What’s driving the feverish growth of Global Capability Centres (GCCs) in India?

What is driving this feverish growth of GCCs in India? (Representative image)

Some days ago, NASSCOM reported that the number of Global Capability Centres (GCCs) – or in-house technology and business process centres of global companies in India – has grown to 1,580, up from about 700 in 2010. Notably, during this period, the employee count in GCCs grew from 400,000 to a whopping 1.7 million.

What is driving this feverish growth of GCCs in India?

I believe there are three key reasons: First, digital transformation being core to companies’ differentiation and growth, thereby driving the need to “own” capabilities rather than “lease” them. Second, the explosion of high-quality talent from science, technology, engineering, arts, and math (STEAM) streams in Indian universities and colleges, and finally, the migration of leadership and middle-management talent from traditional IT companies to GCCs.

While the need to own digital capabilities rather than lease them is well understood and much written about, let me expand on how talent, especially the availability of digital talent at scale and leadership talent, has been the key driver of growth.

How The Tables Turned

For more than a decade, the bulk of STEAM students from campuses in India gravitated to traditional IT companies. These companies had terrific brand equity and suction power because what they offered was well aligned with the aspirations of generations of talent, Gen X and Gen Y.

What the students looked for was four-fold:

* Attractive compensation and benefits,

* Opportunity to work on cutting-edge technologies to solve complex business problems,

* Global exposure, including onsite opportunities in key markets, and

* Rapid career progression.

GCCs then did not have the brand cache, scale of operations, opportunities for global mobility, credentials of high growth, or business transformational capabilities to attract the best talent from campuses. In turn, they had to look at off-campus initiatives to onboard such talent.

Cut to today, the tables have turned. GCCs have become a big draw in campuses even though their individual recruiting numbers are relatively lower compared to large and mid-sized IT companies. This is because they have quickly evolved and aligned with the aspirations of the talent.

Today, at GCCs, compensation and benefits are as attractive if not better than traditional IT companies. A significant proportion of the core digital work is done out of GCCs – across cloud, analytics, IoT, AI and security – along with build out of next-generation global products and platforms.

Given that many GCCs are seeing strong growth, they are able to provide accelerated career progression to their employees. And with global workforce mobility getting hamstrung because of stringent immigration norms, the advantage that traditional IT companies had for a long time has significantly diminished.

Explosion Of Quality Talent

In addition to these employer-employee dynamics, the explosive growth of new and well-established educational institutions has vastly expanded the absolute numbers of quality talent in India. One can point to more than a dozen developments in India, but here are four significant ones.

1. More than a dozen new Indian Institute of Technology (IITs), a dozen new Indian Institute of Management (IIMs) and over two dozen Indian Institute of Information Technology (IIITs) were established in India.

2. Several hundred private universities, including state universities, were established throughout India. Today, there are more than 400 private universities across India, many of whom are funded by corporate houses and collective philanthropism. Some of these institutions have set global benchmarks in a very short period.

3. Well-established educational institutions – including those with an “Institution of Excellence” tag expanded their India footprint. Examples include BITS Pilani in Goa and Hyderabad, and VIT in Chennai, Amravati, and Bhopal.

4. Scaling of the National Skills Development Corporation (NSDC) and Skill Sector Councils (SSC) across industries, incubating skilling universities such as TeamLease Skills University and Symbiosis Skills and Professional University, as well as large-scale acceptance of skilling platforms such as NPTEL, SWAYAM, and MOOC courses from global edutech firms.

Migration Of Leadership, Middle-management Talent

Scaling organisations is largely a function of leadership quality, depth, and breadth. While a cross-section of GCCs brought in leadership talent from their headquarters or other key locations, in recent years a significant number of leaders and middle managers have migrated from traditional IT companies to GCCs building the much-needed bulwark for growth.

But what has been the incentive for these leaders to make a beeline for GCCs, given that third-party IT companies continue to offer rich experience of working across clients, industries, technology stacks, and geographical regions? The reasons are varied.

Many of these leaders had travelled widely and seen the world, often relocating with family, and also experienced a large canvas of opportunities. In doing so, they had a compromised work-life balance, and in some cases, just got bored of frequent travel and dislocation. Furthermore, with slowing growth in IT companies, the pace of career progression became a casualty.

Factors such as these, and more, have encouraged many of them to migrate to GCCs. Multiple conversations that I have had with my colleagues who have done this have indicated that the GCCs of today are well aligned with their aspirations at that stage in their life and provided what they were looking for – stability in education for their children, greater appreciation for their rich and diversified experience, and better career prospects given the faster growth of GCCs, among other things.

Will This Trend Continue?

Given that we have seen cycles of ups and downs with GCCs in the past two decades, it is but logical to ask if this positive trend will continue. Given the developments of the past decade, one can comfortably say that GCCs have gone mainstream, and are here to stay and rapidly grow.

In fact, I would not be surprised if GCCs add more net headcount relative to traditional IT companies, starting this financial year. For the record, NASSCOM expects the number of GCCs to grow to 1,900 by 2025.

Ramkumar Ramamoorthy is a partner at Catalincs, a growth advisory firm. Views are personal, and do not represent the stand of this publication.