India’s global capability centre (GCC) sector is expanding significantly. According to Pune-based consultancy Wizmatic, 24 GCCs crossed the $1 billion export revenue milestone in FY 2023-24, up from 19 the previous year, contributing over $43.6 billion in exports. These centres, serving as the technology and operations hubs for MNCs, are becoming integral to Fortune 500 companies. Wizmatic founder Sandeep Panat notes the rise of giga capability centres in India.

The number of billion-dollar GCCs has doubled from 12 to 24 in the five years upto FY24. Various consulting firms have projected that the number of GCCs will grow in the coming years, creating additional jobs. According to a PwC report, by 2028, the country is poised to have 2,100 GCCs, with the market size of the centres touching $90 billion. A Nasscom-KPMG report estimates India will have 1,900 GCCs, with $60 billion in revenue, by the end of this year.

Although some exclude the Indian branches of IT service firms like Accenture and Capgemini from the GCC category, Wizmatic considers them part of it. The consultancy argues that their operational models and legal structures in India align with other MNCs running GCCs. Their revenue model is based on providing services to parent companies and global affiliates, following predefined markups regulated by transfer pricing norms. “The revenue gets credited where the clients are, like the US or Europe, not India. For these firms, income is tied to where clients are located, not where the work is executed. In principle, a GCC doesn’t generate revenue independently; it enables revenue for the parent entity. India’s local entities also operate as profit centres to meet transfer pricing norms, mirroring how traditional GCCs balance cost efficiency with regulatory compliance. Transfer pricing is a critical aspect of GCC operations, ensuring compliance with international tax regulations,” Panat says. As they scale, their ability to reinvest in R&D, digital capabilities, and strategic initiatives will grow. Transfer pricing policies dictate the margins GCCs can operate on, influencing their financial structuring and growth strategies. “While most GCCs operate on a cost-plus model, their financial success is determined by their ability to increase value addition. Unlike IT service providers that maintain a bench workforce, GCCs function as specialised entities with dedicated service lines for their global parent organisations,” says Panat.

Panat says traditionally, the scale and impact of GCCs were measured by headcount. However, the emergence of digital transformation and high-end services has shifted the focus to revenue and value creation. Many of these large-scale GCCs have outgrown the conventional captive centre classification.

About a year back, Ramkumar Ramamoorthy, partner at Catalincs, a tech growth advisory firm, wrote in a LinkedIn post: “In the last 20 years, about a dozen Indian IT services companies crossed a billion dollars in revenue. It’s now the turn of GCCs to add to the drumbeat given that many of them have tens of thousands of employees and are growing in double digits. While it’s hard to speculate on how many will cross the magical billion-dollar revenue mark in the next three years, one thing is certain. Going by hiring trends and the high-value work they do in their centres, the number of billion-dollar GCCs will be neck-to-neck with traditional Indian IT services companies, if not more.”

Phil Fersht, CEO of HfS Research, said that in terms of contributing to the top-line growth of their parent organisations, the jury is still out on whether GCCs can deliver more than efficiency. Currently, they are more of an efficiency play under the banner of “innovation”. “However, the future hope is they will start to contribute to top-line growth as they grapple with AI opportunities and become more integrated with the leadership of their parent organisations. The simple fact that GCCs offer the chance for Indian talent to get closer to global enterprises and have a more direct impact on their clients is making the GCC career option far more attractive than many of these “back office” service provider roles,” he said.

According to Fersht, the key challenge here is to establish stronger lines of collaboration between GCC leaders and the enterprise leaders in corporate. This is usually a result of legacy-minded corporations who traditionally treat Indian resources as “back office” as opposed to being part of the broader corporate mission. “Smart enterprise operation leaders need to establish clear skills development programmes and career paths to encourage more Indian staff to establish themselves as strategic workers forming part of global teams,” he said.

Lalit Ahuja, founder of ANSR, said GCCs have always hosted leadership roles and executed functions that directly impact the topline of companies. "This includes ownership of revenue driver digital products and platforms such as online banking and e-commerce. With the maturation and scaling of GCCs, the ‘billion dollar’ impact club continues to grow at a rapid pace. In 2024 alone, we have seen several of our portfolio companies hit the billion dollar revenue impact mark. We are seeing a clear transition from expense management to driving growth as a critical part of the GCC agenda."

(With TOI inputs)