GCCs - Their India story!

Global Captive Centers have been in India for over 2 decades if not more. The initial pathbreakers were companies like Texas Instruments, Microsoft and General Electric amongst a few more. The concept of a GCC happened because of the issue of the EBITDA arbitrage that global corporations saw between their firms and the Indian IT services firms. Those were the days of the runaway growth in both revenues and profits of the SWITCH firms (Satyam - Wipro - Infy - TCS - HCL). Of course post 2009 this acronym became TWITCH!!

Indian IT firms were servicing MNC corporations which were perhaps making single digit EBITDA or maybe low double digit EBITDA and the very Indian firms servicing them were making EBITDA in excess of 20%; some of them in excess of 25%. In any situation in business, water has to find its level ultimately. That is the point where Global Corporations thought, "if India was the land of gold for tech talent we must have a piece of the action too. Why let only the Indian IT firms make merry?"

And that's how the initial set of firms set foot in India. Clearly it wasn't all that easy. Because of the runaway gravy train that was the Indian IT industry, it was very hard to attract and retain talent by the GCCs. Sure they had the brand name and maybe they could pay as well, but the growth opportunities, the overseas postings and the ESOPs were hard to match. I believe the first few years were a bit of a struggle to justify to the masters overseas that this GCC business was viable.

Also remember that when executives at global firms outsourced to Indian IT services firms it was not always about cost and expertise. There was this hidden element of control. The vendor listens to you and fawns over you. The GCC is another department within the corporation and headed by another executive who is perhaps your peer. When you hand off work, you make him / her powerful and that is something which bothers you. So after the struggle phase, GCCs became like any other Indian IT services firm. Executives had to check with the GCC whether they could do their work but leeway was given to the executive and s/he was not mandated to give work to the GCC.

Of course all this while, the flood continued to India. JP Morgan, Mastercard, Ford, Mercedes, Wells Fargo, Tesco, Deutsche Bank and many more. This also spawned off an industry of firms that offered Build Operate Transfer models to GCCs wanting to set up an India base. Two other things started to happen simultaneously.

1. The Indian IT industry sheen and invincibility started to wear off. There were stops and stutters. Satyam happened. And layoffs, previously unheard of in Indian IT started to happen regularly even with the TWITCH. And folks started to think that maybe GCCs are OK after all as a stable place to build a longer term career.
2. GCCs themselves figured out the India story. The offshore and onsite model. The sourcing & mass hiring and training of engineers. I would rate Accenture as a gold standard in this in terms of process maturity, control and agility.

At this point in time, GCCs as a concept has matured and scaled out in India. At the HQ level the need to outsource work to the GCC is much more than a request and a wee bit less than a mandate. Systems of checking and rewards stipulate that unless "offshoring" on IT projects is say 90%, execs are given negative points that add up and shows up at the time of appraisals and bonus decisions. So there is a positive pressure to give work to GCCs. And that's how GCCs are thriving and growing.

Today, every kind of a firm in the US, Canada, Europe, ANZ or Japan has a GCC in India. And to my mind the following are some of the reasons summarized from the above narrative

• The GCC code has been cracked by the global corporations and the success playbook is available as executives from one firm move to the other.
• Talent is available and willing to work with GCCs for the longer term.
• Many of the GCCs like Accenture, Microsoft, Amazon etc have learnt to give out stocks to employees. The Indian financial systems opening up and allowing trading in global stocks has also helped.
• With HQs measuring or almost mandating that executives give work to GCCs, the higher end work has started coming to India. This makes it attractive for young engineers to join GCCs right from college and work on cutting edge technology.
• COVID has also helped with the realization that even high end consulting work can be done out of India.

Clearly with the foregoing, its clear that GCCs are here to stay and grow. For tech professionals it offers a stable and learning environment to stay and grow and also offers wealth creating opportunities. NASSCOM has a separate track for GCCs and there are annual and regional summits every year where execs from GCCs get together, network and share.

Over time there have been instances where senior execs from GCCs have moved back to HQ to take up important roles there, also signaling a fact that GCCs are no longer seen as factories or outposts of the global corporations.

Today GCCs are not just in IT services, they are in BPO/ KPO, Engineering Services and in R&D.

Of course there have been a few that have sold out and shut shop when bad times hit their markets. Global Corporations do Fail Fast and in such situations a GCC is carved out and sold to an Indian IT services firm. We have had instances of a Citi e-Serve or an IFlex but by and large my sense is that GCCs have cracked the code and are here to stay and grow.