Global Capability Centers (GCCs) are forging partnerships with start-ups and investing in equity stakes up to 15 percent, to accelerate the captive centres’ product development.
This often involves white-labelling of products developed or produced by start-ups, said experts. White-labelling is when one company rebrands a product or service developed by another company under its name.
GCCs, which are dedicated offshore centres set up by a company in a foreign country to in-source IT and other related business functions, have been expanding at a frenetic pace in India in the last few years, with more global corporations looking to build their software service and products.
Not just equity, GCCs are also actively engaged with start-ups through various collaboration models, such as accelerator programmes and strategic partnerships. These models enable GCCs to tackle specific challenging use-cases with faster go-to-market strategies.
Based on the programme's location, GCCs typically acquire stakes ranging from 5-15 percent in equity programmes, according to data accessed by Moneycontrol from management consulting firm Zinnov. Moreover, GCCs often institute structured programmes for early to growth stage start-ups to drive innovation from their Indian centers, Zinnov’s Managing Partner, Karthik Padmanabhan, said.
Additionally, start-ups often receive mentorship, funding, and access to infrastructure from GCCs, facilitating the development and validation of their products and solutions.
“It's become quite a mainstream operating model where start-ups and enterprises, through their GCCs, interact with start-ups to work on specific enterprise use-cases and solve those problems,” said Lalit Ahuja, Founder & Chief Executive Officer of ANSR Inc., a firm that builds, manages, and scales GCCs.
Ahuja told Moneycontrol that start-ups bring “product ideas” and “incremental functionality” to the table from an engineering point of view.
E-commerce, generative AI, information security, data analytics, banking products, etc., are some of the key areas where collaboration is being witnessed.
“The investments that companies are making are obviously relatively minuscule, sometimes $100,000 kind of an investment. It's more of optics and putting skin in the game,” Ahuja added.
Some of the GCCs which actively engage with start-ups are Bosch, Honeywell, Adobe, NetApp, Cisco and Intel, among others, Zinnov said.
Proof of concept
As part of the collaboration process, GCCs embark on Proof of Concept (PoC) initiatives with start-ups, evaluating the feasibility of their products or solutions. These PoCs typically span 3-6 months and serve as a litmus test for the viability of the start-up's offerings. Successful PoCs may lead to GCCs becoming customers of the start-ups, leading to the integration of their innovations.
Boston Consulting Group’s Partner & Director, Snehil Gambhir, explains that GCCs typically provide the problem statement to the start-ups and subsequently support them in developing a pilot.
“If the pilot is successful, then the solution is scaled up and deployed throughout the organisation,” Gambhir said. He said retail giant Target was one of the early adopters in bringing the value of start-up partnerships to life.
In fact, financial services firm JPMorgan Chase’s GCC in India, with over 50,000 employees, hosted a forum for several dozen start-ups recently. JPMorgan Chase said the event helped it in benchmarking current solutions to emerging technology capabilities.
“We engage with start-ups in multiple ways, including to partner or invest,” said Vibhavari Jahagirdar, head of global technology for India, JPMorgan Chase.
Time is of the essence
GCCs take advantage of the inherent agility of start-ups to speed up the delivery of products and services. Start-ups offer quick solutions that require rapid responses, providing GCCs with the flexibility needed to embed or integrate those fast.
“GCCs are obviously larger global organisations, but if they have to solve some of these problems quickly, then the agility is there only with start-ups,” Srikanth Srinivasan, Vice President at industry body, Nasscom.
Srinivasan explained that large GCCs need a longer time to build a product or solution due to the processes involved in these big firms. “What a large corporation may do in a few weeks or months, this start-up can do in a few days,” Srinivasan added.
White-labelling solutions
The practice of white-labelling products has also emerged as a new trend. Essentially, GCCs take the product developed by the start-up, embed it into the product offering and then offer it to the end customers.
For start-ups, the branding aspect holds little significance as their primary goal is to get their product out in the market and gain traction. Whether their product is white-labelled or not is inconsequential to them.
Ultimately, regardless of whether the product is white-labelled or not, recognition, revenue, and profitability are what start-ups look at.
“You have the global companies in your backyard… and it's (GCC-start-up collaboration) going to catch up over the years because GCCs are now truly representing the enterprise,” Ahuja said.
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