Global capability centres: India
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YEAR-WISE DEVELOPMENTS
2021: Retail GCCs
Avik Das1, January 13, 2021: The Times of India
From: Avik Das1, January 13, 2021: The Times of India
“We are not here for cost; it is about talent, capability and building a team to support various functions, including our online platform. Our Bengaluru office is the engine room for analytics,” says John Kenny, director of KAS Services, the India tech arm of Australia’s biggest discount department retailer, Kmart.
The company is among the numerous global retailers that are establishing technology centres in India, or expanding existing ones, to become more digital, so that they can take on the likes of Amazon and Alibaba. The Covid-19 pandemic has only underlined the urgency – the internet is where customers increasingly want to buy on, and without a digital backbone, supply chains can get badly disrupted.
Bengaluru is home to the majority of these centres – Walmart, Target, Tesco, Lowe’s, JCPenney, Hudson Bay, L Brands, Ikea, Falabella. Not one has a single store here (an Ikea is coming up), but they are all developing new technology to make the shopping experience pleasant.
“The retail industry represents the highest levels when it comes to maturity of global capability centres (GCCs, as the captive centres are now called). They have become strategic to their parent companies,” says Lalit Ahuja, CEO of ANSR, a company that helps set up such centres in India. “Retail was slow to Amazon-ise, and now these retail centres are coming up to drive change and bring new technology and innovation,” he says.
India has nearly two decades of experience in retail tech. Target and Tesco came to Bengaluru in the early 2000s to consolidate back-office operations and make them more efficient with the use of IT. Flipkart’s emergence and Amazon’s entry, and their intense rivalry added to the retail tech talent pool. The new retail GCCs are benefitting from this talent. “The country now has extremely relevant talent – talent that understands all aspects of retail,” says Lalitha Indrakanti, head of global business operations for Sweden’s Ingka Group, which runs Ikea, and which recently established a global business operations cum digital centre in India.
Chilean retailer Falabella’s India centre has built the point-of-sale (PoS) system for its stores in seven Latin American countries, and integrated its indigenous e-wallet in the retail ecosystem. The centre also manages the e-commerce operations and digs into data to provide more personal experiences.
“Falabella has multiple retail formats, and a host of other businesses including financial payments, banking & insurance, driven by the goal to build an ecosystem for our customers. It requires a holistic technology transformation across the conglomerate. We knew it wouldn’t be possible to do that in Chile or anywhere in Latin America alone, so we chose India as a key location, given the talent pool,” Ashish Grover, MD of Falabella India, says.
The digital acceleration is taking place across ten key retail themes, consultancy firm Zinnov says. These include automated checkout, contactless payments, omnichannel inventory management, warehouse automation, stores as fulfilment centres for online orders, autonomous last-mile delivery, virtual trials, assisted shopping, social commerce, and move to marketplaces. It estimates that globally, the retail sector has invested in three years’ worth of digital transformation within six months, spurred by the pandemic.
Walmart’s engineers in India have helped build the tech stack for the US supply chain and have developed tech solutions for its Mexican e-commerce platform. They are reimagining in-store and online shopping experiences.
US home department chain Lowe’s centre in Bengaluru is involved in developing and pricing products. It has product management, engineering, data analytics and operations teams in India that help manage assortments at the stores, pricing, inventory and store design.
Kmart’s Kenny says one of the advantages of having a base in Bengaluru is the presence of other retailers, which facilitates sharing and learning unlike other places. “The team here works on high-end technology. We have built PoS solutions, we have built solutions that make teams more effective. We have a demand fulfillment team that allows us to forecast stock in store a lot more accurately,” he says.
Minneapolis-based Target started in India as a shared services centre. Today, the centre supports global strategy across technology, marketing, human resources, finance, merchandising, supply chain, analytics, and reporting. The company says the work involves creating highvalue tools and products to create a competitive advantage.
Retail GCCs, says KS Viswanathan, vice president of industry initiatives at Nasscom, are increasingly working on services like marketing, social media campaigns, designs for new shops and managing e-commerce operations and online customer experience. And are providing analytics and insights.
2022: India’s rise as GCC hub
SWAMINATHAN S ANKLESARIA AIYAR, India’s rise as GCC hub shows way forward
One form of globalisation is progressing rapidly without much recognition. This is the rise of Global Capability Centres (GCCs). Nasscom (National Association of Software and Service Companies) estimates that by 2021 more than 1,400 MNCs (multinational corporations) set up GCCs in India, employing 1. 3 million highly skilled people with a revenue of $36 billion. Nasscom projects that by 2025 India could have 2,000 GCCs employing 2 million people and generating $60 billion of revenue.
Many Indian start-ups have been created by former employees of the GCCs. Thus, skills nurtured by GCCs spill over into other sectors. This helped India create 100 unicorns (unlisted start-ups with an estimated market value of over one billion dollars).
The rise of GCCs has escaped attention because MNCs do not publish separate balance sheets for offshore operations, in India or anywhere else. Many MNCs have no interest in highlighting the growth of their GCCs because it might open them to accusations of exporting jobs to low-wage countries. Once, high-level skills were available only in advanced economies. Today MNCs cannot get enough skilled staff in their home countries and so search the world. They find India is a major source of talent.
Back in the 1990s, foreign companies began offshoring low-level work like call-centres and medical transcriptions to India and other developing countries. Next computer software and business processes were offshored on a large scale after 1998. Much offshored work went to Indian companies but an increasing amount was also done by captive centres of MNCs in India, an in-house form of offshoring. These centres have now risen in sophistication and technical excellence to become GCCs that are global hubs for design and R&D. Nasscom estimates that 42% of employees in GCCs are in engineering R&D.
Ironically, education in India is terrible overall. Schools and colleges produce millions of semi-literate students who are unemployable. Yet India also has some world-class educational institutions that are expanding in both the public and private sectors. MNC managers say that no other coun-try (save China) produces half a million engineering graduates of decent quality every year. Doing business in India can be tough, but fierce competition for talent obliges MNCs to come to India, in services if not manufacturing. Deloitte estimates that 45% of the world’s GCCs are in India. Accenture, the world’s biggest consultancy company, recently revealed that of its 700,000 employees worldwide, no less than 300,000 were in India. Goldman Sachs reportedly plans to expand its Indian GCC to 2,500 employees by 2023. IBM and CapGemini have over 100,000 employees in India.
Historically pharma MNCs were reluctant to expand in India for fear of losing their intellectual property rights to Indians who were seen as expert “copycats. ” Today Indian skills have gone well beyond mere copying and so MNCs are beefing up their R&D centres in India. AstraZeneca had a great collaboration with Serum Institute of India to produce anti-Covid vaccines that saved millions of lives globally. AstraZeneca now plans a GCC in India.
