offshore devlopment center in india

OFFSHORE DEVELOPMENT CENTER

Canada | India | Netherlands | Singapore | UK | USA 2

The Covid-19 has accelerated the pace of digital transformation across sectors and industries.

Irrespective of the size, companies are either building in-house capabilities or taking external

support to fast-track digitization to remain effective and efficient. However, many companies are

facing difficulties in executing their plans due to a shortage of talent, thus looking for alternative

centers to fulfill their requirements. For such companies, India with a huge talent pool and

robust infrastructure becomes the most suitable option – both in terms of cost and quality. With

the ease of doing business and well-established support ecosystem, setting up an offshore

development center in India is not a complex task anymore – as long as companies are clear in

terms of objectives and expected outcomes from the ODC.

AN OVERVIEW

OUTSOURCING

BUSINESS IN INDIA

India is considered among the most attractive destination to

offshore business services

Source: Statista

1200+ GICs that includes 25% of FTSE

2000 and 50% of fortune 500 companies

from US has GICs / Captives in India

Employing ~1 million people

Up to 45% cost savings over 3-5 years

2.82

1.882.6 2.84 2.82

0.4

2.76

2.23

2.251.15

1.26 1.17

2.34

1.31

1.14

1.381.64

1.27 1.33

1.89

1.11

0.87

0.970.76 0.65 0.56

1.210.59

India China Malaysia Indonesia Vietnam US Philippines

Financial Attractiveness People Skills and Availability

Business Enviornment Digital Resonance


7.06

6.486.15 6.02 5.88 5.84 5.77

Off shore

(Set-up)

Captives

(Ramp-up)

GICs

(Value Addition)

GCCs

(Breakthrough Innovation)

Key Focus • Prove the concept • Cost Arbitrage & Mature

Delivery

• Business Impact &

Thought leadership

• Competitive advantage for the

Enterprise

Value

Delivered

• Select anchor functions

• Multiple pilots

• Defined processes

• Predictable, hi-quality

delivery

• Process efficiency

• Capacity augmentation

• High skill capabilities

• Driving process change

and efficiency

• Global products and service

lines

• New revenue channels ’

• IP creation

Operating

Model

• Often shared services • Vertical integration • Effective matrix

organization

• Integral part of a globally

networked organization

• GCC viewed as another

business location

People

Model

• Reliance on expats

• Different people profiles

• Development of local

leaders

• Subject matter experts

• Part of global

leadership teams

• Business focussed leaders

Key

Stakeholders

• Function Heads

• 1-2 leaders as

‘Champions’

• Regional / Global function

heads

• Global function heads

• Select business heads

• CEO/Mgmt. Committee/Board

• Senior business leaders

• Clients

EVOLUTION OF INDIAN IT OUTSOURCING INDUSTRY

Source: NASSCOMCanada | India | Netherlands | Singapore | UK | USA

KEY TRENDS

Collaboration with

start-ups and vendor

engagements are on

rise

Tier-2 cities are emerging

as an alternative to well-

established hubs

APAC based and non-English

speaking multinationals are

exploring GIC space

in India

Long term net value has

become a decision-making

criteria rather than just cost

advantage


ODC ESTABLISHMENT IN INDIA

» Business Plan Preparation

» Location Planning

» Entity Establishment

» Tax and Regulatory

» Talent Landscape

» Success Factors

KEY STEPS

BUSINESS PLAN PREPARATION

BUSINESS PLAN CREATION

It is important to develop comprehensive business plan covering strategic drivers, cost-benefit

analysis and expected outcomes from the ODC initiatives.

Indicative organization structure and talent acquisition strategy

Recommending suitable legal, tax and regulatory structure

Estimating facility buildout and IT infrastructure cost

Define scope and objectives of GIC

Detailed project plan with defined roles and responsibilities of each stakeholders

Short term financial model for better decision making

1

2

3

4

5

6


LOCATIONPLANNING

Cost

Parameters

Sustainability

Parameters

Talent Acquisition

Cost

Office Rental

Utility Cost

Other Indirect

Costs

Talent Availability

and Quality

Presence of other

GICs

Infrastructure

Scalability

FDI Trends and

Major Investments

Maturity of GIC

related ecosystem

Social

Infrastructure

It is critical to identify most suitable location by analyzing various cost and

sustainability parameters in line with organization’s long-term vision

LOCATION PLANNING


LOCATION PLANNING

Delhi- NCR

16%

Hyderabad

14%

Chennai

11%

Bengaluru

36%

Mumbai

11%

Pune

12%

Over the last couple of years, many Tier 2 cities in India

have also become hotspots for GIC setup:

Kolkata Chandigarh

Ahmedabad

Vadodara

Thiruvananthapuram

Coimbatore

%: Percentage of GICs out

of total GICs in Tier 1 cities ‣ Bengaluru is the undisputed GIC capital of

India. Delhi-NCR region is also a major GIC

destination with the presence of corporate

HQs.

‣ Hyderabad is increasingly favored by tech,

Engineering R&D companies besides the

traditional healthcare & pharma base.

‣ BFSI, auto/industrial, engineering &

manufacturing ecosystems drive the growth of

GICs in Chennai and Pune.

Present GICs’ Location in India:

Source: NASSCOMCanada | India | Netherlands | Singapore | UK | USA

13Canada | India | Netherlands | Singapore | UK | USA

0.6 0.7 0.9 1.0 1.1 1.1 1.21.5 1.6 1.7 1.7

2.3 2.3 2.4 2.4 2.52.9 3.0 3.2 3.3 3.3 3.4

4.75.3

5.9

7.4

9.9 9.9Real estate costs are lowest

in India compared to

other APAC cities

LOCATION PLANNING

Source: Cushman & Wakefifield



BUSINESSSET-UP


TYPES OF PERMITTED BUSINESS ESTABLISHMENTS

Private Limited

Company

Limited Liability

Partnership

Joint Venture

Wholly Owned

Subsidiary

LLP

For carrying out manufacturing / services and other related

business operations

Private Limited Company (PLC) or a Limited Liability Partnership (LLP are the two key options that

could be explored for a permanent form of business set up in India.

Foreign Company

Liaison Office

Branch Office

Project Office

For carrying out import-export,

research and project execution



KEY REQUIREMENTS - COMPANY INCORPORATION

Minimum 2 directors with at least one resident Indian

No minimum paid-up

capital is requiredPhysical office address

required



TAX AND REGULATORY

The taxation system in India is such that the taxes are levied by the Central Government and the State Governments.

Primarily, there are two types of taxes in India- Direct Tax and Indirect Tax. Direct taxes are levied on taxable income

earned by individuals and corporate entities and is also payable by those on whom it is levied. On the other hand, indirect

taxes are levied on the sale and provision of goods and services respectively and the burden to collect and deposit taxes is

on the sellers instead of the assessee’s. Primarily, the following are the key taxes collected in India:

Direct Taxes

Income/ Withholding

Tax

Corporate Tax

Capital Gains Tax

Indirect Taxes

Goods and Services Tax

Excise Duty

Customs Duty

Central Goods and

Services Tax

State Goods and Services

Tax

Integrated Goods and

Services Tax



Type of Company New Corporation Tax Rate Additional Benefit/Requirements

Corporations not seeking

any incentives/exemptions

22% (earlier 30%) + applicable cess and surcharge.

Effective corporate tax rate of 25.17%

No MAT (minimum alternative tax)

payable by these companies

Corporations seeking

incentives/exemptionsUnchanged at 30% + cess and surcharge

MAT rate reduced to 15% from

earlier level of 18.5%

New Manufacturing

Companies

15% + applicable cess and surcharge. Effective

corporate tax rate of 17.16%

New manufacturing co. must be

incorporated on or after 1 October

2019. Must start production before

March 2023.

TAX AND REGULATORY

With effect from fiscal year (FY) 2019-20, domestic companies are provided with an option to pay income tax at 22%

provided that they will not avail certain exemption/incentive. The effective tax rate is 25.17% inclusive of surcharge and

cess. Further, such companies are not required to pay the minimum alternate tax (MAT) / MAT credit if available, would

lapse.



TALENTLANDSCAPE


TALENT LANDSCAPE

With 4.6 MN IT-BPM

talent pool, India is among

the leading supplier of IT

talent globally

8 MN

6 MN

2 MN

220K+

Layer 1: Estimated University Enrolment Talent Pool in India

Total number of University Enrolments in 2019

Layer 2: Estimated University Enrolment in

Undergraduate, Postgraduate and Ph. D levels

Layer 3: Estimated STEM Talent Pool

Layer 4: Estimated Fresh Talent Pool that

will transition to roles in IT-BPM industry

Fresh Talent(Per Annum)

Source: NASSCOM



Singapore Beijing Kuala Lumpur Manila Bangalore Pune

INDIA IS AMONG THE

MOST COST EFFECTIVE

LOCATIONS TO SETUP

OFFSHORE CENTER

Operating Cost per FTE for ADM Services 2018;

USD ‘000 per annum

56-58

41-43

35-37

19-2115-17 14-16

TALENT LANDSCAPE



KEY SUCCESSFACTORS


KEY SUCCESS FACTORS

Cultural

Understanding

Comprehensive Business

Plan with clear Goals and

Objectives

Robust Governance

Structure

Effective

Communication

Alignment between

Enterprise Strategy and

Offshore Business Strategy

Hiring and Retaining

Right Talent



OUROFFERINGS

OUR

OFFERINGS

1. Business Plan Creation

2. Location Analysis

3. Strategy and Execution

o Tax and Regulatory Advisory

o Business Set-up and Project

Accounting

o Infrastructure Set-up Support

o HR and Recruitment Support

o Processes and Governance

4. Project Management Support

OURAPPROACH


CLIENT TEAM

Tax and

Regulatory

Business

Advisory

Business Setup,

Accounting and

Payroll

IN-HOUSE TEAM

Legal Firm HR Firm

Real Estate IT

NETWORK PARTNERS

Project Team

Finance &

Accounts Corporate

Company Secretarial

& Legal IT HR

OUR APPROACH


For detail insights, please reach out to [email protected]

VAIBHAV MANEKPartner,

Business Advisory

HIMANSHU GODARADirector,

Inbound Advisory Services

KEY CONTACTS

28

https://www.linkedin.com/in/vaibhav-manek-762841/

https://www.linkedin.com/in/himanshu-godara-87b2907/

OTHER OFFICESINDIA OFFICE

Canada55 York Street, Suite 401, Toronto, ON M5J 1R7, Canada

NetherlandsFokkerstraat 12, 3833 LD Leusden, The Netherlands

Singapore60 Paya Lebar Road,

#10-31 Paya Lebar Square, Singapore 409 051

UKGround floor, Hygeia Building, 66-68 College Road, Harrow,

Middlesex HA1 1BE

USA

AtlantaOne Lakeside Commons, Suite 850, 990 Hammond Drive NE, Atlanta, GA

30328

T: +1 678 584 1200

New York1177 6th Ave 5th Floor, New York, NY 10036, USA

For assistance, please contact

[email protected] or visit us at: www.knavcpa.com

India

Mumbai201/202, Naman Centre, G-Block, Bandra-Kurla Complex, Bandra

(East), Mumbai – 400 051

T: +91 22 6164 4800

PuneA 401, Lotus Siddhi, Survey no. 162, D.P. Road, Aundh, Pune -

411007

offshore devlopment center in india

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