From Outsourcing to Ownership: How GCCs and AI Are Reshaping the Indian IT Industry

For decades, India has been a global hub for outsourced IT services, with international companies relying on Indian talent to handle everything from customer support to software development. However, the industry is now seeing a significant shift. Multinational corporations are moving from outsourcing models to establishing their own Global Capability Centres (GCCs) in India. At the same time, progress in Artificial Intelligence (AI) is transforming how work is done across various sectors.

Impact of GCCs on the Indian IT Industry

GCCs are rapidly replacing traditional outsourcing models. India now hosts over 1,800 GCCs, employing 1.8 million professionals and generating $65 billion in revenue . Multinational firms such as McDonald’s, Bupa, Tesco, and Google are shifting operations from Eastern Europe to India due to talent saturation, geopolitical instability, and cost inefficiencies .

These GCCs are no longer back-office support units. They now handle AI development, real-time analytics, and product engineering, becoming strategic innovation hubs. For example, Tesco’s Bengaluru GCC saved millions annually by deploying AI-based refrigeration monitoring . GCCs are absorbing core functions like R&D and digital strategy, which were previously outsourced to Indian IT service providers.

This shift is intensifying competition for top-tier talent and prompting Indian IT firms to reposition themselves as ecosystem partners rather than primary service vendors.

Impact of AI on the Indian IT Industry

AI-driven automation is triggering a structural reset in India’s IT sector, particularly impacting mid-level roles such as manual testers, L1 support engineers, and basic coders. Billing models are also undergoing a fundamental shift. Traditional FTE-based (Full-Time Equivalent) and Time-and-Material (T&M) pricing structures are being replaced by outcome-based and AI-unit consumption models. Agentic AI systems, which autonomously execute tasks using multiple LLMs, are driving this change by reducing human dependency in enterprise software delivery.

Other Things to Watch Out for in the IT Industry

To analyse the shift in the IT industry due to AI, a few other factors to consider are:

• Collapse of Legacy Employment Models

Legacy employment structures in Indian IT, built around pyramid staffing and tenure-based compensation, are collapsing under pressure from automation and changing client expectations. TCS’s decision to lay off 12,000 employees and freeze global salary hikes reflects a broader industry trend. Infosys and Wipro have also slowed onboarding of freshers, while mid-level roles face redeployment challenges due to skill mismatches .

Attrition rates at Tier-1 firms have worsened, reaching 20.1%, while mid-tier firms report improved rates at 10.8%, indicating a talent migration toward leaner, domain-focused organisations. Compensation is increasingly tied to expertise and value creation, not tenure or headcount.

• Competitive Pressures

India’s dominance in IT services is being challenged by emerging markets like Vietnam and Mexico, which offer cost-effective alternatives and geopolitical stability . Mexico’s proximity to North America and trade agreements like United States–Mexico–Canada Agreement (USMCA) make it attractive for nearshoring IT and BPO operations.

According to S&P Global Ratings, tariff disruptions and supply chain diversification are prompting multinational firms to expand outside China, with Vietnam and India emerging as key contenders. However, Vietnam’s lean cost structure and rising digital capabilities pose a direct threat to India’s export-led IT model.

• Services to Product-Led Innovation

India’s IT firms are under pressure to transition from service delivery to product-led innovation. Despite generating over $245 billion in annual revenue, Indian IT companies lack globally recognised software products . Nasscom reports that firms are now shifting toward product-aligned delivery models, driven by client demands for agility and innovation .

Models like Services-as-Software (SaS) are gaining traction, where services are embedded into AI-infused platforms that deliver outcomes autonomously . Although a few companies are leading this shift by offering modular and scalable solutions, implementation remains limited. Most large firms still rely on traditional service contracts, and mid-level talent struggles with redeployment due to inadequate skilling.

Challenges the IT Sector Faces in the Transition

Despite progress in the IT sector, several challenges remain:

• While India has a large workforce, only a fraction is currently skilled in AI, advanced analytics, or systems architecture. Bridging this gap requires collaboration between industry and academia.

• Traditional IT companies and even some GCCs may find it difficult to transition their workforce towards AI-based operations. Resistance to change, legacy systems, and rigid management structures can slow down progress.

• As AI becomes mainstream, questions about data privacy, algorithmic fairness, and AI governance are becoming important. Indian firms need to ensure that their AI systems are ethically developed and compliant with global standards.

Conclusion

India’s IT industry is moving from being an outsourcing destination to becoming a hub of innovation through GCCs and AI. While this transition brings opportunities for value creation and global leadership, it also presents new challenges, reskilling the workforce, adopting outcome-based models, and ensuring ethical AI use. For Indian IT to stay competitive, continuous innovation, talent development, and regulatory adaptability will be key in this fast-changing global technology landscape.

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