Cost efficiencies, skilled manpower attract offshore units to India

Amid gloomy economic outlook, firms considering moving work to less expensive locations

Published: 23rd April 2023 10:10 AM  |   Last Updated: 23rd April 2023 10:10 AM   |  A+A-


For representational purpose (Photo | IANS)

Express News Service

BENGALURU: At a time when recession fears and economic slowdown is pushing the global economy on a cliff’s edge, one sector that is gaining prominence and generating employment opportunities is the Global Capability Centre (GCC).

The country has been witnessing an increase in the number of GCCs or captives, which are offshore centres that support the operations of global enterprises, across retail and BFSI (banking, financial services and insurance), among other segments. During the pandemic, many companies shifted their focus to India and the country has been attracting many centres for a few years now.

Due to the global macroeconomic conditions, businesses attempt to reduce costs to ensure a profitable operation. Companies are considering moving work to less expensive locations, in addition to restructuring. “There are many models that have significant offshore or nearshore + offshore outsourcing. In addition to this, there is a shortage of people with specific technological skills. India is the leader in terms of the availability of labour in this area as well, and this is another important factor in the shift,” says A R Ramesh, Director - Managed services & Professional staffing, Adecco India.

In July last year, US luxury retailer Neiman Marcus Group (NMG) inaugurated its new GCC in Bengaluru. The company said that the centre brings new strategic technical talent to its integrated team focused on operational excellence, curated customer experiences and a faster time to market.
Lowe’s India, the global capability centre for Lowe’s Companies, launched its second office in April last year in Bengaluru due to its increased demand from customers across selling channels.

According to Nasscom’s recent report, in the third quarter of 2022, about 60% of the new GCCs instituted in India hail from the software and internet vertical. Also, US-headquartered MNCs accounted for about 76% of new GCCs as well as new centres of existing GCCs established in India when compared to 63% in Q2 2022. The reasons behind the steady ramp-up of GCCs are driving cost efficiencies, leveraging technology, leading innovations, and boosting quality delivery to name a few, says Sachin Alug, CEO, NLB Services.

He adds that about 3.64 lakh new jobs are estimated to be created by GCCs across India in 2023. As found through NLB Services’ recent report ‘India Captivating! - Impact of Global Captive Centers (GCCs) on the Indian Staffing Ecosystem’, these jobs will majorly be in domains like data science, data analytics, data engineering, statistical analysis, UI/UX Design, DevOps, AI, blockchain, cybersecurity, etc.

According to Alug, the market size of GCCs as of 2021 in India was $35.9 billion. The sector is predicted to scale up to $60-85 billion by the year 2026. Nasscom’s GCC India Landscape 2021 & Beyond report says that ER&D (Engineering R&D) is leading the GCC growth story in India with a 55% market share. By 2023, the country will have over 1,900 GCCs, employing over 2 million people and generating revenues of $58-61 billion by 2025.

Kotak Institutional Equities says the headcount has large scope to increase across segments - Automotive, BFSI, IT and software, and would have likely grown further over FY23, looking at the sharp increase in business services exports.

The future of GCCs

The future of GCCs, specifically in India, seems to be promising as they are highly intent on the technical skills, resources, foreign policies, and infrastructure this country has to offer. Similarly, Indian start-ups have witnessed stable growth in various sectors due to some of these very factors that provide them with impeccable ease in doing business, Alug says.

There is growing interest around adoption of modern IT solutions and upgrading existing infrastructure despite challenges. “For instance, seeing the growing need for flexibility, security and an urge to remain prepared for modern workloads like AI, we brought in innovation into our PowerEdge portfolio and recently launched 16G servers in India, to meet business demands,” says Sudha KV, VP, Dell Technologies India.

India is home to several top tier institutions which are our hunting grounds for tech talent. As a country India is quick in adopting new technologies and spending on IT/ Digital transformation has been growing constantly, Sudha adds.

Vikram Ahuja, MD ANSR and CEO, Co-Founder Talent500 says in today’s landscape, GCCs have expanded their scope and capabilities beyond just technology-driven functions. They also focus on delivering growth drivers and decision-based services that go beyond technical expertise. He adds that this shift in perspective can help GCCs unlock new opportunities and play a more strategic role in driving overall business success.

India is home to 1,500 GCCs, employing 1.3 million people, generating a revenue of $33.8 billion - about 1% of India’s GDP. 500 new GCCs are estimated to be added to the existing tally by 2026, he adds.

GCCs’ talent demand has grown by 12-15% in the last three years, double that of IT services firms. Despite the hiring slowdown globally, GCCs continue to hire for roles including cloud, data engineering, AI, info security, RPA, blockchain, among others.

GCCs have also emerged as a preferred employer of choice for three key reasons, explains Ahuja. First, employees have the opportunities to work on cutting edge technologies that demonstrate tangible impact. Second, GCCs reflect the culture of their headquarters, which means the employees enjoy the same work-life balance and benefits. Furthermore, in light of recent layoffs, job security has become a top priority for tech workers.

“GCCs are increasingly viewed as a more stable option compared to start-ups and service companies, providing a sense of security and stability for tech professionals in today’s uncertain job market,” he adds.


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