Tech service providers lean into GCC boom as industry models evolve

The global capability center (GCC) landscape has seen massive growth in the last couple of years. These centers have evolved from primarily offshoring centers for cost-arbitrage purposes to becoming significant innovation hubs for their parent companies.

The growth of GCCs in India particularly has been phenomenal. In FY24, the number of GCCs has risen to over 1,700, with close to 3,000 centers. These GCCs are estimated to generate $64.6 billion in revenue and employ over 1.9 million people, as per industry body Nasscom’s report.

As the tasks handled by GCCs increase, they are being pitted against IT and managed services providers in several segments. GCCs insourcing their operations has directly impacted IT service providers’ business. They are also competing to attract high-end talent. A report by Teamlease Digit in August 2024 showed that GCCs are offering 12-20% higher salaries than IT services and other industries for similar positions.

However, both have complementary functions that at large can benefit mutual business growth. “A significant portion of the work at a GCC involves tasks that a managed tech service provider typically cannot or will not handle, such as product engineering, data analytics, AI, and R&D. In contrast, third-party tech service providers focus on areas like global business services, automation, and maintaining legacy systems,” said Vikram Ahuja. Co-Founder of GCC consulting firm ANSR.

“As GCCs expand, the demand for specialized talent will surge, creating a spillover effect that benefits IT services companies by generating additional business opportunities. Overall, this growth is a net positive for the industry. However, it's crucial to recognize that the nature of work at a GCC is fundamentally different from that of an IT services company.”

Further, many firms leverage the build-operate-transfer (BOT) or the build-operate-transform-transfer (BOTT) model to establish their GCCs. In such cases, local technology services firms initially operate these centers, eventually transferring them to the parent organization. One of the most recent examples is Infosys establishing GCC in India for Germany-headquartered airline company Lufthansa as part of a $300 million IT contract.

“In a classic BOT setup, a GCC is initially incubated under a third-party provider, scaled over time, and eventually transferred to the client once it reaches a certain threshold. However, a more evolved approach is now emerging—GCC-as-a-Service. This model introduces a more refined managed services component, offering greater flexibility, cost efficiency, and seamless operations without the constraints of traditional BOT transitions,” said Manish Goyal, managing director and GCC lead of consulting firm Alvarez and Marsal.

Building on the growth of GCC landscape

Many third-party tech services providers are also looking at increasing their investment in India to better serve their GCC clients.

In an earlier interaction with TechCircle, GlobalLogic head of India operations Piyush Jha said that the company is working with several GCCs providing them with end-to-end product engineering-related consulting. The boom in the Indian GCC landscape has benefited the company too, with its GCC clientele growing from 23 two years back to 45 now.

Further, IT infrastructure services provider Kyndryl’s VP and GCC Head for India Manjula Ramaswamy said, “We work with over 700 customers globally many of whom have a GCC presence in India, and we engage with them to enhance their capability centers. Our extensive portfolio of IT services includes hybrid cloud solutions, AI services, digital workplace management, business resiliency, and network maintenance.”

Ramaswamy said that Kyndryl has worked with a leading US insurance company, an automotive firm, and a global retail giant among others in enhancing their operations. 

Poland-based Lingaro Group has announced a 30% year-over-year growth target in India on the back of GCC growth in the country. The CEO Sam Mantle told TechCircle in an earlier interview that Lingaro is particularly focused on GCC expansion in India. “With our strong presence in the country, we’re well-positioned to partner with these companies in the areas of data and analytics—services that operate at the higher end of the technology value chain,” he said.

Industry analyst and founder of CEO of research consultancy Horses for Sources, Phil Fersht wrote in one of the blogs that a hybrid model is the future. “A hybrid model that combines in-house capability centers with third-party services can offer the best of both worlds. This approach allows for flexibility, scalability, and access to a broader range of expertise and resources, enhancing overall service delivery and innovation capacity.”