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Partners in Success: How GCCs and IT Service Providers Together Drive Innovation and Efficiency

GCCs have become business-critical assets for their parent organizations due to their access to diverse and niche skill sets, strong leadership, cultural integration and cost-effectiveness
 
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Saurabh Singh

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Saurabh Singh
Business Head, India
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Partners in Success: How GCCs and IT Service Providers Together Drive Innovation and Efficiency

In the ever-changing dynamic landscape of global businesses, the collaboration between and IT services providers (ITSPs) is also undergoing a paradigm shift. The earlier GCCs would engage ITSP primarily for cost-efficiency gains and elasticity in demand and supply. However, today's GCCs are actively working with partners, sharing a seat at the table with them, and driving strategic initiatives in emerging tech, new product development, operational excellence, and efficiency and innovation in general. This shift in focus from cost efficiency to strategic initiatives marks the evolution of GCCs and their increasing influence in the global business landscape.

The growth of GCCs has been significant in the last decade, marking a paradigm shift in the global business landscape. By 2010, there were multiple instances of GCCs being successfully leveraged for technology and product development. As a result, more and more MNCs started setting up GCCs for strategic technology operations, focusing on areas like full-stack development, AI, and IoT, building deep domain expertise and driving high-value work. This trend, along with the rising demand for niche skills in various sectors, accelerated GCC growth, underlining their increasing importance in the global business landscape.

Where the action is

The GCC landscape in India has witnessed a remarkable evolution, employing nearly two million GCC talent and contributing over $64 billion to the country's economy. About 23% of the Global 2000 MNCs have established their presence in India as GCCs. The rise in demand for digital services, including cloud and data analytics by GCCs, along with investments in talent acquisition and skill development, has significantly expanded the market size of India's GCC IT sector.

By 2030, the number of GCCs in India is expected to increase from 1,700 to 2,550, employing more than 2.5 million professionals and catapulting the market value to $110 billion. The annual average of new GCC launches in the country is anticipated to rise from 70 to 115, fortifying India's position as a preferred destination for centers of excellence/innovation.

Categories of GCCs

GCCs are of two types—upstream and downstream. Upstream GCCs are highly specialized and require a rich industrial ecosystem comprising AI, cloud computing, quantum computing, robotics, etc., to operate and grow. Conversely, downstream GCCs are independent of economies of scale and can be set up wherever there's steady and sufficient availability of a skilled workforce, required infrastructure and favorable governance. They comprise 25% and 75% of all GCCs in India, respectively.

Clash of the titans

GCCs cater to various business functions, including—but not limited to—finance and accounting, human resources, customer support and even IT services. Becoming increasingly mature over the years since their inception, GCCs are now competing with IT Service Providers in specific segments. This is true of those GCCs actively insourcing operations, directly impacting IT service providers' business.

Moreover, companies in BFSI, healthcare, media and travel industries will likely set up GCCs to increase market penetration, drive digital transformation and enhance global business service (GBS). As a result, IT Service Providers relying solely on the offshoring model will face stiff competition from GCCs. This model was immensely successful when setting up a GCC, which was a complex business endeavor. So, it is bound to take a hit as establishing GCCs becomes increasingly efficient.

With that in perspective, IT Service Providers must expand their service portfolios across technology consulting, systems integration and digital transformation. While it is easier said than done, it has become a business imperative nonetheless.

The pursuit of synergy

GCCs, especially the upstream kind, are mainly involved in driving innovation and creating proprietary technologies. On the other hand, IT service providers specialize mainly in external service delivery, which makes businesses more adaptable and efficient. In other words, the domains of GCCs and technology service companies do not overlap entirely. They do have traits that complement each other for business growth. By marrying the agility and skill set diversity of technology service firms with the strategic specializations of GCCs, these two sectors can thrive in unison rather than compete for existence/survival.

For instance, mature GCCs are open to strategically outsourcing specific projects. They serve as regional headquarters, onboarding IT service providers to drive new projects, managing legacy systems, catering to non-core activities, handling workforce expansion, and more. For IT service providers, there lies a business opportunity rather than competition. Moreover, many GCCs also cater to global vendor management, ensuring localized coordination with IT/BPO partners.

Additionally, many MNCs adopt the build-operate-transfer (BOT) model to establish their GCCs. They outsource building their GCCs to local technology service companies, who also operate these centers initially and transfer the infrastructure and operations incrementally to their parent organization. And it doesn't end here; in case the GCC setup in India doesn't deliver on the stated objectives or fails to align with the parent HQ's KPIs, the service provider can engage with the parent to explore a potential buy-out of their India captive center, thereby "carving out" a part of GCC business to be run by ITSP. This further exemplifies how GCCs and ITSPs can benefit from each other and deliver tangible ROI to their shareholders.

Proven outcomes

GCCs have become business-critical assets for their parent organizations due to their access to diverse and niche skill sets, strong leadership, cultural integration and cost-effectiveness. They are centers of R&D and innovation in AI, ML, RPA, cybersecurity, analytics, product development and other key domains. Given that, leading IT Service Providers such as HCLTech have established to cater to GCCs. The effectiveness of such strategic and adaptive business maneuvers is evident from HCLTech's successful and long-standing partnerships with many globally leading enterprises.

For instance, the world's largest heavy-industry equipment manufacturer has leveraged HCLTech's capabilities to optimize its GCCs for nearly two decades. Being the preferred technology partner, HCLTech has successfully provided many solutions as and when the global behemoth is needed. Similarly, a financial holding company, which partnered with HCLTech more than a decade ago, continues to rely on its expertise to maximize the potential of its GCCs.

Both examples establish how ITSPs and GCCs can be growth catalysts for each other. The future of business hinges on their ability to effectively identify and capitalize on collaboration opportunities. As enterprises worldwide look for ways to adapt and innovate, combining these two forces will unlock floodgates of opportunities for all.

Are you ready to explore how GCCs can transform your business? Contact us to learn more.

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