Traditional Indian outsourcing giants, that have thrived on providing IT services to clients in developed markets, are now increasingly entering into business partnerships with MNCs to work with the local GCCs, helping them offset the revenue impact.
This is also helping companies such as Infosys, HCLTech and Wipro increase the share of their revenue from the home market.
Industry experts see GCCs as a key revenue driver for India, as IT services companies diversify amid weakening demand from their core markets of the US and Europe.
“It’s party time again. GCCs are turning third-party in larger numbers,” Ramkumar Ramamoorthy, partner at growth advisory firm Catalincs, wrote on LinkedIn recently.
“For IT services companies, revenue from GCCs has been steadily increasing. I won’t be surprised if GCCs contribute $1 billion or more in annual revenue for the large players,” he told ET.
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US-based technology research firm Everest Group estimates the revenue generated by IT and business process service providers from GCCs and GCC-related support at $20 billion, with Indian GCCs contributing a majority share.“Indian and global IT services firms are viewing GCCs as a new business opportunity. This is a significant shift from their stance before 2020, when they primarily saw GCCs as competitors,” said Everest Group vice-president Hrishi Raj Agarwalla.
Half of the new GCCs established in the past one-two years have leveraged external IT and business process services firms for setup support, as per Everest Group data.
Within the GCC setup, the build operate transfer (BOT) model has seen significant growth as compared to virtual or assisted GCCs and joint ventures,” Agarwalla said.
According to Ramamoorthy, there are a number of partnership models in vogue. “From the most common staff augmentation to building tech centres of excellence, a BOT of the client entity, creating virtual captives as well as co-locating and co-innovating with these entities within the same premises, there are plenty of models,” he said.
French IT consulting major Capgemini sees gaining prominence of various business models, from BOT and GCC accelerator to GCC-as-a-service and joint venture.
In 2020, Ananth Chandramouli, managing director of Capgemini’s India business unit, said that GCCs were the largest segment of Capgemini’s India business, contributing to about two-thirds to the domestic revenue.
While he did not disclose the latest revenue share, Chandramouli said the firm continues to collaborate with GCCs across various stages of their life cycle.
“Newer GCCs leverage us for our expertise, accelerators and talent development to speed up their value creation. Larger, long-tenured GCCs partner with us to move up the value chain…While mid-sized GCCs partner with us to accelerate their growth and scale up faster,” he said.
“Companies beyond the tech and digital sectors, facing challenges in attracting top talent in advanced technologies, collaborate to drive faster innovation.”
In one of the projects, Capgemini helped a global logistics major set up an AI innovation lab.
Oursourcers tap Insourcers
Indian GCCs have been the buzzword for more than a year now, growing at 40% in fiscal year 2024 increasing their revenue contribution to $64.6 billion (from $46 billion in FY23) to the $250 billion technology services industry, as per a Nasscom report.
Given the weakness in technology demand from clients amid disruption caused by generative artificial intelligence (Gen AI) and automation, IT and business process services companies faced their slowest growth in FY24.
In order to compensate for the slowdown, Indian software service providers are actively supporting GCCs in various capacities, including their establishment, operational management through staff augmentation, and facilitating digital transformation and process improvements.
The country’s second largest IT services company, Infosys, is increasingly working with its clients when they are setting up GCCs, chief executive Salil Parekh said recently.
“We are working with them when they do a BOT and we participate in it with the build, operate and when they transfer. We are working with GCCs in India to help scale them, to help with recruiting. And we are also working, in some instances, with clients when they are exiting from GCCs, when we have programs where we take them and they become a part of us, so a very strong connect with GCCs across India,” Parekh said during the company’s second-quarter earnings call.
Last September, Infosys acquired the GCC business that one of its clients, Danske Bank, had been running in India for 10-15 years.
Wipro chief Srinivas Pallia has a similar view. “It’s our strategy to partner with GCCs. We know that GCCs are growing significantly in India at this point in time,” he said.
Local revenue gain
GCC-related operations have helped Indian IT majors increase the share of local business in their revenue.
Infosys’s India revenue, which was 3.1% in the three months through September 30, grew 19.9% and 16% sequentially in the first and second quarters of fiscal 2025, after shrinking 15.4% in the January-March period.
For market leader Tata Consultancy Services, India led growth with a 95.2% expansion in revenue from the home market that accounted for 5.6% of total revenue.
HCLTech and Wipro do not disclose India revenue share separately.
Even mid-tier IT players like Coforge, Persistent Systems, Happiest Minds Technologies and KPIT Technologies are leveraging the growing force of GCCs.
“The GCC business is growing for the industry,” said Sandeep Kalra, CEO of Persistent Systems. But the GCC business “is a little less profitable”, he said, “because sometimes the contracts are in rupees … the US business is usually more profitable.”
Kalra refused to disclose the company’s business from GCCs but said it is part of the India business which is sub-10% of its total revenue of $1.38 billion (annualised as of the second quarter).
None of the firms divulged their GCC business revenue share.
Threat from insourcing
Nevertheless, increasing insourcing remains a threat to the business of local IT companies.
In December 2023, State Street Corp decided to buyout HCLTech’s 49% stake in their UK-based joint venture, Statestreet HCL Services, which provided services to the US financial services company.
This affected HCLTech’s revenue from the financial services vertical by around 0.8 percentage point each in the first two quarters of this fiscal.
In an interaction with ET after the Q2 earnings, HCLTech CEO C Vijayakumar acknowledged that insourcing has deflated the total addressable market for IT services, although it (insourcing) is still small.
Coforge CEO Sudhir Singh said there is no point fighting a trend that is pushed by clients.
“We found it productive to collaborate, that helps us penetrate the rest of the organisation as well… There is a proportion of enterprise IT budget that goes to GCCs (depending on micro and mega GCCs). And enterprise clients also have their own standalone enterprise IT which has its own outsourcing agenda,” he said.
The strategy of tech giants to make use of the opportunities from the increasing trend is reflected in the decision of Accenture, the world’s largest technology services giant, to invest around $170 million in ANSR in July this year.
US-headquartered ANSR helps multinationals establish GCCs in India, including finding the location for the centre, sourcing of employees and setting up the leadership.
Since its inception in 2008, ANSR has been instrumental in helping set up around 135 GCCs in India. ANSR co-founder Vikram Ahuja said GCCs and service providers are not rivals.
“There is a misconception that GCCs and service providers compete with each other,” he said. At ANSR, we oversee and partner with GCCs to oversee over 30,000 staff from IT services companies working with them. Today, 85% of our GCC customers also work with IT services companies in some regard.”
According to Ahuja, the core capabilities — data and AI, analytics, product engineering, etc. — remain in GCCs while specialised and legacy functions, optimisations and project-based work will continue to be managed by IT service providers.
Talent and business
GCCs continue to remain top employers, largely due to their competitive compensation packages at a time when IT services firms are witnessing a slowdown in their cumulative workforce.
“In FY22, the initial wave of GCC expansions laid the foundation for operations and service delivery. FY23 saw the growth of GCCs into multi-functional centres, driving demand for experienced IT professionals. By FY24, a strategic pivot towards AI, digital transformation, and specialised skills such as AI/ML and cloud computing became the focus,” said Neeti Sharma, CEO of recruitment firm Teamlease Digital.
“This combination of automation, cost optimisation and specialisation underscores the industry’s ongoing adaptation to technological advancements and market evolution.”
India currently houses more than 1,700 GCCs, with the largest global share at around 17% of such centres globally. These centres employ around 1.9 million people.
The number of GCCs is expected to increase to 2,100-2,200 and headcount to 2.5-2.8 million by 2030, as per a Nasscom-Zinnov report. By 2030, their share revenue is estimated to grow to $99-105 billion from $64.6 billion last year. But so will the Indian outsourcing industry.
Vijayakumar believes that the IT services market is very large and is expected to see trillion-dollar spends in the next couple of years.
“So, whatever GCCs scale up will be a very, very small component. And there are a lot of untapped areas for service providers like us, that’s where we need to focus and increase our addressable market,” Vijayakumar said, adding that HCLTech’s services share of revenue is still a third even within the Global 2000 companies.
— With inputs from Sameer Ranjan Bakshi
