H-1B fee hike a wake-up call for GCCs to move up the value chain

Experts say the US visa fee hike will push firms to expand global capability centres in India, but warn GCCs must move beyond delivery roles to create greater value

The United State’s decision to charge $100,000 for all new H-1B visa applications is a setback for the IT services industry, which will have to further reduce its dependence on that channel.

 

However, it will provide for the already booming global capability centres (GCCs) in India as US companies use their capability centres to execute a critical part of their technology-based work, according to experts.

 

Many have labelled the move as America’s loss and India’s gain, as they feel that this will lead to a reverse brain drain, with more people coming back from the US and taking up jobs in the thousands of GCCs dotting Bengaluru, Hyderabad, Pune and Gurugram. 

 

“Companies like Amazon, Microsoft, and Google, who are major H-1B beneficiaries, will double down on their GCCs and R&D hubs in India. The “war for talent” in the US is about to get a lot more strategic, as the most innovative minds will now be based where the cost-effectiveness and talent pool converge, right here in India,” Avinash Vashistha, chairman and chief executive officer of Tholons, wrote on Linkedin. 

 

India has about 1,760 GCCs, according to data from Nasscom, which is expected to cross 2,000 by the end of next year. Many of those centres, seen as extensions of the headquarters, work on some cutting-edge technology in several sectors, including retail, automotive, healthcare, and banking, with greater control on product R&D, analytics, and design than before. Many global executives also sit out of these centres with people reporting to them globally. 

 

However, many GCCs have not attained that level of maturity in spite of operating in India for many years, and are still seen as delivery centres rather than value creating hubs. This can pose a big challenge in the coming days, as the mood of the US President Donald Trump’s circle turns hostile to both H-1B visas in specific, and outsourcing in general. 

 

Shalini Pillay, partner and India leader for GCCs at KPMG India, said the current situation is a wake-up call for such centres to do more value-added work and position themselves as indispensable parts of the global organisation. “Not all GCCs have reached the desired maturity level,” she said. 

 

A report by the Boston Consulting Group (BCG) mentioned that just 8 per cent of Indian GCCs fall in the category of top performers. Around 66 per cent are classified as average performers and 20 per cent as above average.

 

An Emkay note on the impact of H-1B visa fee hike said the shock and increasing uncertainty could accelerate GCC trajectory and lift GCC exports as a share of India’s total services exports over time.  

 

Lalit Ahuja, co-founder and CEO of ANSR, said while the drastic move is a big blow to the IT industry, the GCCs were in some way neutralising the impact of immigration challenges over the last few years as more high-end technology work was being delegated. 

 

“The work done by people on H-1B visa can be done here by the GCCs, if not impacted by tariffs,” he cautioned, referring to the proposed HIRE Act brought in the US Senate, which seeks to tax any outsourcing work at 25 per cent.

 

Ahuja, however, also pointed out that GCCs need to buckle up and cannot just focus on commoditised work. “The fundamental premise of a GCC is its focus on high-quality work and not commoditised one.”  

 

Monica Pingal, CEO of Bhartiya Converge, said as US companies curb on-site staffing and accelerate offshoring, GCCs in India will emerge as the preferred hubs for critical operations. The return of skilled professionals, who might otherwise have relocated to the US, ensures a stronger domestic talent pipeline.