The rapid expansion of Global Capability Centers (GCCs) in India is significantly reshaping the country's outsourcing industry. This growth, driven by multinational corporations (MNCs) increasingly insourcing core technology tasks, presents both opportunities and challenges for the established IT services sector.
GCCs are essentially extensions of multinational corporations, handling a range of tasks critical to their operations. Unlike traditional outsourcing to third-party entities, GCCs are owned and operated by the companies they serve. India has become a prime location for these centers, evolving from basic back-office setups focused on cost reduction to strategic centers of excellence driving innovation and global operations.
The rise of GCCs in India has been remarkable. There are over 1,700 GCCs already operating in India, accounting for more than 50% of the world's total. Projections estimate that India will have 2,500 GCCs by 2030, attracting roughly 160 new centers annually. This growth is largely fueled by companies from the U.S. and Europe. The Indian GCC market size is expected to reach $110 billion by 2030.
Several factors contribute to India's attractiveness as a GCC hub. The country boasts a large and adaptable talent pool, with approximately 65% of the global GCC workforce located in India. GCCs are now taking on high-value work, including product engineering, AI, cybersecurity, financial services, and analytics. Moreover, India offers a favorable cost-to-skill ratio, particularly in areas like AI, analytics, and digital transformation. These centers are also embracing digital transformation and enterprise innovation, handling AI-based analytics, cloud transformation, cybersecurity, and automation.
This rapid growth of GCCs has implications for India's traditional IT outsourcing industry. The increasing insourcing of core tech tasks by MNCs may be contributing to the slowdown and layoffs experienced by some outsourcing firms. The Indian technology services industry, traditionally structured as a pyramid with a large base of entry-level coders, is undergoing a foundational shift with the rise of AI.
However, the relationship between GCCs and Indian IT companies is not solely competitive. GCCs often collaborate with IT companies on transformation projects. Some experts believe that GCCs will continue to work with service providers for existing tasks, with the focus shifting towards carrying out core functions through their own centers in India. To remain competitive, Indian IT companies may need to improve their onshore-to-offshore value proposition.
Moreover, the rise of GCCs is creating new opportunities within India. These centers are driving demand for skilled professionals, leading to increased hiring and higher salaries. Entry-level salaries at GCCs can be up to 30% higher than the average across sectors. The growth of GCCs is also expanding beyond major metropolitan areas, with Tier-2 cities like Lucknow, Indore, Mysuru, Coimbatore, Jaipur, Kochi, and Chandigarh witnessing increased investment due to lower operating costs and government incentives.
In conclusion, the rapid growth of GCCs is reshaping India's outsourcing industry. While it presents challenges for traditional IT service providers, it also creates new opportunities for innovation, talent development, and economic growth across the country. As the GCC landscape evolves, it is expected that both GCCs and Indian IT companies will coexist and contribute to a thriving technology ecosystem.
