Transforming India’s GCCs: From cost optimizers to innovation powerhouses

The global capability center (GCC) ecosystem is buzzing with potential. As India charges forward to become the world’s third-largest economy, its GCCs are evolving from back-office hubs into innovation engines that drive global value. HFS Research, in partnership with Publicis Sapient, gathered the top GCC leaders in Bangalore to tackle a big question: Why is India primed to lead in the innovation arbitrage era, and how are GCCs leading the way?

This point of view summarizes the executive roundtable discussions from prominent GCCs in India, including Exxon Mobil, Franklin Templeton, Haleon, Lumen Technologies, Mastercard, Merck, Microsoft, Novartis, Philip Morris, Tesco, and Unilever.

India’s GCCs: From support act to main stage

The numbers don’t lie—GCCs in India are multiplying, with HFS forecasts suggesting they’ll exceed 2,500 by 2029, growing at a solid 10% annual clip. Headcount? It’s set to surge by around 14% yearly, meaning an ever-greater demand for top-tier talent. But it’s not just about growth—it’s about transformation. The GCC journey is moving from pure cost-cutting to a place where skills, technology, and innovation dominate the game. Developing and grooming leaders capable of opening and running these new centers will be crucial.

Exhibit 1: GCCs in India are proliferating at breakneck speed

Source: HFS Research estimates, 2024

Forget cost arbitrage; it’s yesterday’s news. The future is all about skills and innovation. Leaders at the roundtable made it clear—they’re gunning to move beyond being just “cost-effective” to becoming critical innovation hubs. The playbook is evolving—GCCs must focus on innovation-led projects rather than just labor arbitrage. This shift means more work in advanced tech and less focus on routine tasks.

Exhibit 2: Moving up the value chain from cost to innovation arbitrage

Source: HFS Research estimates, 2024

Only 15% of the participants positioned themselves in the Cost Arbitrage stage, which focuses on cost efficiency. Nearly 50% of leaders placed their GCC at the skills arbitrage stage, indicating a focus on developing technical expertise. Almost 35% mentioned they were already in the early phases of the Innovation Arbitrage stage, with organizations actively leveraging AI, cloud technologies, and other advanced solutions for strategic advantage.

Challenges? They’re real but not unbeatable

The path to becoming a true innovation powerhouse is no walk in the park. We asked the roundtable participants what GCC challenge they would make disappear if they had a magic wand. Here are the top five challenges that GCCs must tackle:

1. Tear down the walls: GCCs shouldn’t be treated like distant cousins—they need to be at the heart of the organization, fully integrated with a “OneOffice” mindset. Why even call them “GCCs” at all? They should simply be the “India Office,” as essential and core to the business as any other part of the company. It’s time to drop the labels and recognize that these centers are not just support units but strategic hubs that drive growth, innovation, and competitive advantage.
2. Change or get left behind: It’s easy to get stuck in old ways, but breaking out of the labor arbitrage mold requires leadership. Upskilling talent and shifting organizational culture are musts. Parent companies and GCCs need to move in lockstep.
3. Build products, not just run processes: It’s time for India’s IT and GCC sectors to go beyond services and become product powerhouses. That means more R&D budgets and placing R&D teams right alongside engineering. It’s about turning ideas into game-changing products. GCCs must also look beyond engineering and develop experience design and product management capabilities. This will help conceptualize and drive end-to-end thinking for business value and not be limited to execution.
4. Talent remains the secret sauce: Finding and keeping top talent is a battle every GCC fights. As GCCs shift focus, the need for industry specialists becomes even more urgent. It’s about having the right people blend domain expertise with fresh ideas to solve old problems through new tech and AI. This will also mean looking at talent with high learnability to constantly adapt as the context changes.
5. Make friends in the right places: The startup scene in India is thriving, and GCCs need to tap into it. Building partnerships with startups can fill gaps in skills and tech, speeding up innovation and boosting capabilities. The service providers are also a network that GCCs should tap into for inspiration since they are making their own and enabling transformation journeys for others.

The real challenge isn’t just technical—it’s mastering softer skills such as leadership, communication, and collaboration. These elements will drive GCCs from cost-focused operations to becoming true innovation leaders.

GCCs and AI: From hype to impact

All GCC leaders indicated that AI would play a central role in their future aspirations, with specific focus areas being productivity improvement, automation, decision-making, and customer experience.

There is a strong focus on generative AI (GenAI), deep learning, and the development of AI feedback loops. However, participants also emphasized the need to integrate AI gradually, ensuring safety and alignment with ethical standards.

It’s clear that GCC leaders see massive potential in GenAI, but they’re stuck on one major hurdle—turning proof-of-concepts into real-world results. GenAI shouldn’t just be a productivity booster; it should drive bold new ideas. Without it, GenAI risks becoming another shiny tool instead of a genuine value driver. According to Sanjay Menon, Managing Director, Publicis Sapient India, “The GCCs have an excellent opportunity to be AI first in their thinking and show real examples of scaled implementation of productivity tools and a learning mindset of change. They can be a point of inspiration for the rest of the company to follow suit.”

Exhibit 3: AI ambitions versus reality | Death by a thousand POCs

Source: HFS Research, 2024

The future GCC operating model will require an ecosystem approach

Many enterprises grapple with whether to keep work in-house through their GCCs or outsource it to service providers. Spoiler: the answer isn’t either/or. The model of the future is about building fluid ecosystems with the GCC team at the core, which will enable leveraging a diversity of capabilities through service providers, startups, etc. that can drive innovation while having an increased impact on execution.

A survey of 510 GBS leaders revealed a preference for a hybrid model.

Exhibit 4: Enterprises are more likely to adopt a hybrid model on a long-term basis

Source: HFS Research, 2024
Sample: 510 GBS Leaders

The Bottom Line: GCC leaders need an “infinite mindset” to play the long game.

To succeed long-term, GCC leaders must adopt an infinite mindset¹ . Unlike a finite mindset, which focuses on winning specific battles or achieving short-term goals, an infinite mindset embraces ongoing growth, adaptability, and resilience. For GCCs, this means looking beyond immediate cost savings or quarterly targets and focusing instead on continuous innovation, talent development, and long-term strategic partnerships.

By thinking beyond the limits of immediate success, GCC leaders can navigate market shifts, technological disruptions, and evolving customer needs, ensuring that their organizations remain relevant and competitive in the ever-changing global landscape. GCCs are becoming central to the broader business strategy. For GCCs, it’s about stepping up and becoming innovation leaders, not just support functions. The path forward? Lean into the change, build those partnerships, and prepare to disrupt.

¹Inspired by Finite and Infinite Games, a book by religious scholar James P. Carse