Indian IT companies acquire GCCs to boost revenue as growth falters

IT services firms are targeting GCCs for scale, steady revenue and domain expertise as weak organic growth and AI put pressure on traditional contracts

With organic growth in the slow lane, Indian information technology (IT) services companies are turning to acquisitions for growth, increasingly targeting global capability centres (GCCs) that offer scale, as well as opportunities to move up the value chain.

 

That move is a win-win for both sides; services companies have been under sustained revenue and margin pressure over the last few years due to weak macroeconomic conditions and volatile geopolitics, while many GCCs have failed to mature beyond a certain level despite operating for a long time, leading to higher operating cost and internal inefficiencies. These deals, thus, provide the IT industry an inorganic method to boost revenue, besides the other capability acquisitions they have been doing for the last year.

 

Some of the major deals executed this year include Tata Consultancy Services (TCS) buying the GCC operations of US consumer electronics retailer Best Buy, HCLTech buying Guardian Life GCC and Wipro buying Mindsprint, the IT unit of food and agriculture business company Olam. The first deal is reportedly worth ₹2,000 crore, while the Wipro deal is expected to get about $1 billion (approximately ₹9,625 crore at the current exchange rate) over the next eight years. 

 

A major advantage of these deals is these are typically long term five year ones, which give companies assurance of steady inflowing revenue at a time when legacy deals are under pressure due to the impact of artificial intelligence (AI). Also, AI-led deals are not steady and big enough to offset the diminishing revenue coming from the traditional revenue sources.

 

Pareekh Jain, chief executive officer (CEO) of EIIRTrend, said these deals should be viewed primarily as long term consolidation, which will provide productivity benefits. “Such deals help the services companies do more client mining and be in line for other vendor consolidation projects.”

 

From the GCC perspective, the deals make sense. A significant number of them have failed to become strategic hubs for their parent companies even after years of operations, leading to stagnation, layoffs, shutdowns or buyouts.

 

The reasons are multifarious; from a change in corporate sponsorships and the perception of the department as a cost centre, to a lack of strong local leadership and workforce growth without a corresponding increase in specialist skills.

 

A starker data point is from Embark and UnearthIQ that says 30 per cent of the GCCs set up since 2021 have plateaued, which translates to about 150 GCCs in the last five years, and more than 500 centres that are not fully realising their potential.

 

“For the IT services companies, this is also a response to slowing organic growth. AI is putting pressure on traditional effort-based contracts and clients increasingly expect more output for less money, so acquiring an established capability center with a multi-year relationship attached give providers greater revenue visibility while also bringing domain expertise, IP and people who already understand the client environment,” said Phil Fersht, founder and CEO of HFS Research.

 

GCCs once emerged as a direct threat to the bread and butter business of the services companies between 2015 and 2020 as they insourced a large portion of their technology work, which was otherwise outsourced. They still remain so, but the other party has also developed capabilities with AI-led offerings and solutions to assist their digital transformation and in the most extreme cases, take them under their umbrella.

 

That is why these companies have also opened their GCC business units. For example, TCS created a dedicated Global Value & Innovation Centers business this year to build and transform AI-native GCCs, while Infosys now has an AI-first GCC model covering setup, operation, transformation, and carve-outs, and says it has worked on more than 100 GCC engagements. Cognizant is also actively offering greenfield setup and build-operate-transform-transfer models.

 

But greenfield GCCs are still not the forte. India had more than 101 greenfield GCCs in 2025, but the share of Indian IT services continued to be less than 15 per cent, with more than 60 per cent of the market share belonging to ANSR, Zinnov, Aeries Tech, and the Big 4.

 

“While these deals do provide near-term growth visibility, the typical savings involved can cause pressure later, which is key to watch. In the past, deals like Pramerica and Postbank for TCS had annual revenue run rates that fell by 70-80 per cent over the duration of the deal,” Ambit Capital wrote in a note.