GCCs in India face regulatory compliance as key hurdle for growth and expansion
With a changing regulatory and generative AI (GenAI) environment, managing intricate compliances like transfer pricing, SEZ (special economic zone), labour, and data laws are the key focus for global capability centres (GCCs) in India, according to a recent study by Nasscom and KPMG in India.
GCCs, established by major multinational corporations, specialize in tech services, R&D, engineering, IT support, and business process outsourcing. Typically based in emerging markets like India, they aim to innovate solutions and practices for the parent company.
The report, named "GCCs in India: Building Resilience for Sustainable Growth," reveals that regulatory conformity is a key issue for GCCs, as emphasized by over 55% of leaders.
As of FY2023, India boasts over 1580 GCCs, with new centres emerging regularly. Srikanth Srinivasan, Vice President at NASSCOM, stated that factors like access to a vast pool of digitally skilled talent, the drive to adopt new technologies, and a focus on enhancing customer impact are driving the growth of GCCs in the country.
This growth trend is expected to persist in the coming years, with more global entities establishing technology centres and transformation hubs in India. Despite facing regulatory hurdles, the rapid expansion of GCCs presents challenges in talent management, strategic adoption of emerging technologies, and addressing concentration concerns, according to Srinivasan.
The demand for high-value digital skills in areas like automation architecture, cloud development, AI/Machine Learning, and Data Science is on the rise as GCCs in India evolve their roles. The competitive talent market poses challenges in talent availability, attraction, and retention. Establishing a talent pipeline with emerging skills and developing leaders for global roles have become top priorities. The report underscores the importance of addressing concentration concerns beyond mere headcount assessments.
Nonetheless, the report suggests that challenges can be overcome by implementing innovative workforce strategies like Hire-build-scale, borrow-augment, and co-create models. These strategies ensure a consistent supply of skilled professionals to meet present and future business requirements.
Furthermore, GCCs are taking steps to cultivate future-ready leadership and enhance functional capabilities for global roles. Currently, GCCs are shifting from traditional transaction-focused centres to strategic innovation hubs that drive value through the adoption of emerging technologies. They are concentrating on areas like GenAI and refining GenAI governance processes for global enterprises.
However, GCCs need to reassess their approaches and leverage a four-tiered transformational ecosystem for technology adoption. Evaluating regulatory compliance and engaging proactively with regulatory frameworks are vital for sustained success and reinforcing India's status as a global business hub, as per the report's recommendations.
Shalini Pillay, India Leader – Global Capability Centre, KPMG in India, said that as GCCs continue to build, innovate, and adopt new operating models influenced by emerging technologies, they can fortify their resilience in a dynamic risk landscape.
As per an earlier Nasscom report, India's GCCs are expected to see growth in market size, rising from $46 billion to $60 billion by 2025, with the total number of GCCs exceeding 1,900. While the IT industry as a whole employs around 5.4 million individuals, Nasscom notes that GCCs make a significant contribution by employing about 1.66 million people. This sheds light on the changing landscape where global companies are increasingly utilizing India's skilled workforce not just for cost-effectiveness but also for driving their digital transformation strategies.
An EY forecast further suggests that the GCC sector is set to hire around 2.6 million individuals in India by 2030, pushing the total workforce in GCCs to over 4.5 million people by the same year.
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