Seize the opportunity in global capability centres - Hindustan Times
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Seize the opportunity in global capability centres

Jun 19, 2024 09:33 PM IST

India should not lose the opportunity to become the foremost marketplace for end-to-end service delivery in the world.

The emergence of Global Capability Centres (GCCs) as centres of innovation and technology has been a remarkable feature of India’s recent growth story. Initially seen as offshore captives handling routine tasks, GCCs have evolved into strategic hubs driving core business functions, innovation, and doing research and development (R&D) for multinational corporations. With estimates placing the number of Indian professionals employed in these centres at 3.2 million, with an estimated contribution of $121 billion in revenue, GCCs have transformed India into a vital node in the global business ecosystem.

FILE PHOTO: AI (Artificial Intelligence) letters and robot hand miniature in this illustration taken, June 23, 2023. REUTERS/Dado Ruvic/Illustration/File Photo (REUTERS) PREMIUM
FILE PHOTO: AI (Artificial Intelligence) letters and robot hand miniature in this illustration taken, June 23, 2023. REUTERS/Dado Ruvic/Illustration/File Photo (REUTERS)

The rise of GCCs has catalysed India’s transition from a service provider to a global innovation leader. These centres are not just back-office support units but pivotal to the strategic vision of their parent companies, spearheading advancements in AI, software as a service (SaaS), and cutting-edge engineering solutions. The movement of technical jobs to India is driven by a shortage of STEM (science, technology, engineering, and maths) graduates in the West and bolstered by India producing approximately 2.3 million STEM graduates annually. It reflects the broader trends of globalisation, where India’s ability to provide high-quality, cost-effective, and innovative solutions has become indispensable to companies navigating the modern market.

Unlike traditional outsourced offices, GCCs are fully integrated extensions of their global counterparts, mirroring and often surpassing the capabilities of their headquarters.

The numbers reflect this transformation. In 2023, India boasted over 1,580 GCCs, concentrated in major tech hubs such as Bengaluru, Hyderabad, Pune, and Gurugram. A recent Nasscom-KPMG report puts 60% of these centres as specialising in engineering, R&D, data analytics, information technology (IT) services, and business process management, with a significant focus on emerging technologies such as AI, machine learning, blockchain, and end-to-end product development.

The same year, India saw 10 new GCCs entering the market, with the presence of key multinational corporations such as Edge Cortix, M31 Technology Corporation, and Signature IP. Nearly one-third of new GCCs established in the quarter were focused on the semiconductor sector — a strategic move aligning with India’s ambitions to emerge as a key player in the semiconductor industry. The semiconductor industry is projected to reach $1 trillion by 2030.

It’s not just tech companies that are tapping into India’s talent pool. Today, global retailers such as Tesco and Target recognise the value of consolidating operations in India. Tesco’s GCC in Bengaluru, established in 2004, has evolved from focusing on core technical skills to encompassing a wide range of functions, including AI, data analytics, and customer service. As GCCs expand, there is a noticeable shift towards tier-II and tier-III cities, which offer economical living, affordable real estate, local knowledge, and a reservoir of skilled professionals. To capitalise on this trend, it is crucial to make all cities in India GCC-ready by enhancing educational platforms, digital infrastructure, and local incentives.

GCCs also play a pivotal role in fostering a culture of continuous improvement and strategic alignment with their parent organisations. They offer a competitive edge through cost-effectiveness, high-quality output, and the ability to adapt quickly to market changes. This rise of GCCs is attributed primarily to India’s demographic dividend, with a young and growing workforce offering a vast pool of digitally skilled talent. Additionally, the Covid-19 pandemic has accelerated the shift towards remote work, reducing the significance of geographical boundaries.

To sustain this momentum, India must leverage its demographic dividend. Talent management, strategic technology adoption, regulatory compliance, and concentration concerns remain key priorities for the rapid expansion of GCCs. Investing in education, fostering innovation, and ensuring regulatory compliance can help solidify India’s position as a global hub for business and innovation. Primary and secondary education needs to move from a rote-based to a creative and analytical thinking-based education system. Schools and universities should encourage innovation and entrepreneurship through dedicated programmes and incubators: IITs, IIMs, and various engineering colleges, must continue to feed the startup movement by cultivating talent and instilling an entrepreneurial mindset in their students. Bridging the gender divide in tech and STEM fields is essential. Encouraging more women to pursue careers in these areas will also foster a diverse and inclusive work environment.

Ensuring regulatory compliance and effective corporate governance is key for the smooth operation of GCCs. Transfer pricing, SEZ regulations, and labour laws necessitate clarity and streamlined processes. GCCs will benefit immensely if they leverage existing and emerging technologies like the India AI Stack to become strategic transformation hubs. India should not lose the opportunity to become the foremost marketplace for end-to-end service delivery in the world.

Amitabh Kant is India’s G20 Sherpa and former CEO, NITI Aayog. The views expressed are personal

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