How are GCCs delivering value while optimizing cost and operations in a changing environment?

GCCs now have a seat at the elusive strategy table and are focusing more on value adding niche capabilities amid increasing overall cost.

In brief

• Focus on employee value proposition for talent attraction and retention has been the highest contributor to the overall cost, followed by investment in IT infrastructure to support niche services.
• Due to the hybrid working model, GCCs are optimizing facility and travel costs while operating at higher capacity utilization with enhanced virtual collaborations.

Globally, there has been a significant increase in company cost pressures across sectors as a result of geopolitical conditions, mounting inflation, rising salaries, investment in modern workspaces, and adoption of cutting-edge technology. The cost of running a Global Capability Center (GCC) has also steadily increased over the years, with GCCs now having to balance innovation spends and operational costs. 

Key trends and strategic imperatives across four areas of workforce, facilities, IT/communications, and travel, can help GCCs identify cost optimization levers and opportunities for improvement, as per EY’s latest GCC Cost and Operations Benchmarking Study 2023.

1. Focus on employee value proposition amid increasing cost and talent crunch :

Post-COVID-19, GCCs have witnessed an 18% increase in the overall workforce cost. Increased hiring and focus on employee value proposition for talent attraction and retention have been the highest contributors to this overall spike in the cost. Furthermore, investment in digital platforms for training new hires and upskilling existing employees has added to the overall cost.  

With GCCs pivoting to provide high-end services by hiring of niche skillsets, enhancing employee value proposition has taken the center stage. The key priorities to revamp the employee value proposition include increased focus on employees' wellbeing, employer brand, and providing a customized growth path to the employees. Some GCCs are also exploring the managed services model with build-operate-transfer kind of model for faster setup and scaling of required capabilities. 

2. Shifting to satellite offices in low-cost locations for lower rent and higher capacity utilization of hybrid model :

In the recent times, office rents in Tier I cities have significantly increased1  owing to supply constraints and shortage of Grade-A office spaces. With a hybrid working model, GCCs now have the option of managing their existing office space with increasing headcount, without necessarily expanding.

GCCs are looking forward to expanding into tier-2 cities or satellite centre and are also exploring Opex-based models for establishing these new facilities without upfront Capex investment. Co-working office spaces have a lower operating cost, they are becoming more popular for facility expansion. Professional office spaces are now available with flexible and negotiable lease terms like first right to refusal.

3. Pivoting on value-add niche services through high end computing systems, investments in cloud environment and enhanced security :

To support the rapid transition to a distributed workforce with minimal risk and optimum costs, GCCs are moving toward using an as-a-service model for both hardware and software requirements. Organizations are prioritizing innovation through intelligent automation, AI/ML/AR-VR, thereby reducing human intervention with enhanced quality. Furthermore, cloud adoption is helping GCCs realize significant cost savings by eliminating legacy technology stack and enabling real-time monitoring and reporting. Organizations are also proactively approaching virtualization, cyber security, data protection, serverless architecture and compliance programs.

4. Focus on reducing carbon emissions has led to investment in sustainable travel options :

During the pandemic, transportation and travel cost decreased significantly. With employees starting to come back to office in a phased manner, transport cost is expected to go back to pre-COVID-19 levels soon. 

In this backdrop, GCCs are leveraging route optimization applications, demand consolidation to further optimize travel expenses. Given increased climate consciousness, GCCs are partnering with travel partners investing in green initiatives to identify sustainable travel options. Majority of the GCCs today are investing in sustainable infrastructure, environment conservation and ergonomics, prioritizing facilities with LEED certifications and low carbon footprint.