For years, global multinationals have set up offshore centers primarily in low-cost geographies with access to good talent. Pioneers of this trend in India were companies such as Texas Instruments and General Electric who set up IT operations and Offshore Development Centers (ODCs), as early as the 1990s. The initial part of the decade saw a gradual growth in this space as more multinationals came in including companies such as AT&T and Lucent Technologies which partnered with IT services companies like Wipro, Oracle and others. However, it was the Y2K boom towards the end of the decade, that propelled organizations into the world of IT and Business Process outsourcing.
Fast forward two decades – the humble offshore centers have metamorphosed into various avatars – BPOs, KPOs, customer contact centers, captives, GIC, and Global Capability Centers. Through this journey, these centers have evolved, become viable and sustained through challenging times/phases including competition from other low-cost geographies, “reshoring” and a lack of quality talent and senior leadership. The GCCs have withstood most challenges that came their way and today India accounts for about 50% of the GCCs globally, with a market size of $35.9 Bn (GCC India Landscape – 2021 & Beyond!) (annual revenue) in FY21, accounting for ~1% of the GDP of India and employing over 1.38 Mn people (GCC India Landscape – 2021 & Beyond!). Forecasts suggest that this market size will rise to $60 – 85 Bn in 2025.
It is fascinating that this growth was possible despite the global slowdown that manifested in the form of the Covid-19 pandemic. The pandemic was a period of uncertainty and great difficulty, with organizations scrambling to function and adapt to the challenges. While some organizations remained forced into adapting to new ways of working due to the criticality of services/products provided by them (ex: Financial service on essential banking, FMCGs on supply chain and stocking food items on shelves), a few others followed a more wait-and-watch approach. In the case of GCCs, while initially there was uncertainty and a focus on services/products of critical nature, throughout the pandemic, GCC as a group saw sustained growth, proving their resilience GCCs contributed to the economic recovery as they continued to expand their footprint in India through the pandemic rising from ~1250 in 2019 to ~1430 in 2021.
One of the key reasons for the sustained growth of the GCCs is attributable to the swiftness with which they were able to adapt and be resilient in the face of the pandemic. The uncertainty and challenges faced during this time forced them to think differently, innovate, be creative, be agile and hasten decision making on initiatives which would have otherwise taken multiple years to implement, thereby enabling GCCs to gain a generational shift in ways of working. Here are some key initiatives that helped GCCs adapt, change, sustain and subsequently also thrive during the pandemic. Most of these initiatives have continued and have now become the “new normal”.
- Acceptance of WFH and move to Tier 2/3 cities– One of the fundamental challenges that the pandemic brought with multiple lockdowns was the large migration of professionals to their hometowns or tier-II / tier-III cities. Most GCCs s were able to shift a substantial proportion of their workforce to virtual ways of working within a short span of time. What was envisaged initially as a temporary arrangement has now become a norm with most GICs providing flexibility to their employees to work in a hybrid or remote mode and following location-agnostic hiring.
The pandemic has also strengthened the belief of GCCs to look for alternate locations and staffing strategies. We are witnessing a spurt in GCC’s exploring popular tier-2 locations such as Coimbatore, Kochi, Vizag, Ahmadabad, Jaipur, Mysore, and Madurai to potentially set up a Hub-and-spoke model of operations, where employees can work at one of the satellite offices (spoke) closer to their home locations and supported by the central office (hub). GCCs are also exploring creating staffing models like part-time work, gig, retainership and contract workers. Implementing these initiatives has allowed GCCs to cut costs on expensive real estate in Tier-1 cities and repurpose this fund for other initiatives.
- Empathy and focus on mental wellbeing – During covid, companies also witnessed workforce attrition owing to phenomena such as the great resignation and the pandemic shifting focus on health and mental well-being. The Work From Home (WFH) set-up left people overwhelmed with work, where weekends became the new extension of weekdays and there was a blurring of work and personal time. Most people felt that there was no mental sign of being “done for the day”, where the distance between the work desk and bed was two steps. GCCs seem to have handled these situations well by equipping their workforce with the required support including counselling sessions, extra personal time-off, mandatory no meeting Fridays, special covid leaves for self and family and free medical assistance. It was hearting to see them prioritize mental health and wellbeing over business priorities. Post pandemic, this trend continues, where GCCs are empathetic and fully supportive of employee wellbeing.
- Focus on technology strategy and Digital Transformation – During the pandemic, GCCs have had to focus on technology infrastructure and solutions needed to quickly adapt to the work-from-home situation. As a result, they have been strengthening their focus on collaboration tools, cybersecurity solutions, cloud-based apps, and other remote IT services. This focus is now helping them accelerate the adoption of technology trends that drive governance, efficiency and security.
Another challenge that GCCs faced was the need to rapidly re-imagine their products and services to address changing customer demands While GCCs had already embarked on their digital transformation journeys to address this challenge, there was mounting pressure from parent organizations to accelerate these during the pandemic. These transformation initiatives were aimed at consolidating, streamlining and automating business processes in order to address customer and business requirements. Industry Experts quote that the digital transformation initiatives, which would otherwise have taken at least 5 to 10 years to implement were fast-tracked because of the challenges brought by the pandemic. GICs continue to play a pivotal role in global transformation initiatives for their parent organizations.
- Leveraging reusable assets – Another factor that helped GCCs be agile is the external force to land products and solutions quickly to end-users, not rebuilding from scratch but leveraging partnerships and collaborations with innovation drivers like start-ups and universities. Faster, Better, Cheaper has been their ‘mantra’. This collaborative mindset in the form of Co-creating with the ecosystem partners, setting-up innovation labs/ incubation centers, and acquisitions have helped GCCs in building a network of cross-sector teams to support their priorities.
Conclusion – The future will never be the same!
The pandemic has forced us all to rethink the way we do business. For GCCs in India, the new business as usual created a plethora of opportunities to emerge from being a ‘Supporter of the enterprise’ to ‘Becoming the enterprise’. We now see GCCs aligning their objectives with that of their parent companies and growing as a key strategic asset. Even the government is taking cognizance of the impact GCCs have had and is looking into GCC-specific policies, to help further accelerate growth and revenues. Karnataka government, for instance, is mulling the idea of a PLI-like initiative specific for GCCs. The journey has been long and challenging but GCCs have emerged successfully and proved that they can withstand unprecedented uncertainties and still be agile and emerge strong. Support from the government on policies, investment in the right technologies, people, and processes combined with innovation imbibed into the enterprise culture will further propel the India GCC’s success story.
Priyanka Nagesh, Partner, Deloitte Touche Tohmatsu Limited, India
Karthika Unnikrishnan, Senior Consultant, Deloitte Touche Tohmatsu Limited, India