Growing captive centres in India face challenges

The captive centres or Global In-house Centres (GICs) are growing in India, but despite the upward trend the domain is facing challenges like lack of domain knowledge and talent retention.

GICs are technology units set-up by large multi-national companies across the world. MNCs move back-office software projects to their GICs, and now they have even started moving high-end technology work, like analytics, cloud computing projects, to them.

As per a report by IT industry lobby group Nasscom and consulting firm Zinnov, nearly 220 new companies having set up GICs in India over the last five years but they continue to face challenges like lack of domain knowledge in sectors like insurance, banking and energy.

Also, majority of these companies are finding it hard to find and retain key talent, including in leadership roles.

"Leaders who have an ability to straddle both technical and business perspectives are still a rarity in the Indian ecosystem. As a number of newer GICs and start-ups are coming with competitive talent attraction policies, (existing) GICs are facing a challenge in attracting and retaining talent,” the report stated.

However, the report read the revenue from GICs grew at a compounded annual growth rate of 11 % since the financial year ended March 2010.

As per the report, GICs contributed about $20 billion in revenue to their parent companies in 2014-15. According to Nasscom, India's IT industry presently generates about $146 billion in annual revenue.

"Somewhere around 2006-07, there was this notion that 'the GIC story is dead'. I think that myth has been well and truly busted," Karthik Ananth, a director at Zinnov, told Economic Times.

He added that from talent perspective, India had great pool of engineering talent which made it an attractive destination for companies looking to set up GICs.

“Besides, now India has also emerged as a huge market for a number of companies that are coming here. In most cases, India is no. 2 or 3 market for a lot of companies,” said Ananth.

As per the report, 69 GICs have come up in India in past two years, which include household brand names like MasterCard, US-based retail chain Lowe's and American fashion retailer Limited Brands.

Presently, more than 1,000 GICs in India employ over 700,000 people, according to the study.

In a recent roundtable with ET, Nitin Seth, country head of Fidelity Worldwide Investment, said over a period of time, over 8-10 years, GICs have built leadership maturity, credibility within the organisation and high-level of business value.

Emergence of GICs has often been seen as a threat to traditional large Indian outsourcing companies such as TCS and Infosys, but both GICs and service providers will continue to co-exist the near future, Ananth told the financial daily.

Customers also said that Indian IT firms need to view GICs more as partners rather than as threats.

"For Indian tech vendors, rather than coming to us and saying this is what we can do, they should come to us and say these are your business problems and we have these solutions for you. Also, Indian IT firms should not view captives as threats, but should view them more as partners," said Narayan Ram, managing director of Lowe's India, during the roundtable with ET.