What Drives India As GCC Hub?

WHEN SOMEONE LIKE Jamie Dimon, chairman & CEO of the world’s largest bank, JPMorgan Chase & Co, speaks, the world listens. During his visit for the India Investor Summit in September, Dimon made a strong case for optimism about India and inclusion of Indian G-sec in global index funds. In August, JP Morgan had announced a massive expansion of its footprint in India, particularly its global capability centres (GCCs) in Mumbai and Bangalore.

Multinationals these days use the expression ‘capability centres’ instead of traditional ‘captives’ for their global technology development outposts. The captives were handling mainly back-office work. GCCs, in contrast, handle complex technologies and processes across the value chain. The 1,600 GCCs of multinationals generate revenues of over $46 billion and employ over 1.6 million people. In 2010, India had 750-plus GCCs with revenues of over $11 billion.

While multinationals have been keen on opening GCCs in India over the years, there has been a strong pick-up in action since the beginning of 2023. The more mature GCCs such as those of CitiBank, Bank of America and Deloitte, which have been present in India for decades, are expanding their scope of work and number of employees. A number of newer ones, too, have set foot in India. For instance, Lloyds Banking Group, Blackberry and Mondee have set up GCCs in Hyderabad, Wayfair in Bengaluru and Cowbell in Pune, respectively. These are among the 18 players that have opened GCCs in India between January and June 2023, says technology industry body Nasscom. Experts say the big push for GCCs came from the pandemic that provided a massive incentive for adoption of technology. While home-grown IT services companies saw stellar growth as a direct result of this tech transformation and multinationals upped their digitisation game, at GCCs, the nature of work underwent a sea change — they started taking up more and more cutting-edge projects on behalf of their global parents.

But the biggest driver has been availability of talent pool in India that has substantially expanded with stagnant growth in revenues of IT services firms in first half of FY24 and start-ups tightening their purse strings and laying off staff in search for profitability amid a funding winter.

This is changing the talent landscape. A classic case is global financial services behemoth JPMorgan Chase. The company, which started India corporate centres in 2002, recently announced a massive expansion and took up a million-plus sq. ft. space in Mumbai and Bengaluru. Deepak Mangla, CEO for JP Morgan Corporate Centres in India and the Philippines, says a third of the 60,000 employees in India work in technology function. “Our expansion in India has become strategic with more global roles and tech transformation work happening here for all lines of businesses and corporate functions,” he says. While one part of the tech work is maintenance of applications and infrastructure, the other is software development. And with emerging technologies in demand, tech talent hired from the IT sector brings the much-needed expertise. “India offers highly skilled and diversified talent. With skills across the technology landscape, including flourishing tech like AI, machine learning, large language models and blockchain, our technologists in India are helping drive our firm’s transformation agenda which is enabling us to better serve our customers and clients globally.” he adds. Availability of such talent also offers cross-learning opportunities. “We can’t have a mindset that we are the biggest bank in the world and you learn from us,” he says.

Covid Push

Accelerated tech adoption post Covid has brought the comfort of knowing that more critical work can be done out of centres other than headquarters. It has also made companies realise the ease with which cross-continental staff can be managed from anywhere in the world. Take Fidelity Investments, another Fortune 500 company operating for over two decades in India, which now has nearly 7,000 employees here. The U.S. corporation’s Bengaluru and Chennai offices provide technology, analytics, research and operations support to the headquarters. Along with grooming internal talent, especially graduates, Fidelity is now looking for lateral/external hires in areas like architecture, AI/ML, cryptocurrency, and cybersecurity. “Architecture, cloud, cybersecurity, blockchain, data science, DevOps and investment research are common lookouts across mid to senior-level hiring, with financial services know-how being an added advantage for certain roles,” says Vijai Kishan, head of Personal Investing, India and India Regional Chair, Fidelity Investments India. Being digitally savvy and having a growth-oriented mindset to learn and upskill are essential traits, says Kishan.

While there has been demand for tech talent across sectors, nearly one-fourth demand is still coming from the traditional banking and financial sector, according to global talent firm Adecco. Marsh McLennan, for instance, is expanding the footprint of its Mercer business in India along with GCC operations. The company has doubled its headcount to over 10,500 employees from around 5,800 before the pandemic. While earlier, nearly 80% was operations talent (even in 2020), now, tech headcount alone is over 1,700. It has also built a big team to design financial products which feed into the entire company. The large actuarial and data analytics talent along with traditional backend work are creating huge value, says Jaspreet Singh Bakshi, Head of Human Resources for Marsh McLennan’s Global Capability Centers in India. “Today, out of 10,500 people, upwards of 40-45% bring high-end skills to the table,” he adds.

Along with BFSI giants, there has also been a rapid rise in number of global enterprises setting up Engineering and Research and Development (ER&D) hubs. BCG-Nasscom estimates that ER&D sourcing from India will rise from $44-45 billion in 2023 to $130-170 billion by the end of the decade. Hiring of tech talent has risen here, too. “A number of senior management designations are expanding in India, including senior technical leadership. Earlier hiring was at the bottom of the pyramid or maybe till the mid-level,” says Manu Saigal, director general, staffing, Adecco India. For instance, Advanced Micro Devices (AMD), a global semiconductor major, recently announced its largest global design centre in Bengaluru. New AMD Technostar campus in Bengaluru is part of the company’s $400 million investment in India over next five years with focus on cutting-edge technology. The company, with nearly two decades of existence in India, has been growing its India leadership team with global CTO Mark Papermaster himself being an executive sponsor for over a decade. Jaya Jagdish was promoted as country head last year. “The country head (Jaya Jagadish) here is at a senior VP level person at AMD with global responsibility. She is working across development teams here and with Indian government,” says Mark Papermaster. “AMD India is already central to every product development. The team here has grown to 7,000 engineers,” he says.

While headcount-heavy GCCs with large set-ups is one part of the story, the other part is numerous smaller teams working on cutting-edge projects. Examples are Flexcar and Docusign among others. ANSR, which provides end-to-end services for setting up capacity centres, says half of lateral talent/senior roles are being filled by people from other GCCs; the rest are coming from product, SaaS and services companies. With shake-up in Indian start-ups, what is attracting more mature professionals to GCCs is risk aversion and comfort of working in companies that offer stability and learning growth, says Vikram Ahuja, MD, ANSR, and CEO and co-Founder of Talent500, which helps businesses build and manage global teams via an AI-enabled platform. “We are doing anywhere between 300 and 500 offers a month today. Out of that, 30-40% are people working in big start-ups and product companies such as Facebook and Amazon,” he says.

Another question that arises is: Are companies willing to spend extra bucks to get the right talent? The answer, perhaps, is an emphatic yes as paying more continues to make business sense with cost arbitrage still working in favour of companies setting up GCCs. Also, India’s talent landscape is something that not many countries can offer to companies that want to grow. Gaurav Gupta, partner and GCC industry leader, Deloitte India, says while the cost of talent might be going up, the same holds true for other geographies as well. And GCCs don’t mind spending the extra buck.

Industry watchers say hiring by GCCs has got a leg-up from the slowdown in other sectors competing for tech talent. Indian start-up unicorns, including Byjus, Dunzo and ShareChat, have been laying off employees. Top 10 Indian IT services players have seen headcount drop for the first time since the global financial crisis. Vijay Sivaram, CEO, Quess IT Staffing, says IT companies have seen a reduction in headcount in past two quarters. Yet, there is little panic or unrest in the job market. “This is because GCCs are absorbing them. Companies that are expanding and well-funded start-ups, but largely GCCs, are hiring them,” he says. This can be clearly seen in lateral hiring in the 4-15 years work experience space. With IT services not hiring and talent management becoming more fluid at GCCs, there is also a trend of hiring contractual and gig workers who can be onboarded in 10-15 days compared to 90 days that it takes to onboard a full-time employee, says Vijay. That said, size of GCCs and IT/ITES players is still not comparable given that the former’s headcount is still under two million, while the latter employs over 5.4 million.

Kamal Karanth, co-founder, Xpheno, says while hiring in IT services cohort has witnessed one of the sharpest drop of over 60% over last four quarters, GCCs have reported significant hiring. The trend of falling net additions in IT services sector is expected to continue in FY24. “The elasticity of IT services sector to external diversities has been high since the pandemic, triggering short-term knee-jerk reactions in hiring. The adversities that made the IT services cohort shake up talent and lose flab turned up in favour of GCCs with long-term talent funnels,” he adds.

However, while IT/ ITES talent penetration has moved beyond metros, GCCs in India are still a big city story and likely to remain so. While industry-academia collaborations are working towards bridging technical skills gaps, the need to collaborate with global team members across geographies has made communications, critical thinking and cultural intelligence more important than ever before.