Initially, foreign firms such as Texas Instruments set up an R&D centre in India. Many other companies followed suit, e.g. Veritas Software, AT&T/Lucent, Sun Microsystems.

Later, these R&D centres evolved into capability centres which design products and work in areas such as AI and digital marketing. They are called Global Capability Centres or Captives. They initially provided back office support and product innovation data and analytic support. Today they have moved from back office to front office. To begin with, they were cost control centres. Today, they are product developers.

GCCs offer substantial employment opportunities. GCC manpower have set up many startups in India. GCCS were set up in Bangalore and Pune. Bangalore provided the educational infrastructure, especially the research promoting IISC. Infosys and Wipro too provided the support.

GCCs were mainly into doing backend IT, customer support and finance in the 1990s and 2000s. Later they moved into supply chain, sales, HR, R&D and high value-added activities. These days they directly move into high value-added activities.

MNCs entering into India take build, operate and transfer route. Indian IT service providers supported them. The transfer fee was charged by the IT companies. This model lost ground as MNCs did not welcome the manpower of IT service companies on account of differences in quality. There was a cultural gap too. The companies now take the greenfield route. Here there are issues of transfer pricing — the price at which products are transferred between the parent and subsidary organisations and vide versa after value addition. The government must simplify the transfer pricing structure.