Global Capability Centers: Catalysts for Corporate and Private Equity Innovation

Introduction

Global Capability Centers (GCCs) were once viewed as cost-saving offshore units that streamlined back-office functions. They are now emerging as strategic innovation hubs for large and mid-sized companies. GCCs today are increasingly offering cost efficiencies, enhanced operational control and oversight, access to deep talent pools, and an opportunity to experiment and scale projects quickly. The GCC market is expected to grow from USD270 billion today to USD413 billion by 2030 (EY, How GCCs are rewriting the playbook for driving strategic innovation, 7 April 2025). This article examines the evolution of GCCs, emerging trends, and the legal and strategic considerations involved in their set up, with a particular focus on their role in the private equity (PE) sector.

What are GCCs?

GCCs are facilities dedicated to providing services to enterprises and typically are set up in countries with lower labour costs, such as India, the Philippines, Mexico, and Poland. Companies of all sizes, including Fortune 500 companies and mid-market enterprises, are now adopting GCCs. These facilities typically are industry-agnostic and can provide value across sectors, such as industrial, financial services, and professional services. Today’s GCCs provide a wide variety of functions, including digital transformation programmes, engineering research and development, and enterprise shared services (eg, for finance, HR, legal, procurement, and marketing functions). Further up the value chain, they also act as Centres of Excellence in AI, cyber, cloud, analytics, and more.

GCCs: evolution and emerging trends

GCCs emerged in the 1990s as “captive” entities for companies seeking to reduce expenses and improve efficiencies by relocating certain business functions to lower-cost countries. The early 2000s marked a significant rise in the establishment of GCCs, particularly in countries like India and the Philippines, which offered a combination of skilled workforces and cost advantages. India became a preferred destination due to its large pool of English-speaking professionals and a robust IT infrastructure. The success of early adopters in these regions inspired other companies to follow suit, leading to a proliferation of GCCs across industries. Many early GCCs were monetised and in many cases acquired by professional services firms.

Since the first wave of captive GCCs were established, companies over the next two decades shifted service delivery toward a more traditional outsourcing model, where a company engages a third-party supplier to provide services from the supplier’s shared offshore facilities. While the outsourcing model remains widespread, in recent years we are witnessing the re-emergence of the captive model.

GCCs originally focused on back-office operations and IT support, which was typically viewed as more commoditised work. The new GCC model is supporting much more sophisticated and higher-value work, with GCCs serving as global hubs of innovation, strategic decision making, and value creation. For example, some GCCs are being deployed as AI “innovation-as-a service” centres that experiment with and test new AI use cases.

Recent figures from firms such as Accenture and McKinsey illustrate this growth.

• GCCs can reduce selling, general & administrative expenses by 15–25% and increase efficiencies of sales and marketing by 25–45% (Accenture, Global Capability Centers site).
• GCCs can be leadership incubators. As talent pools mature, 10–20% of global enterprise leaders are projected to be based in GCC locations (McKinsey Direct, The future of global centers, 12 May 2025).
• GCCs are hubs of emerging talent. Today, 30 countries hold 91% of the world’s skilled force, with 62% based in Asia-Pacific, Africa, and Latin America. This percentage is projected to increase to 67% by 2030 (Accenture, Rise of the Global Capability Center as a reinvention engine, 2024).
• Today’s GCCs drive 5% to 34% of all enterprise innovation (McKinsey, Beyond cost savings: The global footprint of innovation hubs (podcast), 3 June 2025).
• One in five Fortune 2000 companies has a GCC in India. This number is expected to double by 2030 (McKinsey Direct, The future of global centers, 12 May 2025).

The authors are also seeing more creative service delivery solutions, with companies leveraging one or more GCC models as part of their overall technology and services ecosystem. These include the following.

• Hybrid Model – a company uses a combination of captive GCCs and outsourcing partners.
• GCC-as-a-Service Model – a company engages one or more third parties to set up a GCC efficiently and with less risk.
• Hub-and-Spoke Model – a company’s GCC is itself supported by satellite locations.

GCCs in the PE sector

PE firms are increasingly leveraging GCCs to provide shared services across their portfolio companies. This approach:

• enables portfolio companies to share best practices and standardised processes, leading to improved operational performance, cost savings and enhanced EBITDA;
• facilitates better data management, analytics, and reporting, which provides PE firms with valuable insights into the performance of their investments and an opportunity to drive innovation more effectively;
• gives access to a highly skilled and cost-effective talent pool that might not otherwise have been available to the portfolio companies, and that enables operational resilience, scalability, and growth; and
• allows PE firms to de-risk their operations by strategically distributing business functions across multiple locations and minimising reliance on any geography.

Importantly, GCCs now are playing a crucial role in facilitating a PE firm’s post-acquisition integration of a portfolio company. By providing a centralised platform for shared services, GCCs reduce the time and resources required for a PE firm to maximise efficiencies in its newly acquired portfolio companies and thereby to maximise returns.

Legal and strategic considerations for GCC set up

The key legal and strategic considerations when setting up a GCC include the following.

• Entity formation and registration – if a company elects to establish a GCC on its own, it must decide on the appropriate legal structure for the GCC, which could include a branch, a subsidiary, or a joint venture. Each structure carries legal and commercial implications, including regarding regulatory compliance, liability, and operational flexibility. Companies must also meet legal obligations related to business registration and licensing. Engaging local counsel can help streamline the registration process and compliance with any ongoing requirements.
• Using third parties to build GCCs – a company also can partner with a third-party service provider to establish a GCC on the company’s behalf, either through a “Build–Operate–Transfer” (BOT) or “Build–Operate–Acquire” (BOA) model. Companies use this model to decrease GCC establishment time and to mitigate risk because there are many third-party providers who are experts in building GCCs. This approach can also delay and/or mitigate the risk of permanent establishment issues for tax purposes. That said, the engagement of third-party providers can also introduce other risks that are common in the outsourcing model (eg, data protection, IP ownership, and performance issues).
• Taxes – whether a company establishes a GCC on its own or with a third party, understanding the tax implications in both the home and host countries is crucial. This includes corporate taxes, transfer pricing regulations, permanent establishment issues, and potential tax incentives.
• Labour laws – companies must understand and comply with local labour laws when setting up a GCC. This includes regulations related to employment contracts, working hours, employee benefits, and termination procedures. Companies will need to ensure that their HR policies align with local labour laws and practices and are kept up to date.
• IP ownership – it is vital to establish clear agreements with third-party partners and GCC personnel regarding the ownership and protection of any IP that is used and generated in a GCC. This ensures that the company retains control over its proprietary technologies and innovations.
• Privacy and data security – companies and their GCC partners must comply with relevant data privacy regulations, including for any data transfers across jurisdictions, and implement robust data security measures to protect data in transit and at rest. Agreements with third parties need to include appropriate allocation of responsibilities and risks, including with respect to cyber incidents.

Conclusion

GCCs have matured from cost-saving centres to strategic assets that drive innovation and efficiency. As the global business landscape evolves, GCCs are poised to unlock significant value for corporate enterprises and PE firms alike.