The mid-tier playbook gets a new chapter on GCC growth

These days, Agentic AI just trumps the noise levels around GCCs. Yet, the volume levels continue to focus on the location and scale of the centers rather than on transformation and innovation. The strategic question is whether GCCs are really pivoting from a focus on cost reduction and labor arbitrage to value creation and technology arbitrage. Similarly, for service providers, are GCCs a lever for portfolio expansion and a growth driver in a depressed market?

By driving M&A for a GCC specialist consultancy, SMC Squared, Hexaware is upping the ante on its peers. Thus far, we have seen partnerships such as Accenture with ANSR, KPMG with Gloplax, and Deloitte with EmbarkGCC. In parallel with Hexaware, Mphasis announced taking a 26% stake in Aokah, adding more mid-tier colour to those discussions. Another mid-tier peer, Coforge, indicated that GCCs contribute around 10% to its top line.

 At the same time, almost all the Indian majors formalized their GCC practices and appointed new business unit heads over the last 12 months, indicating the shift in relevance for most providers. As the broader market for IT Services remains subdued, GCCs offer a silver lining. It is no longer a question of whether you offer GCC services, but where you aim in the value chain. PAC sat down with the folks at Hexaware to discuss the changing market dynamics.

With SMC Square, Hexaware aims to pivot at the intersection of platforms, AI, and GCCs

When we peel back the layers on Hexaware’s acquisition of SMC Squared, it becomes clear that this isn’t just another tuck-in deal in the crowded IT services landscape. Instead, it reflects a deliberate pivot that speaks directly to the themes outlined in PAC’s framing of GCCs: the shift from labor arbitrage to value creation, the reimagining of GCCs as transformation engines, and the growing appetite among mid-tier providers to punch above their weight in the GCC ecosystem (for details, see: The GCC Paradox). Hexaware executives reflected that they “see two megatrends reshaping the industry: the platformization of IT services and the infusion of AI into those platforms. At the same time, clients are rapidly expanding their GCC footprints. The opportunity lies at the intersection: GCCs can no longer be about simply filling seats. They must become environments where digital and human talent come together, with enterprises having real skin in the game — ownership and control of assets that are central to their transformation.” In Hexware’s view, platforms and AI will disrupt GCCs and offer a clear demarcation from traditional captives, shared services, or GBS setups.

Hexaware is gunning for the upstream funnel for GCCs

With SMC Squared, Hexaware decided against building out capabilities organically, as they felt it would take too much time and risk missing the current market opportunities. Thus, they gain access to a solid set of US organizations that can reference their GCC journey. They include Ecolab, DigiKey,  and Papa John’s. Several SMC Square clients are actively starting near-shore opportunities in Central and South America as a multi-location GCC strategy. Now, after the acquisition, SMC Square’s client focus will expand to Europe, the Middle East, and Asia. The portfolio elements cover the whole GCC gamut, from GCC-as-a-service to build-operate-transfer (BOT) GCC to Managed GCC, while the commercial models focus on OpEx-only approaches, with flexible and fast start-up positions leveraging SMC Squared’s innovation spaces and core leadership team oversight

While all the Indian majors have now formalized their go-to-market for GCCs, Hexaware is aiming higher in the value chain to be involved earlier in the decision-making, rather than waiting for RFPs. Thus, the expectation is to land before the tech scope is defined. While SMC Squared’s reference clients, such as Ecolab or Topgolf Callaway Brands Corp., have high retention rates, indicating successful transitions, the broader market needs to learn from customer journeys where organizations have made the shift from labor arbitrage to value creation or transformation through innovative AI approaches.  While inserting AI drivers into new GCCs is now commonplace in the SMC Squared narrative on “GCC 2.0”, PAC would encourage Hexaware to expand those narratives to demonstrate outcomes such as value creation and transformation. Hexaware pointed to the upsell potential around AI for SMC Squared clients, yet didn’t convey inflated expectations of agents taking over service delivery any time soon. Whereas we see startups like Sash.Ai develop agents tailored to GCCs, the expectation of a pivot from labor to technology arbitrage, where agents run the majority of client interactions, is curtailed by the immaturity of multi-agent orchestration.

The GCC enhanced mid-tier playbook

The discussions with Hexaware and SMC Squared boiled down to the reasons why mid-tier providers are outgrowing the market. As Figure 1 outlines, the mid-tier playbook is based on the willingness to innovate ahead of the market and deliver services in a platform-centric go-to-market. As the mid-tiers have fewer legacy contracts to defend, they can be much more aggressive in cannibalizing existing revenues. The same applies to GCCs when they transfer back to clients. In Hexaware’s view, the experiences of cannibalization from platform services instil the same mindset for GCCs. Blending niche depth with vertical micro-specializations with ER&D and product engineering are the other strategic levers of successful mid-tier providers. The new chapter in that playbook can be upselling those capabilities in GCC ecosystems. However, the goal should be to move upstream beyond hiring and real estate. With the squeeze on H-1B visas, these dynamics are likely to accelerate and push even more talent towards GCCs. To add more substance to this playbook, PAC would love to hear from both mid-tier providers and organizations on their GCC journey and how they pivot to value creation and technology arbitrage.

Figure 1: The mid-tier playbook