IT vs. GCC debate: IT firms excel in services, not domain expertise, EPAM says

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US-based information technology (IT) firm, EPAM Systems, said Global Capability Centres (GCCs) are armed with greater efficiency and deeper industry knowledge than an IT services company. The comments assume significance as Infosys recently said that GCCs can’t match the knowledge that IT companies have accumulated over the years.

“I think IT services companies are good at IT services. It's not about industry knowledge, capability, and domain skill set,” EPAM’s president of global business and chief revenue officer (CRO), Balazs Fejes, told Moneycontrol.

EPAM cited an example of a large pharmaceutical company that it helped build a GCC in India, bringing senior executives from the industry into the country and establishing complete operations locally. "They moved and built a GCC in India, and they've shifted executives from the industry to set up the entire process. Now, the domain sits inside India," the EPAM spokesperson said.

While Infosys and similar IT companies may have strong technical capabilities, EPAM argued that this is not the same as having industry-specific knowledge. "Infosys will be able to… compete (on) how you engineer the data platform. But this is not what I'm talking about," he added.

In a bid to be called a GCC, the centre needs to have executives, decision-making power, and the entire business function shifting to India.

Lately, there have been concerns that GCCs are eating up the revenue of IT companies. However, many top executives from industry giants such as Tata Consultancy Services (TCS), Tech Mahindra, and Capgemini, debunked this apprehension.

Also read: IT companies say GCCs won't hit revenues, forge more tie-ups

EPAM believes that GCCs are unable to build capabilities on their own in India. Fejes said companies, who are building GCCs, are trying to go to the market and hire the relevant talent at a premium. Consequently, the aggressive move is creating more competition.

“But they don't have the processes. They don't know how to run an efficient centre, how to incorporate into the processes the leading/bleeding edge, either in terms of software development lifecycle or automation or AI (artificial intelligence) itself,” Fejes said.

The collaboration is about establishing a GCC and bringing in the right capabilities as more business functions are moving to these centres. “Also, bring capabilities regarding building, running, optimising and automating them," he added.

As GCCs grow in significance, they continue to rely heavily on external IT services for their scaling and project needs, he said. "Your clients, stakeholders, customers are all in the GCC. You need to treat them like any other customer globally," he added.

Eventually, GCCs will plateau like any other enterprise organisation after riding the crest. "On the contrary, there is an open headcount in an IT company. We are ready to serve our clients when they need scaling up to execute certain projects," he added.

The company considers captives and GCCs as two distinct entities. GCC is an evolution of a captive centre. "Entire business functions run, budgeted, and managed out of these GCCs. This explains the evolution,” Fejes said.

He attributed the evolution to an economic shift after the Covid-19 pandemic, as firms wanted to drive insourcing, cost reduction, and economic targets. “A GCC solution is the need of the hour. Despite the nomenclature of calling something as a GCC, in reality it's still a captive,” Fejes said.

Most IT firms are building and running GCCs for companies in order to optimise cost and talent density proportion.

As the debate rages on revenue and capability,  how the partnership plays out going forward remains to be seen.

Also read: IT companies set up dedicated GCC Strategic Business Units as demand booms