Big tech companies across the globe are increasingly turning towards India to drop their anchors and set up Global Capability Centres (GCC). Despite a global pandemic affecting the concept of physical offices, the GCCs or the captive centres remain in high demand. The next five years could see the sector potentially scale up its operations to USD 60-85 billion from the current USD33 billion.
What are GCCs?
For a layman, GCCs are these large facilities that concentrate workers and infrastructure that handle operations such as back-office functions, corporate business-support functions, and IT support. In addition to app development, maintenance, remote IT infrastructure and help desks to sustain productivity growth.
Some large companies use GCCs as a centre of excellence for automation, innovation, and analytics, among other tasks. In nutshell, GCCs are the miniature models of big companies often providing unique solutions, all whilst working within the framework and using the resources of the company. There is no interference of a third party which means that the product furnished is of the highest quality and at times even much more finely tuned than the one developed in the head offices abroad.
One of the major factors why India is the preferred location for foreign companies and not a traditional hotspot like China is because India provides cost-competitiveness in addition to the tech skills and ability to innovate at scale. Moreover, with the clampdown on the entrepreneurial setup by the Xi Jinping regime, even GCCs would not have been free from the influence, thus the safe bet would have been India. Moreover, engineers working in the booming IT sector of India have delivered solutions for customers in the US, Europe, Australia and other markets, something which the Chinese might have lacked in.
A report by ET states that Rakuten, Falabella, Lululemon, and Delta Airlines are four of the new companies that have recently set up GCCs in India. In addition, according to the report titled ‘GCC value proposition for India’, the country has become home to capability centres of over 1,300 global organisations, directly employing over 1.3 million people and creating a strong ripple effect in the Indian economy. Out of these 1,300 companies, over 1,100 are looking to scale up operations as well.
And if one thought, these were simply called centres, a rough look at Rakuten — Japan’s internet behemoth would be enough to dissipate the misconceptions. At its India centre, the largest outside Tokyo, Rakuten is working on computer vision, face detection, face-based payments, fraud detection, pricing innovation, and demand forecasting, and is building a telecom AI cloud. This is the extent of research work that has been offloaded over the nuanced and brilliant technicians of the country.
One of the first American companies to set up a GCC in India was retailer giant Target. The company set up its shop here in 2005 in Bengaluru, which employs over 3,400 employees across technology, marketing, HR, finance, merchandising, supply chain, and analytics. The company is now looking to expand its GCC operations which gives a delightful example of the success of the captive units.
India’s startup culture producing the talent
India’s growing startup ecosystem, which is now churning unicorn after another, is playing a key part in contributing to the easy availability of digital skills in India. 2021 has been a sensational year for the Indian startup ecosystem, which has surpassed all projections — both in terms of the number of unicorns and the funding raised.
According to a YourStory report, in July 2021 alone, the Indian startup ecosystem raised almost $10 billion (including a mega-round of $3.6 billion raised by Flipkart) and added three new unicorns to its cap. This was more than the entire amount raised in 2020.
The Indian startup ecosystem is the third-largest in the world with more than 40,000 companies and around 44 unicorns. Whopping 21 startups have made it to the list in the first 8 months of the year. India witnessed the first health tech, social commerce, crypto and e-pharmacy unicorn this year. BharatPe, Mindtickle, UpGrad and CoinDCX have been the recent entrants in August.
GCCs need more recruits
Even with a big pool of engineering talent, the companies are falling short of their hiring targets. One of the problems that India would not mind having. According to Viswanathan of Nasscom, “There is around a 30% gap in demand and supply, though it’s better than in other countries,”
However, there is bumper hiring season on the horizon and it is a golden opportunity for the domain experts to dive into the pool of opportunity and garner the work experience, which otherwise would have forced them to leave the country and contribute significantly to the brain drain problem.
Hiring Outlook at 7-year peak
According to the latest Manpower Group Employment Outlook Survey, the third quarter of the ongoing fiscal (2021-22) is expected to record more recruitments than in any fiscal quarter in the past seven years. An increase in payrolls is forecast for all seven industry sectors during the coming quarter, with the strongest improvements expected in services (50%), manufacturing (43%) and finance, insurance and real estate (42%).
Increase in FPIs
Bullish at the health of the economy and expecting rich future dividends, foreign investors are continuing to bet on the Indian market. Buoyed by the incoming business, growth in employment opportunities and the soaring stock market, Foreign Portfolio Investors (FPIs), within the first 10 days of September poured in a net sum of Rs 7,605 crore in the Indian markets. While Rs 4,385 crore was pumped into equities, the rest, Rs 3,220 crore was pumped in the debt segment during September 1-9.
While GCC was initially set up to provide value to their global organisations, they have, in fact, emerged as a strong contributor to India’s progress. The thriving tech sector is leading the charge in the country’s development story.