Global capability centers (GCCs) have shifted from being cost-saving mechanisms to becoming strategic assets for multinational enterprises. These centers now serve as hubs for IT support, shared services, research and development and process optimization. The rapid advancements in AI – particularly generative AI (GenAI) and agentic AI – present a new frontier that can transform a GCC into a powerhouse of innovation and productivity.
What operating model changes do you need to make to build, extend or monetize a GCC? And how can you optimize the use of AI?
The Strategic Importance of GCCs and Key Growth Drivers
GCCs have become indispensable. Why? There are a few reasons: globalization, the digitization of operations and the advancement of technologies that support centralized expertise in areas like finance, IT, HR and data analytics. A strategic GCC approach can enhance operational efficiency and allow enterprises to quickly adapt to changing market dynamics.
Our data show that enterprises look to GCCs for a variety of reasons. Top among them is:
- Access to global talent: GCCs enable enterprises to leverage skilled workforces in strategic global locations, providing specialized expertise in various fields at a competitive cost.
- Operational efficiency: Standardizing processes across geographies helps maintain high quality and provides an opportunity to reengineer processes for efficiency.
- Strategic flexibility: GCCs can be scaled to align with business demands or monetized for financial reinvestment, providing organizational agility.
Figure 1 below shows how enterprises responded when we asked them to name their most important objectives for managing functions through a GCC.
Source: ISG Market Lens, 2023 GCC Study n=301
Figure 1: Enterprises Objectives for a GCC
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Building, Extending or Monetizing GCCs
Building a New GCC
To create a new GCC, an organization must navigate significant challenges, including initial infrastructure investments, recruitment and compliance with local regulations. Cultural alignment with the parent organization can be a challenge but is critical for seamless collaboration.
Risks and mitigations include:
- High initial investment: Establishing a GCC requires capital for facilities, technology and staff. Partnering with a service provider can offer a method to conduct a build-operate-transfer style managed-services deal, or it can accelerate the creation of a hybrid GCC. A hybrid GCC combines in-house control with external expertise to speed up readiness and access specialized skills.
- Regulatory compliance: Operating in different regions involves navigating various local laws, particularly related to labor, tax and data security.
- Infrastructure requirements: A strong investment in scalable cloud infrastructure, advanced data management tools and AI capabilities is essential for positioning a GCC as a future-ready and competitive asset.
Extending a GCC
Our data shows that, of large enterprises with existing GCCs, 75% have expanded or expect to expand (see Figure 2). Expanding an existing GCC allows an organization to amplify its strategic initiatives, such as digital transformation and innovation. Integrating AI tools and technologies is vital to maintaining their relevance and enhancing productivity.
Implementing collaboration tools that foster seamless interaction between a GCC and central or regional offices is a strategic priority to align efforts and drive cohesive innovation.
Figure 2 below shows how enterprises responded when we asked them their top reasons for expanding a GCC. The top three responses include cost optimization, improved labor costs and greater workforce flexibility and productivity.
Source: ISG Market Lens, 2023 GCC Study n=301
Figure 2: Top Reasons to Expand a GCC
Monetizing a GCC
Monetizing a GCC through strategic sales, partnerships or outsourcing agreements allows an enterprise to reinvest capital into core business areas while maintaining operational quality through managed services.
Monetization benefits include:
- Capital reallocation, which frees resources for R&D and new product development.
- Access to expertise via strategic partnerships, which provide specialized skills without losing oversight.
- Scalability in the form of outsourcing to expand operations by leveraging external infrastructure and services.
CIOs should carefully evaluate the market potential of a GCC, considering partnerships and joint ventures that balance control and operational quality while ensuring seamless service continuity.
Our research shows that, when the key reasons for expansion or setup are not achieved, organizations tend to exit their GCC. For this reason, it is critical to evaluate key assumptions about labor rates, staffing retention, real estate, travel and productivity to make informed decisions.
Operating Model Changes for High-Performing GCCs
Governance and Oversight
High-performing GCCs tend to have operating models that encourage standardization of processes and autonomy for business decisions. Centralized governance promotes consistency across locations but can stifle local innovation. Decentralized models allow more flexibility but may result in operational inconsistencies. A federated model that balances central governance with local autonomy is ideal for ensuring alignment while encouraging regional agility. All three models pose challenges that require strong communication with business units and the GCC.
Securing data across multiple locations is complex, especially with varying regional regulations. A cohesive data governance framework is essential to uphold data integrity and compliance across GCC operations. This is especially critical as GCCs are typically located in regions where businesses have few operations and relatively little exposure to the local regulatory environment. Extra care is needed to balance the needs of the data from the GCC itself and the data rights pertaining to the parent organization when that data is being managed, used or stored at the GCC or in the GCC’s country.
Talent Management and Cultural Integration
High turnover rates in certain regions can challenge operational continuity. Competitive compensation, career advancement paths and an inclusive work culture are essential for retaining talent. These can be compounded by the relatively fast career advancement opportunities for junior employees at managed service providers. Ensuring that your roles are competitive and designed around talent/skill levels will ensure turnover doesn’t hamper the business case for the GCC.
Harmonizing the culture of the GCC with the culture of the broader enterprise is crucial for smooth collaboration. Time zone differences and varied communication norms can disrupt operations and impede synergy. Investing in cross-cultural training and aligning practices ensures more effective integration.
Scalability and Technological Investments
To scale effectively and sustain high performance, a GCC requires investments in state-of-the-art cloud services, data analytics platforms and AI infrastructure. These investments not only position a GCC as an industry leader but also support rapid adaptability to new technologies and business needs.
The integration of GenAI, including machine learning platforms and large language models (LLMs), is key to transforming a GCC into a center of innovation. These technologies enable intelligent automation, process mining and data-driven insights that elevate a GCC’s role from operational support to strategic innovation. Because many GCC setups come with the possibility of reengineering processes, enterprises should focus on technologies that enable those processes now and prepare for continuous improvement. Avoid letting a GCC become “set it and forget it.”
The Impact of GenAI on GCC Productivity
GenAI as a Catalyst for Transformation
GenAI and agentic AI – AI systems designed to act autonomously, make decisions and initiate actions to achieve specific goals without direct human intervention – have the potential to fundamentally change business processes in a GCC. Automating routine tasks, improving predictive analytics and enabling real-time decision-making can enhance productivity and optimize resource allocation. Process mining, powered by AI, provides valuable insights into workflow efficiencies but requires expertise that many GCCs currently lack.
The value in implementing an AI strategy lies in agentic AI’s ability to streamline operations, enhance decision-making and drive innovation by automating complex tasks and learning from data in real-time. By empowering organizations to scale and adapt dynamically, agentic AI can unlock new efficiencies and create competitive advantages in rapidly evolving markets.
While the motivation to adopt a GCC tends to focus on labor-rate savings, organizations view opportunities for AI on a more indirect basis. The idea that a GCC can provide both near-term financial relief and AI to ensure long-term efficiency, innovation and growth makes a particularly compelling strategy.
Figure 3 below shows the primary motivations for adopting AI, including business growth, cost savings and customer service. Top among them is efficiency.
Source: ISG Market Lens, 2024 AI Study, n=200
Figure 3: Primary Motivation for Adopting AI
The operational advantages of using AI in a GCC include:
- Intelligent automation that automates data analysis, report generation and other back-office tasks, freeing up human resources for strategic work.
- AI-augmented decision support that empowers teams with predictive and prescriptive analytics to make better business decisions.
- Faster development cycles that accelerate the development and deployment of new products and solutions through AI-driven processes.
Challenges in Integrating GenAI: Investment and Expertise
Implementing GenAI requires an initial investment in technology infrastructure and workforce training and also an investment in the time to experiment and iterate. There are limited pools of experience that organizations can pull from, and we recommend that organizations try to be agile in their adoption of new tools.
What this likely means is that there will be many smaller use cases, and that organizations will need to be thoughtful about where to push for scale and wider adoption. The deployment of AI must be approached with clear guidelines around data ethics, transparency and bias mitigation. GCCs need robust policies that ensure responsible AI usage and that are aligned with corporate values and regulatory standards. This ties in directly with the requirement that GCCs take a very active role in data governance.
GCCs are now a cornerstone of global IT strategies, offering opportunities for growth, operational efficiency and innovation. However, realizing the potential of a GCC requires thoughtful adaptation of operating models to integrate AI and other advanced technologies. Investing in scalable infrastructure, enhancing data governance, fostering cultural alignment and leveraging strategic partnerships for expertise are all essential steps. By addressing these challenges and prioritizing strategic planning, CIOs and business leaders can build, extend or monetize GCCs to become high-performing, future-ready centers that drive value and innovation.
About the authors
Steve Hall
As the leader of ISG’s business in EMEA and an Executive Board Member, Steve provides strategic insight and advice to help ISG’s clients solve their most critical business challenges, helping them adopt and optimize the technology and operating models they need to compete successfully. In particular, he uses his long experience and broad expertise to challenge and inspire them to think about their risks and opportunities in new and unexpected ways.
Past achievements for clients
Steve leads his team’s engagement with clients with an industry-recognized and highly valued perspective on the most important trends in business and technology. He asks and answers the big questions: Why do you need to transform? What’s your best way forward? What do you need to accelerate? And where should you invest your technology dollars to make it all happen?
Among his many client success stories, his ability to take in the big picture, define the problem and connect the dots to the right solutions helped one legacy postal and shipping giant transform itself into a modern logistics powerhouse. He also guided a global energy industry leader through a complex operating model and IT provider transition, helping them see past the obvious cost cutting measures to identify the root causes of their challenges—and delivering savings far beyond what they had imagined.
