**IT Firms Invest in GCCs for Strategic Growth**
In a strategic move to enhance their market presence, IT services firms are increasingly investing in consulting companies to gain quicker access to new clients and facilitate entry into India’s burgeoning $68 billion global capability centre (GCC) market, projected to reach $105 billion by 2030. Analysts suggest that acquiring stakes in these consulting firms allows homegrown IT outsourcers to begin offering technology services and secure support and maintenance contracts as soon as major foreign companies establish their GCCs in India.
On July 10, Mphasis made a significant investment of $4 million in Aokah, a US-based GCC advisory firm, acquiring a 26% stake. During a post-earnings discussion with analysts on July 25, Mphasis’s managing director and CEO, Nitin Rakesh, emphasized that this acquisition positions the company to assist clients in shaping their GCC strategies as they explore various operational models.
Similarly, Hexaware Technologies acquired SMC Squared for $120 million on July 17, citing the substantial revenue potential that SMC brings. Hexaware’s CEO, Ramakarthikeyan Srikrishna, noted that while SMC specializes in setting up GCCs, Hexaware aims to enhance operational transformation, particularly in leveraging AI capabilities, thereby strengthening customer relationships.
Both Mphasis and Hexaware reported revenue growth for the April-June period, with Mphasis achieving $437 million and Hexaware reaching $382 million, reflecting increases of 1.6% and 2.8%, respectively, from the previous quarter. These investments come at a time when GCCs present a complex landscape of challenges and opportunities. Persistent Systems’ CEO, Sandeep Kalra, highlighted that rising attrition rates may be linked to clients recruiting talent for their in-house tech hubs, indicating a competitive environment for IT firms.
While some IT outsourcers view GCCs as a threat due to Fortune 500 companies hiring engineers for in-house tech work, Mphasis’s Rakesh explained that investing in a GCC advisory firm was a strategic choice, as establishing a GCC unit internally was not feasible. This approach allows Mphasis to create new client engagements not only in GCC advisory but also in the execution of related projects.
In conclusion, the trend of IT firms investing in GCC advisory companies reflects a strategic response to the evolving market dynamics, enabling them to capitalize on emerging opportunities while navigating the challenges posed by increased competition and changing client needs.
**FAQ**
**What are Global Capability Centres (GCCs)?**
GCCs are operational hubs established by companies to manage their business processes and technology services, often located in countries with a skilled workforce, like India.
