Introduction
In India's ever-evolving technology job market, a significant paradigm shift is underway, delineating the changing dynamics of employment, particularly in the context of the country's expansive tech sector. This transformation is underscored by the rising prominence of Global Capability Centers (GCCs) against the backdrop of challenges and opportunities.
Sector 18
by autowitch
Emergence of GCCs and Shifting Recruitment Trends:
Multinational corporations (MNCs) are recalibrating their talent acquisition strategies, with hiring by GCCs poised to surpass recruitment by India's top-tier IT services firms. A report from TeamLease Digital projects that GCCs will create approximately 3.6 lakh jobs by fiscal 2025, contrasting with muted net hiring forecasts for India's top 5 IT firms as outlined in a December report by ICRA Ltd.
Munira Loliwala, AVP-strategy and growth at Teamlease Digital, acknowledges the noteworthy reduction in IT hiring figures and emphasizes the pivotal role of GCCs in offsetting the diminishing demand in traditional IT firms. Despite this, challenges persist as GCCs strive to bridge the gap in talent acquisition and fully leverage their potential for talent absorption.
Challenges Amidst Opportunities:
The software services industry in India faces headwinds, compounded by a slowdown in technology spending by U.S. enterprises and muted growth forecasts from Accenture Plc. Layoffs in the outsourcing industry and reduced campus hiring underscore the challenges facing traditional IT firms. However, GCCs are poised to mitigate these challenges, with projections indicating substantial workforce augmentation in the coming quarters.
Talent shortage remains a pressing issue, with 81% of GCCs experiencing recruitment difficulties. Moreover, attrition rates and rising talent costs pose formidable obstacles. Lalit Ahuja, Founder & CEO of ANSR, articulates the evolving business landscape and highlights challenges in monetizing products and services for GCCs while navigating concerns surrounding intellectual property.
Bright Prospects for GCCs:
Despite challenges, the outlook for GCCs remains optimistic. By 2028, India is projected to host over 2,500 GCCs, generating revenue exceeding $95 billion and tapping into a talent pool of 3.3 million. EY envisages GCCs evolving into profit centers, emphasizing their role in driving innovation and servicing external clients. Global economic challenges and the successful validation of remote work during the pandemic have catalyzed GCC growth, with projections indicating substantial industry growth by 2030.
Arindam Sen, partner and GCC lead at EY India, underscores the pivotal role of GCCs in navigating global economic challenges and driving digital transformation. EY projects 2,400 operational GCCs in India by 2030, highlighting the burgeoning opportunities in the sector.
Current Scenario and Emerging Trends:
Data from a Nasscom-Zinnov report highlights the proliferation of GCCs across India, with Tier-II and -III cities emerging as key hubs for expansion. Notably, at least 20% of Forbes 2000 global companies have established GCCs in India, reflecting the country's appeal as a preferred destination for global corporations. The Reserve Bank of India's State of the Economy report underscores India's emergence as a global leader in hosting GCCs, attributing this trend to factors such as quality real estate, competitive rental rates, and a burgeoning talent pool.
India's burgeoning digital ecosystem and surging data center capacity further enhance its attractiveness for GCCs, positioning the country as a global data center hub. The availability of a vast English-speaking tech talent pool at affordable rates underscores India's competitive advantage in the global tech landscape.
AstraZeneca's Virtual Leap in Pharmaceutical Innovation:
At AstraZeneca's Global Innovation and Technology Centre in Chennai, a groundbreaking virtual reality experience using XR (AR/VR) technology takes you into a digital replica of the pharmaceutical giant's drug production facility in Sweden. Siva Padmanabhan, MD & Head of Global Innovation and Technology Centre, AstraZeneca, emphasizes the significance of virtual training in reducing waste and time in drug production. He notes,
"Think of it like pilot training on simulators."
This software module, developed in-house, exemplifies how GCCs are driving innovation and cost savings.
Padmanabhan sheds light on India's talent advantage, stating,
"You won’t find an artificial intelligence (AI) engineer in the US for less than $200,000-250,000 a year. India has a depth and pipeline of talent, even if it’s not ready-made."
Rakuten India: GCCs Beyond Cost Arbitrage:
Rakuten Pay, Japan's equivalent of GooglePay, owes its existence and success to the efforts of Rakuten Group's Bengaluru Global Capability Centre (GCC). Sunil Gopinath, CEO of Rakuten India, highlights the multifaceted role of the Indian GCC, overseeing the entire spectrum of the platform. Gopinath emphasizes that decisions to outsource or keep tasks in-house involve trade-offs related to speed, user experience, ownership, and culture.
Gopinath acknowledges India's digital ecosystem as a goldmine for diverse talent, stating,
"India’s digital ecosystem has exploded, witnessing innovation across fintech, commerce, healthcare, food, mobile, and many more areas."
Lowe's India: Transforming Retail Through GCC Innovations:
Lowe's Global Capability Center (GCC) in Bengaluru played a pivotal role in boosting the percentage of transactions processed through self-checkout counters, rising from 25% to 40-50%. Ankur Mittal, Senior Vice President-Technology & MD of Lowe’s India, underscores the shift toward in-house development, stating,
"More and more companies across sectors are realizing the value of doing all these in-house, rather than giving it to third-party IT services majors."
Mittal emphasizes the global impact of GCCs, noting,
"A person owning a capability owns it globally. For instance, I oversee the search function of Lowes.com globally."
Hitachi Energy: GCC Driving Global Projects:
Hitachi Energy's Global Technology and Innovation Center in Chennai has evolved from a modest team in 2007 to 2,500 experts executing global power transmission projects. N. Venu, Managing Director & CEO of Hitachi Energy in India and South Asia, highlights India's capability to train, upskill, and deliver at scale and speed. He notes,
"With 1.5 million engineers graduating annually in India, we are able to do 1,000 projects from here."
EY Consultancy and Industry Trends:
Arindam Sen, Partner and GCC Sector Lead for Technology, Media & Entertainment, and Telecommunications at EY consultancy, observes a decline in attrition rates, from 35-40% during the pandemic to 15-16% at present. Sen recommends strategic outsourcing for less critical tasks while retaining transformative aspects in-house for superior quality and safeguarding intellectual property.
Sen acknowledges the challenges in monetizing GCC products and services, stating,
"Setting up scalable operations for open market sales involves considerable investments in technology, regulatory compliance, infrastructure, marketing, and distribution."
ANSR's Insights into GCC Leadership and Commercialization:
Sudish Panicker, Managing Director of BNY Mellon India, notes the broadened ownership within GCCs, stating,
"This brings more leadership positions. These are folks who have teams across the world reporting to them while they are stationed out of a GCC and drive a global strategy."
Lalit Ahuja, Founder & CEO of ANSR, emphasizes the transformative shift in business, stating,
"Business is moving from one side of the coin to the other."
Conclusion:
In conclusion, the rise of GCCs epitomizes a transformative phase in India's tech employment landscape, reshaping employment dynamics and fostering innovation in the country's burgeoning tech sector. Despite challenges, GCCs symbolize the convergence of talent, innovation, and operational excellence, propelling India's ascent as a global tech powerhouse. As GCCs evolve into centers of excellence, they are poised to drive economic growth, foster digital transformation, and solidify India's position as a global leader in the tech industry.
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