India may hit slow lane in GCC space
Mass layoffs at Twitter and Meta adding to negative sentiment as most global social media platforms have their engineering captives or development centres in India
image for illustrative purpose
India Advantage Sustainable?
- Indian GCC market size at $35.9 bn
- Mostly US-headquartered MNCs opened new captives in Q1
- India one of the favourite destinations for MNCs
- India is home to over 1,500 GCCs in several verticals
- This segment employs over 1.5 mn people
- The number is likely to double by FY25
- The number of GCCs may also increase to 2,000 during this period
Bengaluru: India's attractiveness for setting up technology captives by multinational corporations (MNCs) may take a short-term beating as fears of economic slowdown grips the world economy. Mass layoffs in Twitter and Meta are adding to the negative sentiment as most global social media platforms have their engineering captives or development centres in India.
However, experts opine that if slowdown takes hold, the country may see more work coming to these technology captives here, leading to their expansion.
"There will be some initial tapering off, but if recession takes hold, there will be more movement to India in the long run. However, those enterprises looking at India for setting up new GCCs (global capability centres) are likely to wait as initial setup includes high costs," said Siddharth Pai, an IT outsourcing advisor & Founder and Managing Partner of venture capital firm Siana Capital Management.
India has been one of the favourite destinations for MNCs to set up technology captives, which are called GCCs in industry parlance. The country is home to about 1,500 GCCs across sectors such as banking, financial services and insurance (BFSI), IT software, automotive, pharmaceuticals, retail and oil and gas among others.
Some estimates suggest that this segment employs more than 1.5 million people, which is likely to double by FY25. The number of GCCs may also increase to 2,000 from current 1,500 during this period.
A combined report by Nasscom and Zinnov has pegged the market size of Indian GCCs at $35.9 billion. As per the report, US-headquartered MNCs are the biggest contributors to opening of new captives during the first quarter of 2022.
"As most of the new GCCs are being set up by the US firms, slowdown fear in the North America is likely to have spill over effect on new centres. We are already seeing a slowdown in hiring by these technology captives," said a source.
Meanwhile, recent layoffs by technology giants like Microsoft, Apple, Meta, Twitter, Snap and many others have created an uncertain environment among staffers. Most of the global technology firms, and social media companies have large R&D centres in India. Decisions to reduce headcount are affecting staffers operating out of India.
For instance, around 90 per cent of Indian workers were fired by Twitter which had staff strength of 200 in its development centre. Around 70 per cent of the layoffs in India hit employees in the product and engineering department, sources in the know said.
Given the environment, India is likely to see a tepid growth in new GCC addition in coming quarters, said Pai.
There will be some initial tapering off, but if recession takes hold, there will be more movement to India in the long run. However, those enterprises looking at India for setting up new global capability centres (GCCs) are likely to wait as initial setup includes high costs
- Siddharth Pai, an IT outsourcing advisor, founder and Managing Partner of venture capital firm Siana Capital Management
