Global enterprises that fail to recognize Indian global capability centers (GCCs) as strategic innovation partners risk falling behind in the digital transformation race. GCCs are a significant topic in the Indian IT services industry. Their growth contributes to the subdued performance of Indian IT service providers after COVID-19. GCCs have now evolved to become strategic technology partners for enterprises.
Over the last three decades, GCCs have undergone name changes—from captives to shared service centers to global in-house centers (GICs), and now to GCCs. Their operations initially focused on cost arbitrage but have since transformed into digital enablers for enterprises and now serve as innovation hubs. This shift also reflects that global enterprises no longer view GCCs as a support function but as a strategic partner to drive business goals and innovation for enterprise-wide growth.
Global enterprises are pressured to reduce costs and improve the customer experience in the current turbulent economic situation. To reduce discretionary spending and align with the technology strategy, many enterprises continue opening their GCCs in India.
India plays a pivotal role in fueling GCCs with its redefined global positioning—from running cost-effective operations to providing a thriving ecosystem with a skilled workforce, driving innovation with advanced technologies such as AI, machine learning, cloud, and blockchain, and offering attractive policies and infrastructure (see Exhibit 1).
Source: HFS Research 2024
In addition to fostering talent and infrastructure, India’s central and state governments have established a favorable business environment to promote the growth of GCCs. For instance, the Karnataka state government recently introduced a preliminary policy to drive $50 billion in economic output and attract 500 new GCCs by 2029, creating around 350,000 jobs. This policy entails the creation of global innovation districts (GIDs), consisting of three new technology parks intended to facilitate collaboration among startups, technology leaders, and academia.
The most progressive GCCs in India are shifting from back-office functions to innovation and R&D hubs, aiming to create strategic value for global operations. The evolving digital landscape and diverse talent empower GCCs to spearhead initiatives, develop strategic assets, and integrate advanced technologies for value creation, leading to business transformation.
In a recent conversation with HFS, the GCC head of a professional services company highlighted, “GCCs are not just about doing work at a good cost or leveraging talent in India; it is about leveraging the Indian ecosystem to come up with breakthrough innovations that will have a significant impact on an enterprise’s business model. It is possible as India is diverse, and the market is growing.”
Indian GCCs have demonstrated their ability to develop standalone digital and AI-enabled products with enterprise on-site support. For instance, a GCC of a British retail multinational built an in-house GPT platform that effectively answers queries for procurement teams to make decisions on the buying process with 90–96% accuracy while putting guardrails and governance in place to eliminate hallucinations. This helped reduce mundane tasks and freed up resources for more strategic work.
Similarly, a global specialty chemical manufacturer, Eastman Chemical, developed a digital platform in collaboration with an on-site industry expert, Fluid Genius. This AI-powered platform monitors heat transfer fluid data and predicts fluid life span. It prioritizes safety, minimizes plant shutdowns, and reduces maintenance expenses for systems worldwide. The platform offers analytics, degradation kinetics insights, forecasting, and maintenance recommendations tailored to specific fluids.
Despite GCCs’ extensive operational experience and maturity, they have minimal involvement in strategy execution, sales, marketing, and business development. However, they are evolving to take control and convince board members to bring efficiency to align with the corporate agenda. By partnering with third-party providers, GCCs scale their services and stay ahead in the ever-evolving business world. They are embracing OneEcosystem™ to drive new sources of value and expand their horizons.
The GCC head of a professional services company said that companies have gained substantial knowledge about which functions to keep in-house and which ones to outsource. By adopting a hybrid model, a layer of knowledge is retained internally. Earlier, extensive outsourcing made the company heavily reliant on service providers, which, in their view, put them at risk of knowledge loss.
In discussions with IT service providers such as Accenture, HCL, and TCS, HFS observed that top providers have established dedicated GCCs as strategic business units. These units offer advisory services, operate under a build, operate, and transfer (BOT) model, provide strategic staffing services, set up centers of excellence (CoEs), and act as ecosystem partners to accelerate the growth ambitions of GCCs. By sharing the vision and working toward achieving enterprise goals, GCCs actively seek service providers’ expertise to leverage industry use cases in AI and other emerging technology areas. Due to their extensive experience working with multiple clients in the same industry, service providers can help fill the enterprises’ blind spots.
India presents an excellent opportunity for global businesses to enhance their growth by leveraging its skilled workforce, robust physical and digital infrastructure in urban areas, and favorable policies. Additionally, many service providers operate from Indian cities, making it easier for GCCs to collaborate with third parties. These factors make India a crucial partner in driving essential business operations within the GCC landscape.
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