In recent times, enterprise focus has centered around cost arbitrage, operational efficiency, and digital transformation. Global Capability Centers (GCCs) served as support centers, integrating talent, navigating business challenges, and adapting to changing customer expectations for parent companies. However, with rapid technological advancements, shifting geopolitical dynamics, and the demand for enhanced scalability, enterprises are now compelled to rethink their operating models.

The COVID-19 pandemic further accelerated this shift, acting as the perfect storm of opportunity that brought onto the surface the prospects of remote work and distributed leadership and the scalability that GCCs can offer (McKinsey & Company).

Recent insights reveal that, when asked about the expected maturity of their capability and innovation hubs by 2026, GCC leaders placed high scores to customer experience and technology-led centers (+14%) surpassing all other variables (BCG). This marks a clear progression of GCCs, which has grown beyond execution centers, transcending into talent, innovation, and R&D powerhouses.

This article explores the factors driving the continued growth of GCCs and the role R&D plays in accelerating GCC adoption:

1. Access to Global Talent and Expertise

A key factor that makes GCCs invaluable is their ability to provide unparalleled access to global talent. Modern capability centers are able to leverage a nation's natural advantages, be it labor cost advantages or supporting industrial infrastructure, with the new emerging technology markets in regions like Eastern Europe and South Asia, organizations are able to access highly skilled resources often at a fraction of the cost in the homebase. Countries like the Philippines, Pakistan and Bangladesh are quickly emerging as potential bases for setting up R&D centers, e.g. Pakistan currently has the 4th highest enrollments in the world for higher education in STEM subjects—642,562 STEM enrollments in 2023 (The News International).

GCCs with an R&D focus serve as a gateway for innovation. These structures are able to enable enterprises to tap into specialized talent pools using central or scattered deployments, allowing recruitment for frontier technology such as AI, data science, and advanced engineering. This allows enterprises to swiftly drive innovation-led outcomes by bringing diverse perspectives into R&D processes, accelerating product development, and enhancing their competitive stance in the global markets.

2. Redefined Leadership Structures

In addition to making global talent accessible, GCCs are reshaping leadership progression and R&D-focused talent structures. While traditional capability centers were focused on service delivery through junior roles, with up to 70% of positions filled by entry-level staff in the past decades (International Banker), these centers have drastically evolved into innovation hubs, often driving key decisions through research and insights—flipping the traditional service hub model.

Modern GCCs are therefore purpose-built for scaling capabilities by disrupting the status quo and creating new breakthroughs. These models are built on top of frameworks like the Diamond Team Structure (DTS), emphasizing specialized training, centralized collaboration, and leadership progression at core, central, and top layers. This three-pronged approach enhances operational efficiency and cultivates a steady pipeline of leaders operating at the cutting edge of innovation. By synchronizing these skills across regions, GCCs empower enterprises to drive agile and effective R&D initiatives—fostering growth across teams of all sizes.

3. Technological Innovation Enablement

Forward-thinking enterprises have achieved up to 25% cost savings by transforming their GCCs into robust Global Value Organizations (GVOs), driving operational efficiencies, and prioritizing new product ideation and intellectual property (ISG News).

Modern GCCs have evolved into the digital twins of parent enterprises, embedding critical business functions and aligning them closely with strategic goals. This transformation empowers GCCs to drive technology-led innovation by leveraging robust synergies across departments, enhancing customer experience, optimizing operations, and reducing costs. Moreover, GCCs bring essential domain expertise and technical capabilities to drive value-driven outcomes.

The current automation drive under Industry 4.0 is a prime example of this strategic alignment. By leveraging in-house expertise, GCCs are able to drive transformation by infusing cultural and structural knowledge of the organization with cutting edge technology in order to achieve organizational objectives. As most organizations grapple with the realities of a rapidly changing digital ecosystem where AI and ML are now the primary drivers of sustainable advantage, harnessing the capabilities within the domain is key to turning outcome-oriented innovation into tangible reality.

A remarkable 80% surge in new GCCs prioritizing AI/ML underscores the significance of these technologies in driving innovation (NASSCOM). GCCs’ ability to incubate and scale these technologies while investing in diverse talent and comprehensive upskilling programs to foster agile, innovative cultures, position them as critical enablers of enterprise growth and competitiveness.

That’s not all. GCCs unfold another layer of innovation through the co-location of product management expertise and collaboration with emerging start-up ecosystems. Given the abundance of engineers and operators within these centralized hubs, this strategic placement enables enterprises to remain at the forefront of their innovation agenda by harnessing emergent tools and technologies, aligning high-quality tech talent, and providing the ecosystem to proof test and scale enterprise capabilities.

With over 50% of new R&D centers being established as GCCs, these centers are reshaping the global business landscape, driving innovation across industries such as financial services, telecom, and consumer goods (CIO.com). In addition, the GCC ‘As-a-Service’ model is emerging as a standalone offering, where enterprises can leverage GCCs to drive their digital transformation initiatives.

Moreover, the involvement of GCC service providers, through models like Build-Operate-Transfer (BOT) and assisted setups, has further accelerated the adoption and success of these innovation and R&D hubs, equipping enterprises to capitalize on existing skills and technological capabilities while efficiently scaling innovation and research endeavors without resource limitations.

Global Capability Centers (GCCs) have evolved into indispensable R&D powerhouses, enabling enterprises to drive innovation, optimize operations, and scale rapidly. This transformation marks a pivotal shift in the global landscape, as organizations increasingly embrace GCCs not just for cost efficiency but to access global talent and advanced technologies. With streamlined leadership structures, GCCs are uniquely positioned to lead the next wave of enterprise growth.

As GCCs set the stage for future frontiers, forward-thinking enterprises must carefully assess their options and align with partners equipped with cutting-edge technologies and unmatched talent depth to support their strategic goals and bolster their R&D capabilities.

If you’re unsure where to begin, explore our latest white paper, which offers in-depth insights into advanced GCC models designed to build and scale your R&D capabilities through a customized Global Capability Center.