Global capability centres (GCCs) in the BFSI (banking, financial services & insurance) vertical in India may be much bigger and growing much faster than previously thought. They are also bringing in lots of jobs, but some of it may also be a replacement of jobs that previously went to IT services companies in India.
A study by consulting firms Wizmatic and EY (Ernst & Young), shared exclusively with Times Techies, finds that the segment’s revenue has grown from $13.4 billion in 2020 to $20.8 billion in 2023. That’s a phenomenal CAGR of 16%. And if this growth continues, the revenue is estimated to touch $24.6 billion in 2024. The segment employs nearly 5.4 lakh people.
Nobody has previously tried to estimate such segment revenues. Nasscom and consulting firm Zinnov have been doing estimates of overall GCC revenue in India. The figure they had for FY23 was $46 billion. And they said GCC revenue had a CAGR of 11.4% between FY15 and FY23. But these are estimates based on data from select GCCs. They arrive at an employee billing figure for different categories of businesses, and then multiply these billing rates with the estimation of the number of employees in each category.
Wizmatic and EY, on the contrary, have gone through the balance sheets (RoC filings) of 130 BFSI GCCs, identified the revenues ascribed to work done for parent companies (in contrast to India sales, for instance), to arrive at their figures. In February, we had reported that Wizmatic had done a similar exercise for some 1,000 global companies, and arrived at a total GCC revenue figure of $120 billion ($103 billion if we exclude foreign IT services companies) – more than twice the Nasscom figure.“We initially thought the revenue figure (for BFSI) may be $10-12 billion, but it’s actually $20-25 bn,” Manoj Marwah, financial services GCC Leader at EY India, says, adding that even the average employee billing rate for some of the companies they audit was much higher than they had assumed.
Black swan events
Marwah says two black swan events have happened in the past 15-16 years that have led to a surge in BFSI GCCs in India. The first was the 2008 financial crisis that led to govts sharply tightening banking regulations. The US, for instance, saw the Dodd-Frank Act. “It forced financial institutions to relook at their business, the exposures they have, their credit models, they had to file more reports to regulators. It was a massive exercise. And they couldn’t have done it if not for their GCCs,” he says.The other event was Covid. Before Covid, Marwah says, the US and Europe still had a lot of branch banking. But Covid made everyone realise they need digital banking, mobile banking. “Everyone wanted to become an Amazon or Netflix. That required a lot of tech people, lot of people to handle data. And those dependent on third parties (IT services providers) found they could not respond as quickly as they wanted. So they started insourcing more and more work. Fi nancial institutions were also wary of employees of third parties taking customer calls sitting at home,” he says.
Gaurav Ahluwalia, partner and people consulting leader for financial services in EY India, says majority of IT spending is now inhouse. “Some still outsource more than doing it inhouse, but they are also rethinking, because the skills are now available to do it. It’s about getting the right balance that works to serve business needs,” he says.
Sandeep Panat, founding partner at Wizmatic Consulting, says a lot more work could come to India. He notes that JPMorgan’s overall technology spend globally exceeds $15 billion, but its India GCC generates just over $2 billion.
Ops+Tech
As we noted in our lead story last week, global companies can get their work done in India far more cost effectively in a GCC than even in a third-party. And today there’s plenty of high-quality talent, and great leadership. Companies are recognising that insourcing certain capabilities allows them to innovate more rapidly and respond to market demands with greater agility.
For BFSI in particular, putting operations and business people together with tech people under one GCC roof is proving to be a deadly combination. With this model, In dia is even able to deliver really complex work done by the likes of Citco, a service provider to hedge funds and large PE firms. Amit Verma, country head for Citco Group Services India, says they need highly qualified chartered accountants and other finance professionals to do work like fund accounting, management of funds, valuation, publishing of NAVs and financial reports, treasury management, risk reporting, tax reporting. Initially Citco needed to develop people to do this work. But given the growth in the BFSI ecosystem, Verma says India today has a lot of talent. And Citco’s India GCC today accounts for nearly a third of its global workforce.
