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India’s Global Capability Centers (GCCs) are evolving from cost-driven operations to strategic innovation powerhouses, driven by advancements in artificial intelligence (AI) and digital technologies.

According to Sanjay Menon, Managing Director of Publicis Sapient India, GCCs are no longer just about executing ideas conceived elsewhere; instead, they are becoming hubs for ideation, product development, and strategic decision-making.

“GCCs are at a pivotal point where they are resetting their ambitions,” Menon said in an interview to Fortune India. “Historically, these centers were primarily about operating cost efficiencies, but that has evolved”. Now, companies are leveraging India’s talent pool, infrastructure, and ecosystem to drive innovation and create value for their parent companies, he said.

Menon introduced the concept of “innovation arbitrage,” where GCCs leverage India’s strengths to drive innovation and create value. This shift requires an integrated perspective, encompassing strategy, product thinking, experience design, engineering, and data.

The GCC market in India is substantial, with an estimated annual value of US$60 billion, growing at 30% per annum. Menon predicts that the GCC-driven services market will surpass the Indian private sector consulting market–projected to reach around US$18 billion–by the end of the decade.

Menon highlighted the importance of modernising legacy systems, leveraging technologies like Gen AI for customer segmentation and analytics, and driving hyper-personalisation when working with Indian private sector enterprises.

AI is expected to significantly impact GCC operations, automating codified processes and freeing human resources for more strategic decision-making. While AI may disrupt certain jobs, it will also create new opportunities for value creation.

Menon is optimistic about India’s potential to become a global innovation hub, driven by its robust talent pool, startup ecosystem, and government support. GCCs are expanding mandates beyond technology, with a growing focus on product management, leadership, and innovation.

As the GCC landscape continues to evolve, Menon emphasises the need for businesses to adapt to the pace of technological change. With profitability being a key focus, GCCs must prioritise integrated perspectives, leveraging strategy, product, engineering, experience, and data to drive innovation and value creation.