Micro GCCs are Emerging as Centers of Specialized Innovation & Tech Talent: TeamLease

In an exclusive interview with Ramesh Alluri Reddy, Chief Executive Officer at TeamLease Degree Apprenticeship, Amit Singh explores the critical role India plays in the global GCC landscape. With over half of the world’s Global Capability Centers now based in India, the country has transformed from a cost-saving destination to a global hub of innovation. Ramesh sheds light on how the GCC model has evolved, the benefits of the Build-Operate-Transfer (BOT) framework, and the rising trend of micro GCCs. He also discusses the importance of partnerships with Indian startups and how Tier-II and Tier-III cities are becoming essential players in India’s global talent strategy. As GCCs continue to drive digital transformation, India is positioning itself as a key innovation accelerator for multinational corporations worldwide.

The adoption of the Global Capability Centre (GCC) model has accelerated in recent decades as businesses increasingly recognize the need for a more efficient operating framework. This shift is driven by globalization, rapid technological advancements, and the pursuit of sustainable cost advantages. India has emerged as a key player in this transformation, hosting over 50% of the world’s GCCs. The GCCs in India, operate under three main models, i.e. the DIY (Do It Yourself), BOT (Build-Operate-Transfer), and Hybrid BOT models. India’s initial attractiveness stemmed from cost arbitrage, offering significant savings on operational and talent expenses, with a cost differential of 1:4 for entry-level talent compared to markets like the US. However, this narrative has evolved, with India positioning itself as a global talent hub that drives innovation, digital transformation, and research and development (R&D) for multinational corporations (MNCs). Today, GCCs in India play an integral role in their parent companies’ global innovation strategies, particularly in sectors such as artificial intelligence, cloud computing, and cyber security.

The number of GCCs has grown to over 1,700 with more than 2,975 centers as of FY2024, and the market is projected to reach $100 billion by 2030, with a workforce expected to surpass 2.5 million employees. Key industries—including Technology, Banking, Financial Services and Insurance (BFSI), Engineering, and Manufacturing—along with emerging sectors like Retail, Automotive, Healthcare, and Oil & Gas, are increasingly recognizing India as the preferred destination for establishing GCC operations.

This remarkable evolution in India’s GCCs arises not only from the extensive pool of skilled professionals but also from the transformative nature of the GCC model itself. The surge of artificial intelligence and data science specialists emerging from India’s premier educational institutions positions the country as a potential leader in the AI domain, with projections indicating that the GCC workforce will expand from 1.9 million to 2.8 million by 2030. Although the traditional cost differential has narrowed to approximately 1:3 today, India maintains its competitive edge, bolstered by its depth of talent in cutting-edge technologies. To further propel this growth trajectory, it is imperative for India to further develop talent and address skill gaps.

The GCCs have swiftly evolved into vital drivers of strategic innovation and value creation, far surpassing their traditional support roles as centers of cost arbitrage. In India, with over 1,700 GCCs employing more than 1.9 million professionals, these centers are critical to global business transformation. While their presence in Tier I cities like Mumbai, Bengaluru, and Hyderabad remains robust, there is also rapid expansion into Tier II and Tier III cities, reflecting a broadening geographical footprint. This growth is fueled by government initiatives such as Ease of Doing Business and Make in India, alongside supportive regulatory frameworks that foster foreign investment. States like Karnataka are poised to introduce a new GCC policy aimed at further enhancing the sector’s momentum, positioning themselves as prime destinations for global firms. This positive landscape is particularly advantageous for sectors like Banking, Financial Services, and Insurance (BFSI), automotive, manufacturing, and pharmaceuticals, where GCCs play an integral role in enhancing operational efficiencies. In the BFSI sector, for instance, GCCs streamline customer engagement, risk management, and compliance processes using advanced analytics and digital solutions. Similarly, in automotive and manufacturing, GCCs contribute significantly to optimizing supply chains and driving research and development efforts that lead to innovation and improved product offerings.

As GCCs continue to evolve, they are increasingly integrating strategic roles that directly influence company direction and innovation, further enhancing their relevance in the global operational framework. This evolution allows GCCs to provide a diverse range of services, from infrastructure management to cybersecurity solutions, enabling organizations to tackle contemporary challenges such as technological disruptions and cybersecurity threats effectively. Moreover, as India emerges as the “front office of the world,” moving from handling back-office operations to leading strategic initiatives, it is essential to focus on enhancing employability and skilling within the local workforce. By integrating apprenticeships into their operational strategies, GCCs can cultivate a sustainable talent pipeline equipped with practical skills that align with industry requirements. This approach not only addresses the pressing skills gap but also empowers young professionals to contribute meaningfully to their organizations.

GCCs serve as critical strategic extensions of multinational corporations, acting as key drivers for specialized expertise and international expansion. These centers leverage local talent and innovative operational frameworks to help foreign entities navigate the intricate cultural, regulatory, and financial hurdles that come with entering new markets. A particularly effective strategy employed by GCCs is the Build-Operate-Transfer (BOT) model, which allows foreign companies to establish a foothold in India with minimal upfront risk. Through this model, GCCs handle the entire spectrum of operations—from setting up infrastructure to managing day-to-day functions—during the initial phase. By doing so, they alleviate the complexities for foreign firms while fostering operational stability as the GCCs tailor processes to the local environment. IT service companies, for instance, often use this model as a comprehensive solution, overseeing tasks like invoicing, procurement, and library management systems for their clients. Once these operations become fully functional and self-sustaining, ownership and control are seamlessly transitioned back to the foreign entity, enabling a smooth shift in responsibilities. This strategic partnership allows foreign companies to focus on their core competencies, while GCCs act as critical intermediaries, enabling effective market entry by harnessing local expertise and minimizing operational, financial, and regulatory risks typically associated with expanding into new regions.

On the cultural side, GCCs play a pivotal role in ensuring alignment between the foreign corporation’s values and local practices, helping bridge the gap that can often lead to cultural misalignment. By hiring local talent and leadership, GCCs not only promote cultural integration but also ensure that the global company’s ethos resonates with the local workforce, fostering greater employee engagement and productivity. Financially, GCCs help foreign entities navigate India’s complex tax laws, currency regulations, and financial compliance frameworks, ensuring that multinational corporations stay compliant with local and international financial laws.

From a regulatory perspective, GCCs are instrumental in navigating complex legal landscapes, including setting up appropriate legal entities like subsidiaries or joint ventures and complying with local laws. This becomes particularly critical in the area of data protection and cyber security, where GCCs must ensure compliance with stringent global standards such as the European Union’s General Data Protection Regulation (GDPR) and the US’s various data protection laws like the California Consumer Privacy Act (CCPA). Both GDPR and CCPA impose rigorous requirements on how personal data is collected, stored, and transferred, adding layers of complexity when foreign companies operate across multiple jurisdictions. GCCs ensure that these global regulations are met while also adhering to India’s data protection rules, such as the Data Protection Bill, ensuring that foreign companies can operate securely without facing regulatory penalties or reputational damage.

Micro GCCs are revolutionizing global business operations by offering organizations a strategic avenue to optimize resources, enhance innovation, and improve performance. By focusing on specific technologies such as artificial intelligence (AI), machine learning (ML), data analytics, cloud computing, and blockchain, micro GCCs cultivate deep niche expertise that enables the creation of highly tailored solutions. This specialization helps teams swiftly adapt to changing market needs, leading to faster product cycles and reduced time-to-market. Additionally, micro GCCs serve as employment hubs that actively build a talent pipeline by creating pathways for individuals to enter the workforce, addressing critical skill shortages. Their modular structure allows for scalable operations that expand based on market demand without over-investing in infrastructure, while geographic dispersion facilitates access to diverse talent pools and mitigates risks associated with relying on a single location.

To maintain their agility and innovative capacity, micro GCCs can prioritize the development of a skilled workforce through apprenticeship programs. By partnering with educational institutions, organizations can design tailored apprenticeship initiatives that effectively bridge skill gaps and cultivate a steady stream of specialized talent equipped with the practical skills essential for success in evolving industries. For instance, a micro GCC focused on cloud computing can work with local universities to create curricula aligned with industry needs, ensuring students gain hands-on experience while contributing to real-world projects. This collaborative approach not only enhances the skills of apprentices but also fosters loyalty and improves retention rates within the organization. Moreover, integrating apprenticeships into the operational framework of micro GCCs promotes a culture of continuous learning and upskilling, keeping employees abreast of the latest technological advancements and industry best practices. Furthermore, organizations can leverage the strengths of micro GCCs and the transformative potential of well-structured apprenticeships to create a sustainable talent pipeline of niche talent and skilled professionals for the future.

The GCCs are increasingly capitalizing on India’s abundant talent pool and cost advantages. According to a NASSCOM report, GCCs have established more than 15 incubators, more than 40 accelerators, and various partner programs to foster collaboration with Indian startups. These collaborations take many forms, including innovation labs, hackathons, and startup incubators, thereby enabling GCCs to tap into the latest technologies and fresh ideas. Sectors such as healthcare and pharmaceuticals are particularly benefiting from these partnerships, as GCCs collaborate with startups and universities to integrate cutting-edge technologies into their operations. Notably, engineering, research, and development GCCs have experienced significant growth, with a 30% increase to approximately $25 billion in the financial year 2022-23, demonstrating the effectiveness of these collaborative approaches.

The benefits of these partnerships are multifaceted. Firstly, they promote co-innovation, allowing GCCs to leverage the creativity and agility of startups while simultaneously enhancing their product development capabilities. By investing equity stakes of up to 15% in startups, GCCs can accelerate their innovation processes, bringing new products and services to market faster. Furthermore, these collaborations provide access to niche expertise, enabling GCCs to stay ahead in rapidly evolving industries. This is particularly vital in sectors where specialized knowledge is paramount, such as IT and business process management, which grew by 30% and 27% in FY2023. Additionally, these partnerships significantly contribute to scaling digital transformation efforts, as GCCs can adopt and integrate advanced technologies developed by startups into their operations. Furthermore, these strategic alliances enhance the operational efficiency of GCCs and position them to remain competitive amidst the evolving global digital dynamism.