The GCCs have been mushrooming in India over the past few years, with over 1,580 GCCs and an installed talent base of over 1.66 million currently, as per IT industry body Nasscom. Their number is expected to reach 1,900 by 2024-25
GCCs adding to GDP and forex reserves
The GCCs are now making their presence felt in the Indian economy. Their share in India’s GDP is expected to double to 2% by 2030, according to ICICI Securities. These offshore units of multinational companies collectively generate about $46 billion in revenue, which is likely to touch $100 billion by FY30, the brokerage said. India accounts for around 50% of the world’s GCCs. According to the note, the sector grew by 11% between 2015 and 2023, topping the 7% growth registered by the Indian IT services sector in the same period.A few days ago, RBI Governor Shaktikanta Das underlined the role of the GCCs in India’s economy. “The phenomenal rise of GCCs in India has provided a significant boost to India’s software and business services exports,” Das said. They make a significant contribution to India’s foreign exchange reserves which climbed to a record of $651.5 billion by the end of May, demonstrating resilience despite an uncertain geopolitics.
How the GCCs are evolving in India
The GCCs started off doing back-end IT, customer support and finance functions in the 1990s and 2000s, but they have ventured into supply chain, sales, human resource, R&D and higher value-added activities in information technology such as artificial intelligence/machine learning, robotic process automation, mobility and digital.
Traditionally, GCCs, or captive units, were single-function transactional service centres primarily providing finance and IT services. Now, GCCs are multi-function, multi-geography service centres catering to varied needs of their parent companies. Given their early success with the finance and IT functions, GCCs gained the confidence of their parent organisations to deliver multiple functions out of India.
Artificial intelligence, machine learning, advanced analytics, cybersecurity, ADAS solutions, in-vehicle infotainment, AI hardware solutions, powertrain, foundational IP solutions were some of the major focus areas for the new GCCs as well as the new centres for existing GCCs in Q4 CY2023, as per a recent report by Nasscom and management consulting firm Zinnov.About 60% of the new GCCs established in India have all three functional areas — ER&D, IT and BPM. “India has firmly established itself as the go-to-destination for Global Capability Centres (GCCs), attracting an increasing number of global companies seeking to leverage the country’s unparalleled advantages,” the report said. Notably, around one third of GCCs established in the quarter were for semiconductors, at a time when India is vying to become a semiconductor industry hub.
Why GCCs are coming to India
The reason behind this mad rush to India is that global companies are reinventing themselves as technology companies and undertaking massive transformation programmes. India can provide the tech talent needed at the huge scale for this transformation.
With an estimated 5.4 million tech experts, India provides GCCs with an abundant talent landscape for thriving and innovating. Moreover, the country offers a competitive cost framework encompassing talent, rentals, and operational costs, presenting an attractive proposition for businesses seeking to optimize their operational expenses while maintaining high standards.
Globally, among the top emerging GCC hubs, including Brazil, Chile, China, Czech Republic, Hungary, Philippines, and Poland, India has the best cost and talent attractiveness score, which makes the country the most sought-after destination for GCCs.
A new future for Indian IT firms?
Indian IT firms are gaining from the country’s emergence as a hub of the GCCs, providing services, setting up projects, as well as partnering and even acquiring such centres.
A host of Indian firms including GlobalLogic, L&T Technology Services (LTTS), KPIT and Happiest Minds are getting greater revenue momentum from GCCs in the country, while a few companies including LTTS are helping their global clients set up the GCCs in India, ET has reported recently. Others like Infosys, TCS, Wipro and Happiest Minds are also seeing opportunities in acquiring these centres to deepen their relationship with the parent clients, as per industry executives.
“As GCCs evolve, they are increasingly adopting a hybrid approach, combining inhouse teams along with third-party service providers,” Vikram Ahuja, co-founder of business consulting firm ANSR, has told ET.
While GCCs evolve in the country and climb up the value chain, they not only outsource to IT and engineering services firms in India, but many times also get sold to Indian IT firms as parent companies see more value proposition in doing so. Infosys MD and CEO Salil Parekh recently told ET that the firm signed a contract with a client (Danske Bank) to take over the latter’s old centre in India existing for the last 10-15 years. Happiest Minds in April announced acquisition of Macmillan Learning India Pvt Ltd, an offshore development centre of The Macmillan Group. Last year, Chicago-based financial technology firm Envestnet outsourced certain development, engineering and back-office functions located in Bengaluru to TCS to increase operations scale and business agility. Wipro in 2018 acquired the India operations of US-based technology company Alight Solutions and signed a 10-year contract through 2028.