While artificial intelligence (AI) and automation have been widely cited as drivers of recent layoffs, a deeper structural shift is also at play: the rapid rise of Global Capability Centres (GCCs).
These in-house tech hubs, established by multinational corporations to manage their operations directly, are increasingly challenging the traditional outsourcing model and contributing to workforce disruptions across the industry.
From Outsourcing to Insourcing: The GCCs Surge
The concept of GCCs—formerly known as “captives”—is not new. However, their expansion has accelerated dramatically in recent years.
Companies like Bank of America, Procter & Gamble, and UBS began insourcing tech operations as early as 2013, gradually shifting away from outsourcing contracts with Indian IT firms.
The COVID-19 pandemic further legitimized remote work and distributed teams, making GCCs a more viable and attractive option for global enterprises.
According to HSBC, GCC revenues have grown at a compound annual rate of 11% since 2015, compared to 8% for India’s top five IT firms.
GCCs now contribute 23% to India’s IT exports, up from 18% in 2015.
Analysts estimated that organizations established two new GCCs every week in 2024, raising the total to over 1,700 centres that employed nearly 2 million professionals.
The Impact on Indian IT Firms
This shift has placed traditional IT service providers in a difficult position.
As clients opt to build their own tech teams in India, the demand for outsourced services—especially mid-level coding and support roles—has declined.
The “pyramid model” that underpinned Indian IT staffing, with large layers of mid-tier employees, is now under pressure from both AI-driven automation and GCC-led insourcing.
Recent layoffs at firms like TCS have been attributed not only to AI adoption but also to the erosion of client contracts due to GCC expansion.
Cognizant, for instance, has acknowledged GCCs as a strategic threat in its risk disclosures, noting that nearly every client either has a GCC or is considering one.
A Missed Opportunity and Strategic Reassessment
Interestingly, former Infosys CEO Vishal Sikka had anticipated this trend.
In 2015, Infosys invested $1.4 million in ANSR, a firm that helped global companies set up GCCs in India.
Industry leaders later unwound the investment despite early signs of a shift and largely dismissed the opportunity at the time.
Today, ANSR has attracted fresh interest, with Accenture investing $170 million for a minority stake and a board seat in 2024.
The writing is on the wall: Indian IT firms must now reassess their strategies.
The challenge is no longer just automation—it’s convincing clients to outsource when they increasingly prefer to insource.
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