As IT hiring plummets, GCCs emerge as a ray of hope for Indian staffing firms

While the slowdown in IT is expected to remain in Q2, it may get better in the second half of the fiscal.

Staffing companies, which have been hit by a slump in demand from the domestic IT sector, have got some respite as hiring by global capability centres (GCC) of multinational firms stays strong.

Domestic IT companies, which are already conservative in hiring and tend to utilise their bench strength first, are battling a tough macroeconomic climate, impacting their requirements from staffing firms in the first quarter of this fiscal. On the other hand, GCCs are either setting up India operations or expanding existing ones, lifting demand for staffing firms.

GCCs, or captives, are offshore units of multinational corporations, which handle functions exclusively for the main company.

Guruprasad Srinivasan, CEO, Quess Corp, a staffing firm, told Moneycontrol after the company’s Q1 earnings, “We are working with GCCs that are expanding in India, a few are expanding and there are a few which are entering into India. We are getting a lot of positions from there. We are able to cover up through that. However, my open mandate would be 60 percent down [in this area],” he said.

He said that while the slowdown in IT is expected to remain in Q2, it may open in the second half of the fiscal.

Hitesh Oberoi, Chief Executive Officer of internet company Info Edge, which runs recruitment platform Naukri, told analysts after the company’s Q1FY24 earnings that while hiring from core IT clients has posed a challenge to billings growth of the company, the business witnessed momentum, particularly from captives. Half of this business of Info Edge is indexed toward IT hiring.

Read: A ‘techtonic’ shift: Why India is becoming a hub for GCCs

Small segment yet

Oberoi said that while captive hiring is still a small fraction of overall IT hiring, a lot of captive centres are his company’s clients.

“We’ve been working with them for many years. And of course, if there is growth in hiring from captives, then Naukri will benefit as well… The IT sector employs over 5- 6 million people. Captives are about 15-20 percent of that, so it will be difficult to compensate for the loss in business from IT services companies, by just focusing on captives,” he said.

He also added that it is unclear if the slowdown in IT hiring has bottomed out.

According to a Deloitte survey released on August 23, India is the most preferred location for a global shared services hub.

Read: How GCCs in India are giving IT services companies a run for their money

A Nasscom-Zinnov report expects India to have over 2,000 captives in India by 2026-27, a number that is believed to be understated. EY and Boston Consulting Group expect up to 45 lakh people to be working in GCCs in the country by 2030.

Niche talent

Srinivasan of Quess said the talent that GCCs hires will be horizontal for the company as they look for skills such as generative AI, data analytics, Cloud, DevOps, etc.

“We have created a kind of centre of excellence in terms of recruiting capability for each of these skills. They [GCCs] wouldn't be hiring entry-level talents. We will be hiring for tenures of 7-10 years. We have done some level of capability building on recruiters. From a client engagement perspective, we have a specific focus on GCC,” he said. In terms of delivery, he said, they are creating expertise for each of these skills and GCCs are a focus area overall. However, this doesn’t mean that the company is carving this out as a separate vertical.

Read: Should you look for a job at a GCC or an Indian IT company?

Sunil Chemmankotil, CEO, Teamlease Digital. told analysts after the company’s earnings that while there was a huge drop in the requirement of IT services customers, they saw some green shoots with GCCs and non-tech clients.

“We were able to mitigate the erosion of base in IT services clients through additions in the GCC and non-tech customer base, thereby maintaining the revenue numbers sequentially,” he said.

The company expects a prolonged slowdown in tech hiring as the hiring volumes of GCCs vis-a-vis IT are not comparable, he added. However, while the headcount may not get matched, they come with better margins.

A big opportunity

Ashok Reddy, Managing Director, Teamlease, said the company is targeting to acquire GCCs [as customers]. “We have been going behind GCCs, and the seven large GCCs are potentially a very big opportunity for us to get growth in the near term,” he said. Most of the company’s client additions in this sector during the quarter were in the GCC space. While the absolute numbers aren’t large, they are starting to work with them and build traction on their requirements.

Quess’ Workforce Management President Lohit Bhatia, who is also the president of the Indian Staffing Federation, told Moneycontrol that GCCs have been a big segment of growth for members of the federation who do IT staffing. “In the last 2-3 years of Covid gone by, there are lots of active conversations of global majors still looking to either ramp up their GCCs in India or set up fresh new GCCs,” Bhatia said.

Another possible avenue for growth going forward, Info Edge’s Oberoi said, was generative AI — as there is an opportunity to build new products and create business each time there is a new technology.

“Generative AI, and the advances in machine learning and AI in general, may result in more opportunity for Indian IT companies. If there is more outsourcing of jobs to India when the US wants to leverage generate AI, and they start opening their captives and so on and so forth, then it could result in more hiring than normal in the Indian IT market,” he said.