Here is all you need to know about GCCs and how are they well poised to grow in India
We have all heard about the crazy era of the 1990s, when IT companies were the face of India’s growth. Companies like TCS and Infosys were growing at a rate that was unheard of before.
While the IT boom was in full swing and was the talk of the town, a quieter revolution was taking place in the background. Instead of outsourcing mundane tasks like data punching, processing, auditing, and finance to Indian IT companies, MNCs started setting up their own units in India. These units handling these mundane tasks, started to be known as Global Capability Centers (GCCs) or Global In-house Centers (GICs).
Ever since that time, GCCs have only gained prominence in India, making our role almost inevitable.
What is a GCC?
When a global company sets up its own unit to carry out certain functions, it is called a GCC. These in-house units handle IT maintenance, customer service, financial operations, etc., for their parent companies. This concept took off in the 1980s to cut costs through labour arbitrage, with MNCs setting up centers in countries like India, Poland, the Philippines, Mexico, and China.
The Humble Beginning of GCCs in India
The journey of GCCs in India kicked off in 1985 when Texas Instruments set up the first one, famously transporting a satellite dish on a bullock cart! Jump to the early 1990s, and the liberalization of the Indian economy opened the doors for Fortune 100 companies, attracted by India’s affordable and skilled talent pool. The Y2K crisis was a pivotal moment, showcasing that Indian engineers could manage massive projects efficiently.
By the mid-2000s, major players like GE, Citigroup, and JPMorgan had established their GCCs in India, tapping into the thriving tech sector and paving the way for India’s emergence as a global IT powerhouse.
How the Dotcom Crash Gave Rise of GCCs?
The dotcom crash and early 2000s recession led to a surge in MNC units in India. The number of GCCs jumped from 150 in 2000 to 650 by 2010. Initially, these centers were mostly handling back-office work, but thanks to the exceptional skills of Indian professionals, they quickly evolved. By 2010, tech giants like IBM, Oracle, and Accenture had one in every four employees based in India, with Google, Amazon, and Microsoft not far behind. Over time, GCCs started taking on more complex tasks like analytics, R&D, and core operations, becoming key drivers of global innovation and growth for their parent companies
Indian GCCs are Creating Wonders
Indian GCCs have achieved remarkable feats for their parent companies. For instance, AstraZeneca’s Chennai HQ offers a VR tour of its Swedish drug facility, Rakuten’s Bengaluru GCC built the entire Rakuten Pay platform, and Lowe’s saw self-checkout transactions soar thanks to its Bengaluru GCC. Today, India hosts about 1,700 GCCs, employing ~1.7 Mn people. Currently, we are at the forefront of global operations, driving innovation, and generating over $45 billion in services.
GCCs have become so important that even though they employ less than 5% of the talent in India’s organized sector, they make up over 30% of the top employers in the country. Plus, more than 60% of the top STEM graduates choose to join GCCs. On top of that, most of the DAY ZERO slots at IITs are reserved for GCCs. They also offer salaries that are, on average, over 20% higher than those in Tech Services companies.
Positive Ripple Effects
Real Estate Boom – The expansion of GCCs in India has revolutionized the commercial real estate sector. Leasing activity has soared, with a 17% YoY surge in FY 2023-24, hitting 22.5 million square feet, up from 19.2 million the previous year. In Q4FY24 alone, GCCs leased 4.2 Mn square feet, accounting for 29% of all office space leased in India. This growth is expected to rise in the future.
Surge in Demand for Enterprise Solutions – The GCC segment demands massive connectivity infrastructure, ERP solutions and next-gen platforms. Multiple Indian companies possess the capabilities to fulfill these demands and therefore make life for GCCs a lot easier.
These centers need dedicated leased lines and corporate plans, prompting telecom companies to create tailored solutions and strategic partnerships. The enterprise solutions market for telecom sector alone is expected to reach Rs. 30,000 cr in FY24, growing by 16% YoY. You can say that, we’ve come a long way from the days of transporting satellite dishes by bullock cart for connectivity!
Where is future growth for GCCs expected to come from?
1. New Tech Led Growth
As we dive deeper into the AI-driven digital world, the significance of Indian units is skyrocketing. New and existing GCCs are sharpening their focus on areas like AI, machine learning, and cybersecurity, with one-third dedicated to semiconductors. With the highest AI skill penetration globally and three times more AI engineers than any other country, India is not just keeping pace with the digital revolution – it’s leading the charge. It is expected that many GCCs will help their parent companies invent their zero-to-one breakthrough innovation from India.
2. Govt. Support
The Indian government is rolling out the red carpet for Global Capability Centers (GCCs). They’ve been super supportive, offering incentives and initiatives to attract foreign investment. Special Economic Zones (SEZs) provide tax breaks and other perks, while policies promoting innovation and R&D help these centers develop cutting-edge technologies. GIFT City is one of such example where major global finance companies have established their Indian units. Today, GIFT City is the biggest BFSI hub in India. Such projects are expected to increase going forward.
Moreover, state governments like TN and Karnataka are providing special subsidies to attract more GCCs in their states. For example, TN will provide payroll subsidy of 30% for 1st year, 20% for 2nd year, and 10% in 3rd year for job above Rs. 1 lakh/month. This is because GCCs generate high value jobs with minimal capital investment.
3. Growing Leadership
As GCCs move up the value chain from handling routine tasks to taking on complex activities for global MNCs, it’s expected that many CEOs of these large companies might relocate to India and even declare it as their headquarters. Once a few companies make this move, it will likely encourage many other global firms to expand their presence in India, boosting the significance of the Indian GCC ecosystem. To support this rapid growth, MNCs are offering top dollar to attract experienced professionals. In fact, the number of GCCs paying Rs. 3-6 crore a year to niche leadership talent has surged over the past two years.
Asia is Inevitable
By 2030, Asia will be responsible for over 50% of the global GDP, with 84% of the overall net addition to the global GDP coming from the region. This means companies worldwide will focus more on India and China. Given that India is more open, has a robust ecosystem, and offers the same level of skill at a lower cost compared to China, it’s expected to be a major beneficiary of this growth.
Closing Remarks
The number of GCCs in India is set to skyrocket in the next decade. By 2025, we expect to see around 1,900 GCCs, with the market size hitting $60 billion. This growth will be fueled not just by US companies, but also by a wave of non-US firms.
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