Impact and key implications of growing GCC's on outsourcing and the broader provider landscape!

Impact and key implications of growing GCC's on outsourcing and the broader provider landscape!

👉 For a first, Tata Consultancy Services in recent results acknowledged the impact of GCC since the GCC wave picked up momentum in H2'2023

👉 Considering the strong GCC scale-up plans publicly advertised by enterprises by the end of CY2024 the impact will be more profound. Kraft Heinz plans to move from 400 to 2,000 FTEs while adidas in their first GCC in Asia (outside China) has taken up 45,000 sq ft of space to accommodate north of 500 employees.

👉 While multiple BFSI centric organizations have shown the way, GCC trend has picked up in a vertical agnostic fashion. At the same time, BFSI stands as a key vertical which seems to be picking up growth for service providers. How much of this growth is sustainable?

👉 Though enterprises and consulting majors are quick to call GCC wave as a pivotal moment that is re-defining India from "cost arbitrage" centre to attaining "product/R&D" centerstage, it is pertinent to observe the developments in terms of the nature of work being done by GCC engineers versus that done onshore. While fancy names such as "automation CoE", "product engineering center" have come to light, the exact nature of work and impact will ascertain the future of GCC in India

👉 Let's read all what is happening together: -

1️⃣ Providers start feeling the GCC heat

2️⃣ 2X-5X scale-up of inhouse FTEs by enterprises being seen across BPO/IT and Engineering divisions

3️⃣ FTE salary premiums (15-20%) making GCC's attracting top-talent back to enterprises from service providers

4️⃣ GCCs beating overall bills over service providers as providers have significant premiums attached to offshore cards

👉 Implications for providers: -

1️⃣ Multiple GCCs are running internal gen AI POCs as a low hanging fruit, the fast growing gen AI bill-book of service providers might see a halt / slow growth trajectory

2️⃣ Providers will see more pressure on the offshore rate-cards and margins might should see a pull down across the board!

3️⃣ Certain mature verticals from a GCC POV might re-prioritize their needs and engagement models with providers

4️⃣ Fight for talent remains!