Co-Creating the Future: Why JV-Based Outsourcing is Emerging as the Next Evolution of GCC Strategy

Executive Summary

For years, outsourcing has been the dominant model for global operations. It delivered scale, efficiency, and cost optimization. Yet as enterprises deepen their digital ambitions, they are increasingly asking for something outsourcing alone cannot offer - control, transparency, and capability ownership. At the same time, Global

Capability Centers (GCCs) once seen as cost-effective offshore back offices have evolved into strategic hubs driving analytics, transformation, and innovation. Sitting at the intersection of these trends is a model gaining momentum: JV-based outsourcing with a structured Build-Operate-Transfer (BOT) pathway.

This model forms a co-owned entity between the enterprise and the IT service provider, where operations are jointly governed often with the client appointing the CEO and the provider appointing the CFO ensuring alignment, transparency, shared  accountability, and strategic continuity.

This structure is proven.The HCL-State Street JV scaled to thousands of employees before transitioning fully to State Street ownership, with HCL continuing as long-term strategic partner. TCS and Nielsen, WNS and Aviva, and Infosys and Temasek have followed similar paths demonstrating that when governance and scale intent are well structured, JV-based outsourcing can evolve into high-performing GCCs that continue relying on the original provider even post-transition. 

Why Organizations Choose the JV Route

Enterprises today seek:

• Control over core processes and data

• Cost transparency

• Influence over talent and technology decisions 

• The ability to build internal capability gradually 

• A pathway to eventual full ownership 

The JV model enables GCC creation without the risk and effort of building from scratch.

For the Global Enterprise (GCC Builder), JV Offers:

• Strategic influence from Day 1 (board & leadership representation)

• Rapid scale using the provider's talent and delivery ecosystem

• Predictable cost structures and efficiency gains

• Clear path to buyout and internalization when mature

• Cultural and transformational alignment over time

For the IT Services Provider, JV Offers:

• 7-15+ years of relationship stability

• Embedded strategic relevance (vs. transactional outsourcing)

• Transformation, consulting, platform & managed services revenue

• Significant equity value realization at buyout

• Preferred supplier position post-transition 

Effectively, the provider becomes a co-creator not just a vendor. 

JV Works only when Designed and Governed well 

Ownership Models

Equity Split	Dynamics	Implication
49:51  (Client: Provider)	Provider-led operations	Faster decision-making
50:50	Balanced control	Requires strong reserved matters
51:49 (Client-led)	Client majority control	Provider must protect margin contractually

Control is shaped more by governance (board rights, reserved matters, CEO/CFO ratio) than equity share alone

Revenue and Profit Consolidation

If the provider does not hold a majority share, they would not be able to consolidate the revenue. So, entity structuring would be essential to address this concern.

The Economics: When JV Works and When It Doesn't

JV Works When:

• There is a long-term scaling roadmap

• Transformation not just operations is in scope

• Both parties align on investment philosophy

• Leadership continuity supports joint governance

JVStruggles When:

• The scope is too narrow to scale

• The deal is driven purely by cost savings

• Governance is unclear

• Margin protection is not contractually structured

Scale is the economic engine.

A JV that scales to 1,000+ employees becomes a strategic asset with enterprise value.

Lifecycle Snapshot

Stage	Benefits	Challenges
Build & Transition	Fast setup, transparent cost model	Requires trust and governance discipline
Operate & Transform	Efficiency, resilience, innovation	Performance alignment becomes critical
Buyout / BOT	Client gains ownership: provider monetizes equity	Provider must shift to transformation revenue

The Service Provider Dilemma: "Should We Do This?"

Buyouts can reduce long-term run-rate revenue but:

• Scale revenue is secure in the growth phase

• Transformation and consulting revenue increases 

• Equity exit generates significant capital value 

• Provider often remains long-term strategic partner post-buyout 

This is not revenue loss it is value shift: From transaction volume to strategic value creation and equity monetization.

Evaluating Fit 

Enterprises Should:

• Define strategic capability goals

• Assess control vs outsourcing comfort

• Confirm cultural alignment with provider

• Commit to scale roadmap (3 - 7 years)

• Align upfront on buyout timing and valuation method

Service Providers Should:

• Anchor pricing on transparent cost models

• Lock margin floors & indexation protections

• Apply transfer pricing for IP/platform usage

• Evaluate total value: services + transformation + equity exit

A JV succeeds only if it is financially and strategically balanced for both parties.

Closing Note

JV-based outsourcing is not just another delivery model. It represents a strategic evolution, one that blends the speed and scale of service providers with the control and capability aspirations of GCCs.

When thoughtfully designed and jointly governed, JVs create lasting value.

• Stronger operational resilience

• Deeper talent capability

• Transformational readiness  

• Shared long-term success 

The organizations that embrace co-creation today will be the ones defining competitive advantage tomorrow.