Private equity (PE) firms are significantly influencing the establishment of Global Capability Centres (GCCs) in India, marking a shift from reliance on large corporations to mid-market companies as key players in this space. This trend reflects a strategic move to enhance capabilities in areas such as artificial intelligence, engineering, and product development.
Currently, over 500 GCCs are associated with PE-backed companies in India. Notably, these firms contributed to nearly 31% of new GCC establishments from FY21 to FY26. Industry experts indicate that these centres are no longer merely cost-saving measures but are vital for creating value in portfolio companies.
Strategic Value Creation
According to Amita Goyal, managing partner at Zinnov, PE-backed GCCs have transitioned from experimental initiatives to essential components of value-creation strategies. These centres provide operational efficiencies and support growth through:
- Accelerated product development
- Enhanced AI adoption
- Cybersecurity improvements
- Innovation in platform modernization
Many mid-market firms establishing GCCs are also backed by private equity, with approximately 65% of over 220 mid-market firms launching GCCs in India since 2021 being PE-supported.
Efficiency and Technology Transformation
Sundeep Sharma, CEO of Summit, notes that the decision to set up GCCs is increasingly viewed as a repeatable strategy for driving efficiency and enterprise value. Typically, these centres begin with small teams of about 20-25 employees in their first year, growing to an average of 70 as they centralize shared services and focus on emerging technologies.
Sector Adoption
The technology sector is leading the adoption of this model, with software-as-a-service, cloud services, and IT security representing 55% of PE-backed mid-market GCCs. Other sectors, such as banking and financial services, account for 15%.
Accessibility of GCC Models
The emergence of GCC-as-a-service and build-operate-transfer models has made it easier for smaller firms to establish these centres without needing extensive resources or expertise. Vikram Ahuja, co-founder of ANSR, emphasizes that companies can now utilize purpose-built GCC models, reducing execution risks and accelerating value realization.
Future Growth and Considerations
While Fortune 500 companies will continue to expand their operations in India, the next phase of GCC growth is expected to be driven by first-time adopters, including PE-backed firms and mid-market enterprises. However, analysts caution that not all GCCs established during this boom will thrive. Factors such as operational scale, intellectual property needs, and long-term goals will significantly influence the success of these centres.
In summary, the GCC model has matured and is likely to remain a relevant strategy for private equity firms. Sustaining these centres and continuously creating value will present ongoing challenges for organizations.
