USA – NEW YORK Trends and Developments Contributed by: James McPhillips, Vipul Nishawala and Meighan O’Reardon, Clifford Chance US LLP
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 busi - ness functions to lower-cost countries. The early 2000s marked a significant rise in the establish - ment of GCCs, particularly in countries like India and the Philippines, which offered a combina - tion 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 com - panies to follow suit, leading to a proliferation of GCCs across industries. Many early GCCs were monetised and in many cases acquired by pro - fessional services firms. Since the first wave of captive GCCs were estab - lished, 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-emer - gence of the captive model. GCCs originally focused on back-office opera - tions 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.
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 experi - ment and scale projects quickly. The GCC mar - ket 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 ser - vices 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 sec - tors, such as industrial, financial services, and professional services. Today’s GCCs provide a wide variety of functions, including digital trans - formation programmes, engineering research and development, and enterprise shared ser - vices (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.
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