It’s due to a unlikely Indian creation.

The Global Capability Centers (GCC) concept was pioneered a little more than a decade ago, with India at the forefront.

Much of the definition lies in the name. Even though an office is on the other side of the globe, they are still capable of fulfilling some key US or western corporate duties. Needless to say, you save a ton of money in the process, and lose a fair amount of American white collar jobs.

China already started gobbling up the blue collar jobs in the US decades ago.  Duvvuri Subbarao, a former governor of the Reserve Bank of India sums up the emerging trend quite nicely telling Bloomberg News, “Over the last 30 years, while China specialized in becoming the world’s factory, India specialized in becoming the world’s back office. Over the years, India moved up the value chain.”

Long story short? Job-wise, the US is getting hit from both sides. First China took the manufacturing jobs, then India dealt a one-two punch by outsourcing office jobs overseas. Now, there is little left for Americans.

Goldman Sachs was an early pioneer of this idea when they set up an office in Bengaluru, now known as the “Silicone Valley of India,” in 2004.

A whopping 8,000 workers are based in India’s outpost office. To compare, Goldman Sachs has 11,000 employees at their flagship 200 West Street office in Manhattan’s Financial District. The entire company worldwide has about 50,000 employees. So India is creeping up on them, supplying about 10% of Goldman Sach’s entire human resources base.

It’s going to hard to stop the rapidly developing nation. The pandemic seems to have benefitted the nation greatly, when remote had to become the standard for work when possible. India benefitted greatly from that as corporations learned they can contract those remote roles overseas, and keep it that way, even post pandemic.

It’s a great way to penny pinch. British employees earn about seven times more than India-based ones working for the same company.

All of this is reflected in India’s rising GDP. In 2019, India’s gross GDP was 3.74%. Their GDP decreased, like every other nation, in 2020 by 6.6%. But, in 2021, India came roaring back, with a historic growth rate of 8.7%. That means the GDP rose by over 15 points in a single year. And that solid 8.7% is the best they’ve seen in a decade.

And here’s the other key difference. It’s not just call centers anymore. India’s education system has put a keen focus on finances and technology, and it seems to be paying off. One of the most quickly expanding corporate gigs in India is risk management for western nations. Trading is also on the rise.

This seems to be paying off for the emerging economic power player. In a single decade, India’s middle class doubled in percentage. 31% of the nation is now considered “middle class.”

And these Global Capability Centers, like the one Goldman Sachs utilize, now account for 1% of India’s entire gross domestic product. Not a bad number considering this is a relatively new phonemoen, one that wasn’t terrible prevalent just a decade ago. And, as these GCCs boom, India will be the primary country to reap its growth reward. India currently hosts 40% of all GCCs across the globe.

And the US workers only have to look closer to home when sweating over the GCC emergence. Canada and Mexico round out the top five nations hosting the most GCCs. Canada takes the number two spot behind India with Mexico nabbing number five. Interestingly enough, China takes number three with Poland, out of all places, coming in at fourth place.

The scary part is GCCs aren’t just prevalent in poorer, far-flung developing nations. The US is taking advantage of Canada’s weaker currency to save around 25% on employee salary costs. And as Mexico’s middle class rises ever more rapidly, corporations are gobbling up younger, increasingly well educated Mexicans for the corporate world. The days of donkeys and dirt roads in Mexico are quickly starting to become a stereotypical relic.

The walls are closing in on the US to the north, south and west of them. It’s no surprise you’ll see many candidates  for president talking about banning outsourcing and free trade. Former President Donald Trump saw something with that argument way back in 2015, and he got elected. Only problem is, it’s only gotten worse under him and now-President Joe Biden. Who knows if there will ever be a permanent fix, or just a myriad of band-aids that provide no long-term hope.


Add comment