Introduction:
The term "Global Capability Centres" (GCCs) was coined to describe a specific model of operational and strategic centres. Global Capability Centres (GCCs) are specialized units established by multinational corporations to leverage global talent and resources for various functions, including technology development, research and development, and business operations. In India, GCCs have undergone a significant transformation from their initial role as back-office support operations to becoming integral powerhouses within the global technology ecosystem.
Historically, GCCs in India began as ancillary support units for Fortune 500 companies, primarily focused on basic administrative tasks. However, over the past few decades, they have evolved into key players in innovation and strategic operations. This shift was marked by the establishment of research and development operations, such as Texas Instruments in Bengaluru nearly 40 years ago, which set a precedent for other companies to follow.
Economic Survey of India 2023-24:
Here are the highlights from the Economic Survey 2023-24. India is showcasing remarkable resilience with a projected real GDP growth of 6.5–7% for 2024-25, following an impressive 8.2% growth in FY 24.
Service exports accounted for 44% of India’s total exports in FY24, with India ranking fifth globally in this sector.
The growth in service exports, particularly in software and business services, has been bolstered by the establishment of GCCs. The rise in net services receipts, driven by increased service exports, has helped cushion India’s current account deficit. This is particularly important as it stabilizes the economy and supports the balance of payments. The number of GCCs in India has increased from over 1,000 in FY15 to more than 2,740 by FY23.
Revenue generated from GCCs has risen from USD 19.4 billion in FY15 to USD 46 billion in FY23, reflecting a compound annual growth rate (CAGR) of 11.4%. This growth contributes directly to the national income and enhances foreign exchange reserves.
The growth of GCCs has also supported the expansion of the tech start-up ecosystem in India, which has seen a remarkable increase in the number of tech start-ups from around 2,000 in 2014 to approximately 31,000 in 2023.
Various government initiatives, such as the Start-up India Initiative and the National Deep Tech Start-up Policy, have been instrumental in fostering the growth of GCCs and the overall tech ecosystem in India. The demand for services and the growth of GCCs have led to increased investments in infrastructure, particularly in technology and telecommunications, which are essential for supporting these sectors. The office space leasing by GCCs is projected to surge, with estimates indicating that it will reach between 60 million and 62 million square feet by 2025.
The Evolution Process:
As companies expanded their operations globally, they sought to optimize costs and improve efficiency. This led to the establishment of shared services and outsourcing models, which eventually evolved into more sophisticated centres focused on specific capabilities, such as technology, research and development, and customer support.
Focus on Capabilities: The term "capability" emphasizes the specialized skills and expertise that these centres bring to the organization. GCCs are not just about cost savings; they are about building strategic capabilities that drive innovation, enhance service delivery, and support business growth.
Global Perspective: The inclusion of "global" in the term highlights the international nature of these centres. GCCs often serve as hubs for global operations, providing services and support to various regions and markets. This global perspective is crucial for companies looking to maintain a competitive edge in an interconnected world.
Recognition of India's Role: India has emerged as a leading destination for GCCs due to its vast pool of skilled talent, favourable business environment, and established ecosystem. The term reflects the recognition of India's significant role in the global business landscape, particularly in technology and service delivery.
Industry Advocacy: Organizations like Nasscom (National Association of Software and Service Companies) and consulting firms have played a pivotal role in popularizing the term GCC. They have highlighted the strategic importance of these centres in driving innovation and operational excellence, further solidifying the term in industry discourse.
Several data points offer insights into the landscape of Global Capability Centres (GCCs) in India. The following are some of the key highlights;
Revenue Contribution: GCCs generated USD 46 billion in revenue during 2023, which constituted approximately 1% of India's GDP. This figure is expected to rise as GCCs continue to grow.
Projected Economic Growth: India is anticipated to emerge as the third-largest economy in the world by 2027, indicating a positive outlook for economic development and the role of GCCs in this growth.
Talent Pool in Engineering: The concentration of engineering and IT talent, with India having a significant number of software engineering professionals. For instance, India has approximately 3.3 million software engineering talents and 446,000 AI-ML engineering talents, showcasing the depth of the talent pool.
Skill Demand: There is an increasing need for skills in areas such as AI, machine learning, data analytics, and cybersecurity, which are expected to grow significantly. GCCs have created over 600,000 new jobs between 2018-19 and 2023-24, bringing total employment in this sector to over 1.6 million.
Looking ahead, the latest Economic Survey projects that GCCs will contribute $121 billion to India’s GDP by 2030, with $102 billion expected to come from exports.
Emerging Roles: The evolving nature of GCCs is leading to the creation of new, specialized roles that demand advanced skills, such as data scientists, cloud transformation experts, and cybersecurity professionals. This shift indicates a movement up the value chain, requiring a workforce that is equipped with niche skills.
GCCs are focusing on talent management and development, which includes investing in training and upskilling initiatives. This approach not only enhances employability but also ensures that the workforce is prepared to meet the demands of emerging technologies and business needs.
Long-term Employment Opportunities: As GCCs continue to grow and adapt to global market trends, they are expected to remain a vital source of employment in India. The emphasis on innovation, operational excellence, and sustainability will further drive job creation in the sector.
Global Capability Centres (GCCs) are significantly contributing to the evolution of real estate in India through several key mechanisms:
Increased Demand for Office Space: As GCCs expand their operations, there is a growing demand for high-quality office spaces. This demand is driving the development of premium Grade A office buildings that cater to the needs of these centres, which prioritize modern, technology-driven work environments.
Shift Towards Multi-Functional Centres: GCCs are transitioning from single-function providers to multi-functional centres that encompass various services such as engineering, research and development, and business process management. This shift necessitates larger and more versatile office spaces that can accommodate diverse teams and functions.
Focus on Employee-Centric Workspaces: GCCs are recognizing the importance of creating inspiring and collaborative workspaces that enhance employee productivity and well-being. This trend is leading to the development of innovative office designs that include recreational areas, flexible workstations, and state-of-the-art facilities.
Investment in Real Estate: The influx of GCCs is attracting significant investment in the real estate sector. The report notes that there has been an investment flow of USD 14 billion in the office sector between 2019 and mid-2024, driven by the attractive returns offered by commercial real estate.
Urban Development and Infrastructure Growth: The establishment of GCCs often leads to urban development in surrounding areas, as the need for supporting infrastructure such as transportation, housing, and amenities increases. This contributes to the overall growth of cities and regions where GCCs are located.
Sustainability and Innovation in Real Estate: GCCs are increasingly prioritizing sustainability in their real estate strategies, leading to the development of green buildings and eco-friendly office spaces. This focus on sustainability is shaping the future of real estate development in India.
Changing Work Patterns: The rise of hybrid work models has influenced the demand for flexible office spaces. GCCs are adapting to these changes by seeking real estate solutions that offer both conventional and flexible work environments, which is reshaping the commercial real estate landscape.
To sum up, the GCC ecosystem in India offers a strong employment opportunity, with substantial growth anticipated soon. This growth will be propelled by the creation of new hubs, the rise of specialized positions, and continuous investments in nurturing talent. By prioritizing the enhancement of its workforce through effective training, implementing suitable policies, and developing necessary infrastructure, India has the potential to significantly increase its services export share, potentially leading the country to become a trade surplus nation in the years to come.
Can GCCs help us become the next economic powerhouse ahead of the USA and China although it sounds like a moonshot, India has all the ingredients to make that possible. I would love to hear your comments.
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