Indian GCCs: Moving from cost arbitrage pitch to competencies

A recent report by Nasscom on the state of global capability centers - “GCC 4.0 – India Redefining the Globalization Blueprint” puts the estimated revenue generated by these centers at $46 billion, employing over 1.6 million people in the country. Traditionally while the captives in India were seen as back offices of large multinational corporations that provided support functions in human resources, IT support, and finance, among others -- today the Indian GCCs (global capability centers) are transforming to a much bigger role than ever before. India's GCC talent market is no longer seen as just a cost-effective market but is also becoming important to parent organisations from an innovation and leadership talent standpoint, according to the industry body. 

Currently, an estimated 1.6 million people are employed across GCCs in India and nearly 44% of the workforce is employed in companies undertaking Engineering and R&D (ERD) work. The rest are employed in the IT Services and Business Process Management segment. Globally post covid pandemic, most industry segments have been giving a thrust to digitisation, while increasingly looking at Indian talent for the digital journey.

According to the report, the talent around cloud, artificial intelligence, machine learning, blockchain, analytics, and the Internet of Things are the most sought-after skills by these GCCs, and manpower with such niche talent is already central to the operations of nearly 210+ entities. 

In terms of net capacity addition over the last two fiscals, American-headquartered companies added an additional 95 units, while European and APAC-headquartered companies added 48 and 7 units, respectively.  “On a year-on-year basis, the automotive industry has seen a lot of new centers being set up while the existing ones are expanding. The other is health care, including Medtech, pharma, payers and providers across the board are seeing a push towards setting up new ones,” says Mohammed Faraz Khan, Partner, Zinnov. 

According to JLL, out of the estimated 202.6 million square feet of space occupied by GCCs nearly 55 percent are concentrated in Bengaluru and Hyderabad. Especially the ‘Center of Excellences’ (CoE), which provide services in specialised areas such as data analytics or serve as innovation hubs in processes or products for the parent companies. An estimated 240 + CoEs are housed in India as per Nasscom.

Also at GCCs, it is not just the transformation in the nature of the talent, but also the roles/positions according to K.S. Vishwanathan, Vice President ( Industry Initiatives ) Nasscom. Indian captives are actively hosting more global leadership and ownership positions including those which envisage managing P&L roles. There has also been a bump up in the cost of talent from India – “While cost is important, people are now looking for efficiencies and domain-specific, enterprise-specific tech talent. In some cases salary levels are comparable to the US market, ” Vishwanthan says. Industry body data put around 5000 global positions (18% of them occupied by women) currently being based out of India, and the number is expected to reach 20,000 by 2030.  

While traditionally Fortune 1,000 companies looked at a large base of hundreds of employees, now even global small firms to mid-sized firms whose revenues ranging anywhere from 300 mn to 5 billion are looking to set up capacity hubs with even small 50-100 member teams. As global macro uncertainties have pressed enterprises to pursue diversification plans, companies are placing their confidence in India given the digital innovation and vibrant startup talent says Vishwanath. Over the next 2 years, Nasscom expects the number of global capabilities centers to grow by over 1,900 in number, employing about 2 million people with an estimated revenue of 60 billion dollars.