Service Providers: Catalysts for GCC Success

Service Providers: Catalysts for GCC Success

Global Capability Centers (GCCs), specialized units set up by multinational companies to centralize key business functions such as IT, operations, and research, are setting new benchmarks as they evolve from traditional cost centers to strategic assets driving innovation and growth.

As the number of GCCs continues to rise and these centers expand and transform, their success is increasingly reliant on forming strategic partnerships with service providers. These collaborations are essential to navigate the complexities of technology, talent acquisition, and operational efficiency which are critical for the sustained growth and effectiveness of GCCs.

This article explores the lifecycle of GCCs, the transformative impact of service providers, and the evolving dynamics of these strategic partnerships.

The Rise of GCCs and Provider Collaboration

GCCs are rapidly growing in number, reflecting their increasing importance as strategic assets in the global business landscape. According to Avasant research, there are currently approximately 5,500 GCCs worldwide, contributing to a substantial USD 113 billion spend in 2023. This growth trend is robust, with the number of GCCs expanding at an annual rate of 15%, resulting in a global workforce of approximately 5 million employees.

Eighteen percent of these GCCs have adopted provider-led strategies, highlighting the crucial role that external expertise plays in their operations. Service providers bring a wealth of expertise and capabilities that enhance the operational efficiency and strategic value of GCCs. Their contributions span various areas, including setup, operations management, technology deployment, and talent augmentation.

Lifecycle of GCCs and Models of Existence

GCCs follow an evolutionary trajectory as they mature their capabilities (Figure 1). The lifecycle of GCCs can be broadly categorized into several stages, each offering distinct operational and strategic benefits. These stages reflect the progression from initial setup focused on cost savings to becoming strategic hubs driving innovation and new capabilities:

As GCCs evolve through different stages of maturity, their operational focus and strategic contributions shift, necessitating distinct support from service providers. This dynamic relationship highlights the importance of aligning service provider contributions with the specific needs of GCCs at each stage of their lifecycle, ultimately enabling these centers to transition from cost-saving entities to strategic innovation hubs.

Provider Contributions Across the GCC Lifecycle

Service providers play a pivotal role in supporting GCCs at various stages of their lifecycle by:

• • Accelerating time to market: Service providers expedite the initial setup phase by providing ready-to-deploy infrastructure and expertise. This allows GCCs to become operational quickly and start delivering value sooner.
  • Accessing top talent: Providers offer access to a vast pool of global talent, enabling GCCs to tap into specialized skills and knowledge that may not be available locally.
  • Implementing global models: Service providers bring best practices and standardized processes, helping GCCs implement global delivery models efficiently.
  • Enhancing operational efficiency: Service providers help GCCs streamline operations by optimizing processes, implementing automation tools, and reducing redundancies.
  • Change management: Providers facilitate smooth transitions and ensuring changes are effectively integrated in the organization through strategic planning, training and development, communication management, process redesign, technology implementation, stakeholder engagement, and monitoring and evaluation.
  • Governance: Providers offer consulting and risk assessment services to ensure that GCCs adhere to local regulations and mitigate legal and reputational risks.

In the post-COVID world, where remote operations have become the norm, service providers offer specialized support tailored to these new dynamics. They manage infrastructure, optimize collaboration tools, assist in remote talent acquisition and management, provide project management services, offer technical support and training, and ensure regulatory compliance. This comprehensive support enables GCCs to effectively leverage remote capabilities, enhancing efficiency, productivity, and adherence to compliance standards.

The Role of Service Providers in Driving GCC Evolution

Service providers play a pivotal role in the ongoing evolution of GCCs, turning them into engines of innovation. Here’s how service providers are making a significant impact:

• • Driving sustainability initiatives: Service providers support GCCs in implementing sustainability and Environmental, Social, and Governance (ESG) initiatives. They help develop and execute strategies for reducing carbon footprints, managing resources efficiently, and ensuring ethical practices. This not only enhances the GCC’s sustainability profile but also aligns with global trends and stakeholder expectations.
  • Increasing agility and resiliency: By implementing scalable cloud solutions, advanced cybersecurity measures, and process automation technologies, service providers ensure that GCCs can quickly adapt to market changes and maintain continuity during disruptions.
  • Innovation and digital transformation: Service providers offer expertise in cutting-edge technologies such as AI, machine learning, automation, and cybersecurity, driving digital transformation initiatives and innovation in processes and services.
  • Market expansion: Service providers help GCCs expand into new regions by managing logistical and operational challenges, providing market insights, and ensuring compliance with local regulations.
  • Monetization: Service providers help GCCs monetize their assets, capabilities, and intellectual property through carveout strategies such as spin-offs, divestitures, or commercialization of products and services. They are conducting market assessments, valuation analysis, and deal structuring to facilitate transactions and generate revenue for the GCC and its parent organization.

Some notable examples of service providers’ contributions include:

• • An American multinational conglomerate and a large IT services provider partnership: As mentioned in the recent Avasant EBS panel, titled “The Rise Of GBS: How Captives Can Deliver Competitive Edge,” an American multinational collaborated with an IT service provider to digitally transform its global industrial operations by leveraging advanced capabilities like the Industrial Internet of Things (IIOT), AI, cloud, and cybersecurity. The provider established a Digital Center of Excellence (COE), significantly enhancing IT and operational technology alignment. This collaboration resulted in the swift adoption of grid software, improving grid stability, resilience, and sustainability, and substantially enhancing productivity and cost efficiencies in managing the clean energy grid.
  • An oil company and a major Indian IT services firm collaboration: The client collaborated with a provider to streamline its global IT operations. The client’s Bangalore IT Center accessed India’s extensive IT talent pool to improve project delivery and optimize workforce management. The partnership enhanced efficiency and innovation within its IT services, resulting in substantial cost savings and competitive advantages. The streamlined IT services and workforce reduction were projected to save approximately USD 850 million.
  • A global pharma company and large IT company partnership: In collaboration with an IT services company, a global pharmaceutical and healthcare company is enhancing its business operations through a GCC network to innovate, manufacture, and distribute life-saving medicines more effectively. By leveraging digital-first talent to optimize R&D, IT, manufacturing, supply, commercial, finance, HR, and procurement, this realignment aims to reduce operational costs and accelerate the development of groundbreaking treatments.
  • A US-based healthcare consortium and a large IT Services firm partnership: In 2023, a US-based healthcare consortium formed a strategic partnership with a multinational IT services firm, where the provider established a center in India to provide comprehensive support and delivery services, including facility setup, talent acquisition, IT support, and ongoing management. This collaboration is expected to boost efficiencies, reduce costs, and enhance profitability for the healthcare consortium.
  • A multinational conglomerate and a technology services company partnership: A multinational conglomerate partnered with a technology services provider to address challenges in modernizing business processes, IT operations, and procurement, especially for its marketing department. The provider developed a comprehensive solution, including the setup of a Robotic Process Automation (RPA) Center of Excellence, digital personas for critical roles, and automation of various processes, resulting in improved throughput, increased process efficiency, reduced repetitive tasks, standardized reports, and over 50% savings in man-hours.

Conclusion

Service providers are undeniably the catalysts for the success of GCCs. As GCCs evolve from traditional delivery centers to strategic assets that drive innovation and growth, the role of service providers becomes increasingly pivotal. These providers bring a wealth of expertise and capabilities, ensuring that GCCs can navigate the complexities of technology, talent acquisition, and operational efficiency. This synergistic relationship ensures that GCCs are well-equipped to meet the challenges of the modern business landscape, delivering sustained value and competitive advantage.

The future of GCCs is marked by continuous transformation and growth, driven by strategic partnerships with service providers. Service Providers will continue to play a critical role in offering specialized expertise, managing complex projects, and providing access to new markets. These partnerships will become more integrated and collaborative, with service providers becoming an essential part of the GCC’s strategic planning and execution.

By Amrita Keswani, Senior Consultant