Why India continues to attract demand for global capability centres

The global business services ecosystem (GBS), or the global capability centres (GCC), has matured with more than 10,000 centres worldwide.

According to a BCG study, India currently has over 1,500 global capability centres, with 300-500 to be added over the next five years. In the past three years, over 140 GCCs were built, said a recent Nasscom report.

With continued cost advantage, the demand for GCCs has gone up. Snehil Gambhir, partner & director, transformation at BCG India, points out two distinct reasons for the growth.

"There are two reasons for the demand. The first is made by players who typically leverage outsourced relationships and want a global talent base irrespective of their size. These companies are primarily new-age, mid-sized organisations headquartered in the US or Europe. India, with a large trained workforce, cost competitiveness and a pre-existing ecosystem of thriving global business services (GBS) centres, is an attractive choice," he said.

Gambhir added that the second category is of larger players with an existing captive centre and want to drive greater automation across their FTE footprint. Artificial intelligence (AI), climate & sustainability (C&S), Web 3.0, and robotics are emerging as significant focus areas for this capability expansion.

GCCs are becoming more important to the parent organisation because of their capabilities, he said.

"It is not just about adding people, but what these jobs are about and what role does that centre play in the strategic delivery," he added.

The report from BCG, "GBS: Yielding the Butterfly Effect", points out that 75 per cent of GBS centres have established three or more new Centre of Excellences (CoEs) in the past 18 months with AI and C&S emerging as key focus areas. FI & IG sector companies are leading the pack in C&S CoE setup.

Debjani Ghosh, president of Nasscom, gives an apt reason for the growth of GCCs.

"India provides the unique ecosystem -- academia, start-ups, service providers, industry bodies, and government, in the world where the GCCs have collectively leveraged and developed over the years," she said. 

"For India to grow as a global GCC hub, GCCs, industry bodies, and the government will need to bridge the skill demand-supply gap and continue to focus on upskilling/reskilling," Ghosh added.

Although the future looks bright for GBS, there are numerous challenges on the way. A high captive attrition rate of 20-23 per cent over the past 12-13 months is of particular concern, especially as captives look to add a 15-20 per cent headcount next year.

According to the BCG report, the key causes of this high attrition are concerns around lack of upward mobility and career progression, a predominance of transactional work and lack of ownership in certain job roles.

Interestingly, a high drop-out rate was observed during two points of a recent employee's tenure survey. One during the first six months, especially among hires from tier-1 and -2 colleges, and the second at about the two-year mark, owing to better compensation offered for enhanced subject matter expertise. In the survey, 40 per cent of respondents said the current employee attrition rate is unacceptable for sustaining good quality operations.

Other major challenges include resiliency risk, low efficacy of automation programmes and undefined outcome metrics. Standing still in this difficult ecosystem is not an option, and GBS centres must navigate these seas of challenges to realise their potential.

While the GCC ecosystem has matured over the years, there is a massive opportunity for growth in the coming years. With the pandemic blurring the lines between locations, there is an increased focus on driving market expansion activities with high-quality, cost-efficient products/solutions from India.