Tech Mahindra is discussing the establishment of a 3,000-member Global Capability Centre for Goodyear Tire & Rubber Co. in Hyderabad. This centre will focus on R&D and IT functions, aligning with Tech Mahindra’s objectives of improving operational efficiency and revenue growth under CEO Mohit Joshi’s leadership. The proliferation of GCCs in India represents a significant trend in the IT sector, with substantial anticipated market growth.
Tech Mahindra Ltd is currently engaged in discussions to establish a Global Capability Centre (GCC) for Goodyear Tire & Rubber Co. in Hyderabad, as reported by two sources familiar with the situation. This centre is projected to employ 3,000 individuals, focusing on the research and development (R&D) and IT operations of the American tire manufacturer.
Global Capability Centres (GCCs) serve as in-house technology hubs for Fortune 500 companies, moving away from outsourcing to employing personnel directly for technology-related tasks. Indian IT service providers traditionally establish these centres on behalf of their clients, offering necessary staff and operational support, which can be compensated either through direct employment payment or revenue sharing.
According to sources, Tech Mahindra’s intention to set up a GCC is driven by its new CEO, Mohit Joshi, who took over from veteran C.P. Gurnani in December 2023. This initiative aligns with the company’s objective to enhance operating margins and revenue growth, as outlined in their strategic plan, Project Fortius.
An unnamed executive revealed, “Since Mohit joined, he has brought a rigour to the whole GCC process, and he has encouraged us to engage more with GCCs.” This remark illustrates the proactive approach being adopted under the new leadership to strengthen relationships with GCCs.
As of the end of FY24, Tech Mahindra recorded $6.3 billion in revenue and plans to allocate around 2% of its workforce, approximately 3,000 out of 150,488 employees, to manage the Goodyear GCC. Goodyear itself reported a revenue of $20 billion for the same period.
Typically, IT service providers return GCC operations to the parent company after a defined period of management; however, the specific future plans for Tech Mahindra’s collaboration with Goodyear remain unspecified. Efforts to reach both companies for comments yielded no responses.
Industry experts suggest that employees involved in GCC operations generally have two options at the conclusion of their tenure: either remain with the IT service provider or transition to the parent company of the GCC. Ramkumar Ramamoorthy, a partner at Catalincs, remarked on this flexibility available to employees.
Technological firms such as Infosys plan to create a GCC for German e-commerce entity Zooplus, indicative of a growing trend. Furthermore, Tech Mahindra currently collaborates with Cisco to manage its Indian GCC.
As per Nasscom estimates, India had surpassed 1,700 GCCs as of FY24, marking a 32% increase since FY19, with Bengaluru hosting over 875 and Hyderabad about 355. These centres provided employment for over 1.9 million individuals and contributed approximately $64.6 billion in revenue within India’s $254 billion IT sector.
Nasscom data indicates that around $36.4 billion of the revenue from Indian GCCs stems from engineering research and development (ER&D). Furthermore, a report co-authored by Nasscom and Zinnov suggests that partnering with tech firms in India can yield substantial cost reductions, noting potential savings of 50-70% through improved efficiencies.
The number of GCCs in India is projected to increase to 2,200 by March 2030, with the market expanding to an estimated size of $105 billion.
In conclusion, Tech Mahindra’s plans to establish a 3,000-member Global Capability Centre for Goodyear reflect a strategic shift towards in-house operations in the technology landscape. Under the leadership of Mohit Joshi, the company aims to enhance its operational efficiency and revenue growth. The rise of GCCs in India illustrates the growing trend of companies opting for in-house technological capabilities, thereby reshaping the dynamics of the IT services sector.
Original Source: www.livemint.com
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