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How COVID-19 re-shaped the Global Capability Centres in India

How COVID-19 re-shaped the Global Capability Centres in India

Global Capability Centres (GCCs) is an offshore entity that supports a global enterprises operation like back-office services, corporate business-support functions, contact centres, and IT support functions (app development and maintenance, remote IT infrastructure, and help desks). Businesses have also begun to shape GCCs into Centre of Excellences (CoE) for automation, innovation, and analytic projects. Technologies such as Robotic Process Automation (RPA), Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT), and Cloud have proven to be key growth drivers for the GCC sector.

Over a period of 3-5 years, these GCCs could save about 45% in their operational expenses for their parent organizations. Roughly 57% of GCCs would provide an integrated service that includes IT, business processes, engineering, and R&D from one cohesive centre, while the rest have only a single focus point.

The GCCs in India have increased fivefold between 2013 and 2021, primarily because of abundance in skilled technology workforce. Currency exchange benefits, skill costs, and real estate are also some key factors that work in India's favour. Bengaluru is the home to more than 30% of India's GCCs, followed by Hyderabad, NCR, Mumbai, Pune, and Chennai.

According to NASSCOM, India has about 1750 GCCs, which employee roughly about 1 million people and account for about 25% of the country’s total IT workforce, and generated a total economic value of about $28.3 Billion in FY 2019-20.

However, many Indian based GCCs activated their BCP (Business continuity planning) plans as soon as the COVID-19 lockdown were imposed, thereby flattening their risk curve. Along with the adoption of cloud- based IT infrastructure and transitioning into a Hub and Spoke model workplaces, the GCCs were quickly able to respond and nullify the effects of the lockdown. This approach required extensive re-skilling not only within their organisations, but also in partner and client organizations. With India going through a rapid digital transformation, the GCCs were able to advance both their own as well as the ecosystem’s digital agenda.

The COVID-19 pandemic has pushed both Indian GCCs and Global Innovation Centres (GICs) to increase business for their parent companies. COVID-19 appears to have huge number of global firms, regardless of the size or domain, to establish GCCs or offshore infrastructure that would make support operation effectively for an organization. According to industry analysts, at least one new GCC open its doors in India every week, with the number increasing post-pandemic.

Despite the COVID-19 pandemic and its negative economic impact, Telangana's IT exports have increased approximately 13% that is Rs 1.45 lakh crores in 2020-21. Telangana has continued to attract fresh investments in the industry, according to K.T. Rama Rao. Amazon Data Services India Pvt Ltd is investing Rs 20,761 Cr ($2.77 Bn) to build three data centres.[1]

In 2021, Salesforce is planning to triple its footprint in Hyderabad over the next five years by investing Rs 1,119 crores and creating 2,500 new jobs. Goldman Sachs has also chosen Hyderabad as the location for its global shared services presence in India, by employing 500 people. Fiat Chrysler Automobiles (FCA), the world's largest automaker, is investing Rs 1,100 Cr in the first year to build the largest and only factory outside of its headquarters in North America.

In 2021, TransUnion, a leading global information and insights firm, is expanding its current GCC in Chennai by creating a new functional unit in Pune that will offer technological solutions to the worldwide TransUnion organisation and complement the Chennai site. The new centre also intends to employ a diverse group of people with backgrounds in data science and analytics, digital technologies, mobile computing, intelligent automation, and other fields.

Ingka Group, which manages IKEA's retail operations in India, has announced the opening of a Global Operations Centre in Bengaluru in 2021, which would work in the area of Global Business Operations (GBO), Digital, and Centres of Expertise (CoE). One of the main reasons for choosing India as the global office is the huge skill pool available.

A Final Take

COVID-19 has encouraged MNCs to revaluate their business and technological readiness, identify consumer requirements, and apply new solutions to boost productivity. GCCs are transitioning from cost-cutting centres to profit producers as a result of their efficient use of automation.

New-age enterprises will drive the expansion of GCCs in India. Digital native businesses are being created by consumer-facing platforms (eCommerce marketplaces, Healthtechs, Edtechs, and Fintechs). More than 700 unicorns are attempting to tackle various problems using technology and data as of June 2021. In India, only a few unicorns have GCCs at the moment (notable names being Uber, Grab, Gojek). This category, on the other hand, will be one of the most important growth drivers.

For global MNCs, India's new age GCCs have the potential to be the crown jewel. This offers enormous job-creation potential for India, as well as the development of Smart City ecosystems. GCC development will be one of the foundations of India's road to a USD 5 trillion GDP this decade.

References

Charak, S. (2021). The journey of Offshore Centres – From “Outsourcing” to “Global Capability Centres (GCCs)”. NASSCOM. Consultancy. in. (2020). Why India is a top location for Global Capability Centres. Consultancy. in. Pinnacle, G. (2021). What are the latest offshoring trends in 2021 and beyond? Glocal Pinnacle. Tejaswi, M. (2021). Indian offshore model will dominate the IT scene for a decade. Bengaluru: The Hindu. Verma, A. (2021). The Evolution of Global Capability Centres in India. The Ecosystem. [1]

About the Author

Akshay Sasikumar is the Managing Partner at www.82advisory.com, a firm that specializes in Capital Strategy and investment banking services for technology companies.