just bring benefits—they can exponentially boost a company’s success. Now, let’s dive into how you can make this a reality for your business.

How to Set up a Global Capability Center Checklist

To help you start your global capability center setup, we have prepared a comprehensive offshore development center checklist that will greatly simplify this task for you.

Choose your destination wisely

• Spin the globe and land on the perfect spot: Start by choosing a region that allows you to efficiently oversee all operations of your global innovation & capability center. If you’re a US-based product tech company, you have two winning options:
  • “Next door”: Pick a location with only 1-2 hours of time difference. For instance, by choosing Mexico or Colombia, you can seamlessly manage your GCC team at every stage of the project.
  • “Across the ocean”: Go for a spot with a 7-8-hour time difference. This will enable you to set up a continuous workflow in your GCC— while you’re wrapping up your day, your offshore team in Poland, Romania, or Ukraine will be in full swing, finishing tasks just in time for you to start fresh the next morning.
• Check the developers’ specialization: Before starting a global capability center, always research which technologies are common in a particular country, which programming languages are most popular among tech engineers, and what kind of work experience they have. For example, in Ukraine, the most prominent technology sectors are DefenseTech, MedTech, and AI, with a higher number of developers experienced in these fields. In neighboring Poland, those seeking excellent skills in Blockchain, VR/AR, and Big Data are successfully implementing their projects and developing their GCCs.
  Compare prices: Some regions are more economically advantageous for business due to the overall cost of living, making it more cost-effective to establish a GCC. However, it’s essential not to forget that developer salaries can vary significantly even within the same region. For example, the average gross annual salary for a tech specialist in Aguascalientes, Mexico, is $61,800, while in the capital, this figure is almost 8% higher.
  

Find a trusted GCC provider

• Check the service offerings: One of the key selection criteria is the range of services offered by your global capability center provider. While the GCC model typically includes the most comprehensive set of services, it’s essential to verify exactly what’s included in the cost and what might require third-party involvement or additional resources. Choosing a vendor that offers everything in-house can save you significant time and resources in the long run.
• Look for local expertise: Choose a GCC provider that is well-versed in the local market and has several years of experience working with local talent. They should be familiar with the local legislation and have their own legal entity in your chosen location.
• Discuss the price: An equally important factor is ensuring that the provider has transparent and clear pricing for its services, with no hidden costs or buy-out fees. Additionally, check the average market price, as this will help you avoid overpaying.
• Check independent review platforms: Finally, to make an informed decision, always refer to reviews from previous clients and ratings on platforms like Clutch and GoodFirms. This will give you a better understanding of how GCC providers manage tasks, their level of efficiency, and whether they can deliver success for their clients.

Top Locations to Set up a Global Capability Center

With India being one of the most popular hubs for establishing GCCs, reaching 1,700 in 2024, one might wonder why to consider other locations. Here are a few potential drawbacks of entering the Indian market that you might want to consider:

• Less skilled talent: According to the Coursera Global Skills Report 2024, India ranks 87th, falling behind countries like Brazil, Chile, Mexico, Poland, Bulgaria, and Ukraine, which are all in the top 30 of this ranking. Moreover, while it may seem like you’re saving significant costs by hiring Indian developers, you won’t receive the expected quality of development, resulting in additional costs for subsequent fixes.
• Saturated market: Attracted by low costs and competitive salaries, many companies choose to establish GCC operations in India, the “GCC Capital of the World,” creating intense competition and a challenging “talent hunt” even in the world’s most populous country.
• Low English proficiency: From 2020 to 2024, India’s English proficiency level dropped 19 positions, from 50th to 69th place. While the local talent may typically have higher proficiency, setting up a global capability center in this location can still pose a challenge when you need to deal with cross-functional teams, communicate effectively with clients, or manage operations and services in a global context.
• Time zone differences and work ethic: The 10+ hour time difference between the USA and India can be a less-than-ideal factor when choosing a location for global capability center development. The significant time zone difference between the US and India isn’t the only challenge—India’s work culture also differs greatly compared to most companies in Europe and North and South America. All these factors can create major obstacles to effective communication within your in-house and GCC teams, directly affecting the quality of the product development.

So, if not India, what are the alternatives? Are there better locations where you can easily set up a GCC while keeping it cost-effective? Here are a few ideas for you:

Latin America

• Mexico: With the largest tech talent pool in Latin America of 800,000+ software engineers and salaries 50% lower than in the US, it offers a cost-effective way to find your perfect match among Mexican tech talent.
• Colombia: Ranked 2nd for nearshoring in Latin America, the country attracts renowned tech giants like Google, Microsoft, IBM, Accenture, and Oracle, showcasing its favorable conditions for establishing your own GCC.

Eastern Europe

• Poland: With 650,000+ highly skilled software developers, Poland ranks 1st in Europe. This exceptional access to talent, combined with a 9th place in global rankings for outstanding competencies, provides a vast pool of professionals to meet your hiring needs in your own GCC.
• Romania: The country is a leader in Europe and ranks among the top 6 in the world for the highest number of certified IT specialists per 1,000 citizens. With a total of over 250,000+ tech engineers highly skilled in Python, Java, JavaScript, and C#, Romania provides exceptional access to top-tier talent and cost-effective software development.

Each of these locations offers ideal conditions for the setting up of a global development center. But can we rely on regular outsourcing instead? Let’s explore why it’s better to choose a GCC provider rather than a traditional outsourcing company. But can we rely on regular outsourcing instead? Let’s explore why it’s better to choose a GCC provider rather than a traditional outsourcing company.

IT Outsourcing Company vs Global Capability Center

Outsourcing company

This option is a cheaper and faster alternative, ideal for short-term projects and hiring a small number of developers.

However, it’s important to understand the role of potential pitfalls. Hidden costs, lack of transparent pricing, and external developers’ disinterest in the long-term success of your project can negatively impact its quality. Additionally, the absence of direct control over engineers’ work, with all processes routed through a third-party provider, can lead to significant delays in product development. The high risk of sensitive information leaks and intellectual property breaches could be another crucial factor when choosing between outsourcing and GCC.

Furthermore, outsourcing providers usually only offer recruitment services, so if you need payroll processing, tax handling, and other services, you would have to involve additional providers and manage multiple partnerships, which could add unnecessary stress.

Global сenter

The GCC model is more comprehensive and all-encompassing, offering a seamless solution that covers everything from recruitment to operational support. Instead of managing multiple providers for recruitment, payroll, and office setup services, companies can opt for GCC solution, which streamlines the entire process under one trusted partner. This approach saves time, reduces risks, and ensures compliance in the chosen region. 

An intriguing offer, isn’t it? Here’s a little bonus for you—the opportunity to set up your GCC with a trusted and exceptional end-to-end provider like Alcor!

Alcor—a Trusted GCC Provider

At Alcor, we will help you build your own GCC from scratch in one of our locations in Latin America and Eastern Europe! We provide a mix of the most sought-after services, including:

• Comprehensive EOR service: Enjoy seamless operations and benefit from expert navigation of legal matters, onboarding and offboarding of your developers, payroll management, and benefits administration. Check out the Tonic Health case—they’ve already leveraged our EOR services to simplify their daily tasks and take their business to the next level!
• Top-notch recruitment: Qualified candidates, 80% of whom are approved of by clients and invited to interviews. Not to mention that our tech recruiters fill 15% of vacancies from the first CV, just as they achieved incredible results by making 6 top-notch hires in 6 weeks for a global company like GoTransverse.
• 360° operational support: For your convenience, we offer office lease and hardware procurement services for your software research and development team, visa support, insurance assistance, and employer branding to boost your company’s global image.

And on top of our core services, you gain numerous benefits:

• No need to register a legal entity;
• Zero buy-out fees;
• No intermediaries and direct team management.

Want to see how it works? Let’s dive into the ThredUP story. When they reached out with a request to build their own R&D center, our team got to work and delivered a wow effect. We hired 20 exceptional local talents, including an ML specialist, and Java and NET developers, managed everything from salary processing to tax planning, and ensured 100% legal compliance with both American and Eastern European laws. The result? A fully staffed team in a new location and complete success for the company!

Dreaming of your own GCC? Kick off your stress-free scaling journey today with Alcor!