April 15, 2025 GCCs: From Cost Centers to Innovation Hubs

Leadership and strategic planning elevate global capability centers (GCCs) from cost centers to innovation powerhouses.

by Gundeep Singh, Principal, Industrial Products, Ernst & Young LLP

Global capability centers (GCCs) have the power to recalibrate an organization’s future.

Their strategic journey from back-office support facilities to dynamic innovation hubs aligns with rapid technological advancements and the increasing demand for digital-native talent. They have become versatile assets that can sharpen a company’s competitive edge and light new pathways to success.

The GCC market is expected to grow to US$413 billion by 2030. Fully integrated with parent organizations, GCCs foster collaboration and contribute to various functions such as IT, R&D, digital, finance and logistics, among others. They also take on complex roles in data analytics and cyber risk management, while becoming the hub and catalyst for artificial intelligence (AI) activity across the enterprise. Modern GCCs are being built with AI at the center of everything GCC does.

The transition to GCCs is significant for several reasons. First, GCCs optimize resources and drive efficiency, saving costs without impacting delivery. Second, as companies acquire new entities, each with its own processes, GCCs help standardize these processes, promoting consistency and streamlined operations. Third, GCCs play a crucial role in retaining talent, acting as catalysts for business transformation, and providing greater control over overall decision-making.

However, realizing these benefits requires significant change management. Leadership roles must adapt from local to remote, and the shift from vendor-managed to client-employee managed services demands a new mindset.

Additionally, employees may fear that their jobs will be eliminated under a GCC structure. To counter these concerns, it is essential to communicate transparently about the intent of GCCs, which is to establish, activate and accelerate a culture of innovation and change. Providing reassurances about job security and highlighting opportunities for growth within this new model are crucial for maintaining morale and engagement. By standardizing processes, addressing job security concerns, and adopting agile ways of working, organizations can foster an environment where innovation thrives and employees are empowered to contribute to the transformation.

To fully leverage the potential of GCCs, strong leadership and strategic planning are paramount. Building engagement and earning buy-in from everyone involved can be the cornerstone of a successful GCC strategy, enabling these centers to evolve into drivers of innovation.

Strong leadership: the cornerstone of a successful GCC strategy

The role of leadership is paramount in executing an effective GCC strategy. As GCCs transition from back-office functions to innovation hubs, leadership dynamics must evolve accordingly. Historically, leadership roles were centralized in the US or Europe, with GCCs functioning as support units. Today, leadership roles in critical functions such as R&D and IT are increasingly being driven through GCCs, underscoring the importance of CEO, CFO and CIO alignment in advancing a GCC strategy.

Transitioning to a GCC model involves significant change management. Leaders play a crucial role in guiding their teams through this transition, addressing concerns, and reinforcing the strategic importance of the GCC. Effective change management can mitigate resistance and foster a positive attitude towards the new operating model.

How GCCs are breaking down barriers to innovation

GCCs are designed around the pillars of innovation and creativity. This strategic focus on finding new ways to do things and exploring imaginative business models creates a culture where employees are not just given the space to think outside the box, they are encouraged to do it in pursuit of novel solutions.

Here are some ways the GCC model is driving innovation and enterprise agility:

Flexibility and scalability – GCCs provide the ability to scale operations quickly in response to business needs, whether it’s expanding existing capabilities or adding new functions. The capacity to adapt swiftly to changing market conditions and business requirements is enhanced with a global network of GCCs. By offloading routine and non-core tasks to these centers, the senior leadership team can concentrate on strategic initiatives, innovation and core business functions, leading to improved efficiency and effectiveness across the company’s footprint.

Focus on R&D and digital growth – GCCs can drive research and development initiatives as they work to build on the company’s competitive edge. Located in tech-savvy regions, GCCs can quickly adopt and implement emerging digital technologies, keeping the organization at the forefront of innovation. Spreading operations across multiple regions also reduces the risk associated with geopolitical instability, natural disasters, or other localized disruptions, preserving business continuity and resilience in the face of unforeseen events.

Local market insights – GCCs can give organizations greater understanding and diversity of thought when it comes to customer preferences and cultural nuances, helping the organization tailor its products and services accordingly. This local expertise often leads to better customer service and a more personalized customer experience. Additionally, GCCs in regions like India are increasingly collaborating and learning from one another, sharing best practices and insights that further enrich their understanding of local markets.

Business standardization – GCCs are instrumental in business standardization. By centralizing and harmonizing processes across different entities, GCCs help protect consistency and efficiency in operations. This standardization not only streamlines workflows, but also enhances compliance and governance, making it easier to implement best practices and maintain high-quality standards across the organization.

How can advisors facilitate defining and executing a winning GCC strategy

While the benefits of GCCs are clear, attempting to develop a GCC strategy without the right insights and experience can be fraught with risk. The launch of an innovation hub in a new location requires a nuanced understanding of the GCC landscape, which many organizations may lack. This is particularly true for smaller organizations that may not have the internal expertise to navigate this complex transformation.

If internal expertise is insufficient, engaging external advisors with specialized knowledge can be invaluable. These experts can provide insights into local regulations, industry benchmarks and best practices, helping the company streamline its operations, set realistic goals and implement IT infrastructure that meets all compliance requirements.

Seeking external guidance is not just about the initial setup, but also about long-term strategic benefits. External experts can help organizations continuously enhance their GCC operations, stay ahead of technological advancements and adapt to changing market conditions.

By fostering a culture of collaboration and continuous improvement, investing in advanced technologies and leveraging local market insights, GCCs can significantly enhance an organization’s global footprint and competitive edge.

The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

About the Author:
Gundeep Singh leads the Business Transformation capability for the Industrial Products sector at EY, helping global clients navigate complex transformation journeys and achieve strategic objectives. With 20 years of global and cross-functional experience in digital, data, software and IT across industries such as manufacturing, industrial products and consumer sectors, he is known for his ability to blend consulting experience with deep industry insights and business acumen.

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