Should a Mid-Market Company (Sub Billion $ Revenue) Establish Its Own Global Capability Center (GCC) in India?

By – Shishir Choudhary, VP GCC India, YASH Technologies

In recent years, Global Capability Centers (GCCs) have become a strategic choice for businesses looking to expand their capabilities and optimize costs. While large multinational corporations have traditionally led the trend of establishing GCCs, small and mid-sized businesses (mid-market companies) are exploring this opportunity as they scale and globalize their operations.

Problems Every Company Faces Today – More so in the Mid-Market Segment

• Rising IT Costs: IT build and run costs are increasing rapidly. IT budgets continuously expand with digital transformation initiatives, cloud migrations, cybersecurity needs, and regulatory compliance requirements. Cost pressures continue to mount as businesses strive to maintain operational efficiency while keeping up with technological advancements.
• Availability of Talent: Skilled professionals in technology and IT are becoming increasingly scarce in the developed world due to rapid digital transformation, evolving skill requirements, and shifting workforce preferences. Emerging technologies like AI, cloud computing, cybersecurity, and data science have created an unprecedented demand for specialized talent, outpacing the supply of qualified professionals. Additionally, the fast-changing tech landscape requires continuous upskilling, but traditional education systems and training programs struggle to keep pace. As a result, companies face intense competition for top talent, driving wage inflation and aggressive hiring strategies.
• Evolving IT Landscape: Due to continuous technological advancements, the lifecycle of IT systems is shrinking. Traditional IT systems that once lasted a decade now require significant updates or replacements within a few years. Emerging AI, automation, IoT, and blockchain trends demand ongoing investments in upskilling, infrastructure modernization, and software adaptation. Companies that fail to keep pace with these rapid changes risk becoming obsolete.
• Outsourcing vs. Insourcing Dilemma: Finding the right balance between cost, control, and agility is a constant challenge. Outsourcing provides cost benefits in the shorter run and access to specialized expertise but often leads to concerns about data security, loss of domain knowledge / intellectual property, and vendor dependency. Insourcing offers better control and deeper integration with business processes but has higher costs and scalability limitations. Smaller organizations – especially the mid-market – find it extremely difficult to form a long-lasting alliance with IT service providers due to smaller ticket sizes.

The Allure of a GCC for a Mid-Market Company

Mid-market companies often face challenges in scaling operations, accessing specialized talent, and managing costs effectively. Traditional outsourcing models offer flexibility but often have limitations in control, quality, and alignment with long-term strategic goals. At the same time, hiring and retaining skilled talent in high-cost locations is becoming increasingly difficult due to wage inflation and competitive pressures.

A GCC provides an alternative by allowing companies to build dedicated teams in cost-effective locations while maintaining direct control over operations, knowledge, and intellectual property. Unlike pure outsourcing, a GCC fosters long-term capability development, deeper process integration, and continuous innovation.

A balanced model combining Onsite + GCC for core capabilities and Outsourcing for specialized skills ensures cost efficiency, scalability, and innovation. Onsite teams drive strategic alignment and business-critical functions, while the GCC builds long-term capabilities, fosters process excellence, and provides a cost-effective talent pool. Outsourcing remains valuable for specialized technology PoCs, niche expertise, and short-term demands, reducing the burden on in-house teams while accelerating innovation. This structured approach ensures control over core functions while leveraging external expertise for agility and speed in emerging technologies.

India has established itself as a hub for high-quality, cost-effective talent, offering a favorable environment for GCCs. Here are some compelling reasons why a Mid-Market Company might consider setting up a GCC in India:

1. Cost Efficiency
   India offers a lower-cost alternative without sacrificing talent quality compared to the operational costs in the U.S., Europe, or other Western regions. For mid-market companies, where budget constraints are often tighter than larger corporations, a GCC in India can translate into significant cost savings over time, covering technology, operations, and HR costs.
2. Access to Skilled Talent
   India’s talent pool is vast, well-educated, and diverse across fields including IT, data analytics, engineering, finance, and more. This talent access can enhance a mid-market company’s ability to innovate, handle technical complexities, and improve operational efficiency—all essential factors for companies aiming for a competitive edge.
3. Scalability and Flexibility
   Mid-market companies in growth phases need scalable solutions to adapt as they expand. A GCC in India provides the flexibility to scale operations with relatively lower incremental costs and agility in ramping up teams, allowing businesses to keep pace with growth demands.
4. Time Zone Advantage
   Operating in India gives mid-market companies a ‘follow-the-sun’ working model that allows continuous operations. This advantage can improve time to market for product development and service delivery, helping them remain responsive and agile.
5. Quality and Operational Control
   Unlike outsourcing, a GCC provides greater control over operations, quality, and adherence to company values and standards. A GCC could be a viable middle ground for these companies wanting direct oversight of processes without navigating third-party agreements.
6. Strategic Location for Future Expansion
   India’s growing digital infrastructure and business-friendly policies make it a strategic location. Once established, a mid-market company’s GCC can serve as a springboard for further market expansion within India or other parts of Asia, where many emerging economies present new market opportunities.

Potential Challenges to Consider

Despite these advantages, there are challenges that a mid-market company must weigh before committing to a GCC in India:

1. Initial Investment
   A GCC requires upfront capital, including office space, technology infrastructure, and recruitment expenses. mid-market companies need to consider whether they have the capital to invest without straining core business operations and whether they have the patience to wait for a return on that investment, which can take 2–3 years.
2. Talent Retention and Management
   The Indian job market is highly competitive, especially in tech-focused GCCs. Attracting and retaining top talent may prove challenging for a mid-market company, particularly without the employer brand power that larger firms possess. Strong HR practices and an engaging workplace culture will overcome this.
3. Cultural and Operational Integration
   Bridging the cultural and operational gaps between HQ and the Indian GCC requires a commitment to aligning goals, communicating effectively, and managing time zone challenges. Mid-market companies need leaders who can foster a cohesive company culture across geographies.
4. Regulatory and Compliance Hurdles
   Establishing a GCC in a foreign country involves navigating local regulations, tax policies, and labor laws. Mid-market companies may need legal and financial advisory support to handle these complexities, which could add to the venture’s operational cost and complexity.
5. Change Management and GCC Maturity
   Setting up a GCC is not just an operational shift but a strategic change that requires maturity in managing offshore teams and understanding how to integrate the GCC into the broader corporate strategy effectively. Developing this operational maturity may require time and targeted leadership focus, which some mid-market companies may lack.

Key Considerations for Mid-Market Company Decision-Making

To determine if a GCC in India is the right choice, mid-market companies should consider the following questions:

1. Business Objectives and Goals
   Does setting up a GCC align with the company’s core objectives? Will the GCC primarily serve as a cost center, or does the business intend to leverage it for product development, R&D, or market expansion?
2. Operational Readiness and Maturity
   Does the organization have the capability to handle the operational nuances of managing a GCC? If the mid-market company lacks maturity in its operational processes, setting up and scaling a GCC could be more challenging than expected.
3. Time to Value
   Is the business ready to commit to a long-term investment, recognizing that cost benefits and productivity gains might take a few years to realize?
4. Risk Appetite
   Setting up a GCC carries certain risks, from regulatory compliance to talent acquisition challenges. Does the company have the resilience and appetite to manage these risks?

Alternatives to setting up own GCC

Some alternatives can offer similar benefits without as much commitment for companies not ready to establish a full-fledged GCC. Some options include:

1. GCC As a Service
   By partnering with a vendor, mid-market companies can access skilled resources without managing a physical setup.
2. Co-sourcing Models
   In a co-sourcing model, these companies can set up a smaller team to manage core functions while leveraging an external partner for more extensive operations. This hybrid approach offers more control than outsourcing but requires less capital than a standalone GCC.
3. Build-Operate-Transfer (BOT) Model
   In this model, a third-party provider sets up and operates the GCC on behalf of the Mid-Market Company. After a specified period, the mid-market company can transfer the operations entirely under its control.

Conclusion: Is a GCC in India Right for Mid-Market Companies?

Establishing a GCC in India offers mid-market companies’ significant cost, scalability, and talent access advantages. However, this path also presents challenges that require careful planning, cultural alignment, and an upfront investment that may not deliver immediate returns. GCC could be a valuable asset for mid-market companies with a clear strategic vision, operational readiness, and patience for long-term value realization. However, exploring alternative models may provide a more viable approach for those uncertain about their ability to manage the complexities.

Ultimately, each mid-market company must weigh the pros and cons regarding their unique needs, capabilities, and growth goals. While the decision to establish a GCC is complex, with proper planning and strategic alignment, it can be a transformative step in positioning for sustained growth in an increasingly globalized world.