Global Capability Centres wooing IT talent with higher salaries

In fact, Wipro is the first IT company to acknowledge how GCCs are luring skilled employees with 4-10 years of experience, offering compensation levels that IT companies cannot match.

“Captives in India are coming up in big numbers, which is also drawing a lot of talent from the (IT) services companies. That is pushing up our compensation because these companies are doing more offshore in-sourcing and can afford to give higher raise to employees," Saurabh Govil, chief human resources officer Wipro, told Mint.

What are GCCs?

India has an estimated 1,600 multinational companies that have reduced their dependence on Indian IT services companies. Instead of outsourcing software development work, they have built their own technology divisions in the country. These in-house development centres are today called global capability centres or global inhouse centres (GCCs or GICs).

Earlier, such organizations were known by a rather unremarkable term— ‘captive centres’. They mostly handled call centres, data processing, document management and customer care functions. Such functions moved to India because of the cost arbitrage the country provided. Over time, these captive centres matured. Slowly but surely, they took on cutting-edge roles; they moved up the value chain.

New Market Reality

GCCs are primarily tapping into people with 4-10 years of work experience taking in ready-made talent, he said. “The capacity for GCCs to pay is higher."

A report by IT industry apex body Nasscom and consulting company Zinnov, for FY23 said there are 1.68 million professionals working in GCCs in India, and the number is expected to double by the end of 2026. Recruiters hiring for both IT and GCCs estimate that the centres hire talent at a 30% premium compared with an IT company.

“Bulk of the hiring from IT sector is happening by GCCs, followed by enterprise customers expanding their tech talent. GCCs are also expanding to smaller towns and there, too, they are hiring from the IT firms," said Vijay Sivaram, chief executive, Quess IT Staffing.

Sivaram estimates that there are about 1,600 GCCs in India, of which 800-900 are hiring large numbers and have more than 5,000 employees, each.

The high attrition rates and the counter offers to retain top talent is reflected in the wage costs of the majority of tech firms. Employee costs as a share of expenses at two of India’s top three software services companies—Tata Consultancy Services (TCS) Ltd and HCL Technologies Ltd—were at least at a six-year high in the September quarter, according to executives.

According to a Mint analysis, the wage costs for TCS constituted 77.4% of total expenditure, while for HCL Tech it was at 69.6% of the wage cost. Infosys saw wage costs at 68% of its total expenditure, down from the peak of 68.4% during the June quarter. Wipro’s wage expenses peaked at 71.3% in Q1, and dipped to 70.2% in Q2.

“People with certain expertise and skill sets will continue to be premium. In this environment of 13-14% attrition, people are moving and leaving," said Govil.

Wipro clocked attrition of 15.5%, while Infosys and HCL reported attrition rates of 14.6% and 14.2%, respectively.

Market leader TCS clocked attrition of 14.9% in the September quarter. However, the four tech firms have seen a steep fall in their attrition numbers.

That said, the only silver lining for IT services companies is that poaching would be limited considering that the scaling opportunity for GCCs is limited compared with IT companies. “The cycles keep coming. Technology is very core to every business and, hence, (talent) has to be sourced. Besides, if they (GCCs) do not get scaled, then it becomes a challenge," Govil added.

Dive Deep: Read our special story by Mint's Leslie D'Monte and Shouvik Das from July | How GCCs stole the thunder from IT firms