GCCs might Nearly Pay as much as IT Firms in Order to Cut Expences

Global capability centers (GCCs), which have traditionally paid salary premiums of 15-30% more than IT services companies to attract top talent, are expected to see the gap narrow to single digits in the next year and a half to two years, owing to pressures to optimize costs alongside artificial intelligence (AI) adoption and a shift toward long-term talent building strategies, according to experts.

"We expect the premium to settle at around 5-8%, depending on the role and sector," said Krishna Vij, vice president of TeamLease Digital. "For niche roles such as AI/ML specialists and high-end analytics professionals, the gap might remain slightly higher, but overall, the differentiation will shrink."

According to Jaspreet Singh, partner at Grant Thornton Bharat, premiums are likely to continue in the 8-12% range in the short term before settling around 5-7% or parity for non-strategic roles in the long run. "Premiums may persist for niche roles in the short term but are likely to converge over the next three-five years," he indicated.

Singh added that increased talent supply from upskilling initiatives and expansion to tier 2 and tier 3 cities, combined with automation, reduces the GCCs' reliance on high-cost talent, while global economic pressures such as inflation, currency fluctuations, and rising operational costs put additional pressure on premiums.

This adjustment is part of a broader market correction following aggressive recruiting and compensation practices seen in 2021-2023, according to Gaurav Gupta, partner and GCC industry leader at Deloitte India. Furthermore, he stated, the Indian IT services sector has grown tremendously, narrowing the quality difference that previously justified greater charges.

According to Gupta, premiums might drop by 20-30% depending on skill level and sector.

"Rather than engaging in bidding wars for talent, GCCs are investing in building their talent pipeline through university partnerships, reskilling programmes, and innovation hubs," said Namita Adavi, partner and head-GCCs (India), Zinnov. "This 'grow-your-own' approach, which can save up to 40% per employee compared to external hiring, is crucial alongside strong retention strategies."

Sluggish hiring activity in the IT services sector has resulted in a cooling of talent competition over the last six quarters, generating a 30-40% reduction in the premium value given by GCCs, according to Kedar Pathak, GCC specialist at Xpheno. Certain mid-senior level IT roles, which formerly had 16-20% premium pay, have now reduced to 10-12% premiums, according to him.

High-level professions such as chief technology officers continue to earn 14-16% more than in IT services, while chief human resources executives earn 18-22% more, albeit this has decreased from 24-26% the previous year.

According to Kapil Joshi, CEO of Quess IT Staffing, the demand for IT system administrators and network engineers is decreasing as cloud adoption and Software-as-a-Service platforms replace many routine tasks, whereas roles in basic software development, data entry, analytics, quality assurance, and customer support are under pressure due to AI and automation. He noted that specialized skills in cybersecurity, AI/ML, data science, and cloud architecture are still in great demand.

To maintain their employer value proposition despite lower premiums, GCCs are focusing on skill-based compensation models while also improving non-monetary benefits such as global exposure and career advancement opportunities, flexible work arrangements, and learning and development initiatives, according to experts.

Pathak said, however, that the talent building plan will be costly for many GCCs and that "there will always be a mix of greenfield GCCs and mature GCCs expanding into newer capabilities, paying a competitive premium". What would change is the competition-defined scale and intensity of premiums, he explained.