LLM Distillation is now new technique revolutionalising the way we are all going to use Generative AI and it is going to transform the agenetic AI world from the perspective of total cost of ownership for enterprises in implementing generative AI and embracing the value of Automation with AI. Recent innovative product DeepSeek-R1 actually is finest implementation of LLM distillation which has changed the perception of AI is costly.
What is LLM Distillation ?
It refers to the process of transferring the knowledge from larger complex model refer as Teacher model to a smaller and efficient model refer as Student model. The process of Knowldge distillation was first introduced by Geoffrey Hinton, attaching paper here. It was written in 2015. The goal of Distillation is to maintain the smaller model performance closer to teacher model by significantly reducing the computational resources for inference and deployment. Training smaller student model using the knowledge of teacher model. First teacher model generates soft labels. Soft labels are the right answers with probability as a result of knowledge it has from previous training iterations. These soft labels will help the student models with confidence levels rather than right or wrong answers. In addition to soft labels, student model also learns from ground truths. Both of these help student model learn faster reasoning patterns than memorising the answers. One the student model learns from teacher model it can be further fine tunes in task specifics and real world reasoning. These are smaller LLMs require smaller computational resources. They are efficient, cost savants are more and easy to scale.
There are challenges in Distilled models also. Loss of information and faster ensuring of generalization. It may not capture all nuances of larger teacher models.
Distilled models are better suited for Mobile devices, edge devices, low-latency and real time systems. For example DistillBERT is 40% smaller and 60% faster than BERT, which is Original Teachers model. Another example is DistillGPT-2, 40% smaller and 60% faster than GPT-2. It enables real time AI and less resource consumption.
Evolving GCCs into Global Growth Engines—requires a strategic approach that leverages technological advancements and fostering innovation. By prioritizing talent development and enhancing operational efficiency, organizations can position themselves to compete on a global scale and drive sustainable growth. Evolving GCCs into Global Growth Engines—Change in CEO Mindsets and Art of Possibility is a great noticeable thinking in the GCC Community. Last week I had a chance to be part of several crucial discussions held with Indo-American Chamber of Commerce, India, ISB Centre for Business InnovationBioAsia 2025and several esteemed GCC leaders. I am reflecting on a couple of my views on the art of possibility for future of GCCs.
The Global Capability Centers (GCC) model stands at a pivotal crossroads. To evolve from efficiency drivers to trusted growth engines, GCCs must unlock the potential of great talent, harness the vast data in their industry and external data sources, and capitalize on transformative Technologies such as Quantum computing and Artificial intelligence. The stakes are so high; leadership is so obsessed with following the crowds or fear of missing the GCC’s bus, but what is more needed now is a shift in thought process and embracing the shift as a change for catalysts of global growth. Future can be co-created by embracing the mindset of cost centers vs. profit centers which generate global growth, is crucial for GCC Leadership. Whoever quickly moves from Cost centers of Sponsorship to profit centers, which generate global growth, will remain as most Impactful GCCs in the current list of 1900 GCCs in India. GCCs were initially started as a cost arbitrage characterized by central technology engineering centers in the early 1990s. GBS was started initially as a shared services characterized by central delivery models to manage business functions that have transformed into internal tech and innovation fulfillment centers within global enterprises. When businesses combine the skills of technology and business services, they get a full set of skills that will help them become growth engines and switch from thinking like cost centers to becoming profit-making global growth engines.
GCC leaders are increasingly concentrating technology, positioning them as “mini-CTOs,”. Technology is seen as a key enabler of experience, valued performance. Now GCC Organizations fundamentally shifting away from traditional service delivery and becoming innovation power houses, leveraging the Generative artificial intelligence (Gen AI) for Strategic advantage and value creation. Key is moving the needle from quantity (Head Count) to valuing value with a mindset of perpetual enterprise value creation and profit by making these centers a global growth engines of Enterprise. Global capability centers led by technology and driven by a mindset of business innovation for global growth will be one of the greatest transformation stories for our time in the coming days. There is a clear call for a shift in mindset from optimization to monetization (to a focus on profit&Impact) thus the ability to propel enterprise growth.
A few Senior Executives who traveled from abroad and recently here in the town, with whom I had the opportunity to meet one-on-one, initiated my work on a new operating model. This model requires a tight alignment with enterprise goals and the right GCCs, transforming them into a larger Global Growth Enabler. This is achieved by driving frictionless change management and implementing proper Leadership driven organizational models for sustained success. We have a few matured GCC/GBS organizations in the country that are now emerged as a true global growth engine driving the real value for the enterprises. We need to understand and replicate while scaling a similar organization. Take these investments as long-standing value for enterprises.
Main pillars of the organization model will consist of leveraging a comprehensive technology stack for enabling the enterprises to have a total experience and real-time collaboration. We will adopt an AI-first (AI-F) approach to accelerate automation and Innovation not only enhances services but also elevates them to newer heights, surpassing the mere focus on productivity movements and automation savings. Fostering the culture of transformation and Innovation employees to embrace new behaviors aligns with this shift, thereby making them catalysts of productivity, innovation, and new growth within enterprises. The opportunity is immense.
India is very close to 60% of the world’s population living in Asia, including India, China, Indonesia, Pakistan, Sri Lanka, Nepal, and Japan. India is a default nearshore to this population. India has immense potential to guide and lead these new global growth engines. There is a potential for significant value creation due to the GCC Ecosystem evolving here in India. Most importantly, 250 million English-speaking first-time new employees are to be available by 2035 here in India, which is the greatest demographic dividend available for global enterprises to unlock for Global Growth Engine. As per the recent research done in the USA by leading executive search firms, India has surpassed Singapore in terms of attracting global executives, expats, and Indian-origin global executives with a track record in leading global businesses, technology, and also in areas of global impact and value. More global executives moving to India, Business Innovation and mind set of driving GCCs towards Global Growth Engines is a great opportunity for all of us to reinvent the future for GCCs. #CEOs #GCCs
The GCC Sector in India is expanding rapidly and according to leaders of Indian IT companies, GCCs are becoming increasingly relevant in the IT services ecosystem and thus they are enhancing their focus on them.
So what are GCCs?
Global Capability Centres (GCCs) or Global In-house Centres (GICs) are offshore units set up by MNCs in specific regions of the world like India to leverage talent, technology, and cost advantages. These centers act as strategic extensions of the parent organizations, housing specialized teams that undertake various critical functions. According to NASSCOM, GCCs deliver access to high-caliber talent and strategic, cross-functional capabilities and often serve as centers of technological excellence and innovation for the enterprise.
Credits: Team Lease
What they used to do earlier and what do they do now?
Earlier GCCs were seen as offshore units set up by MNCs to handle back-office operations such as finance, accounting, and data entry. This was done to lower the operational costs as the same task would cost more in the US than in a country like India.
Today, they have matured beyond cost-effectiveness and handle dedicated tasks such as analytics, R&D, and even core business operations. They have evolved into innovation hubs and Centres of Excellence (CoEs). GCCs are increasing their focus on developing domain expertise and specialization in niche areas such as artificial intelligence, machine learning, cybersecurity, and cloud computing. This specialization enables them to deliver tailored solutions to their parent organizations and gain a competitive edge in the market.
What are the advantages of GCC over outsourcing work to IT companies?
Increased level of control and ownership over operations.
Cost-effective in the long run, particularly when established in countries with lower labor costs.
Offshore captive centers offer heightened data security, as sensitive information remains within the organization’s control.
India has become a preferred destination for MNCs to set up their GCC. But why India?
According to the Economic Survey 2025, the number of GCCs in India has grown from approximately 1,430 in FY19 to over 1,700 in FY24, employing nearly 1.9 million professionals. Over the past five years, India has remained at the forefront of the global GCC expansion strategy, with more than 400 new GCCs and around 1,100 new units established.
India has established itself as a prominent player by leveraging its vast talent pool, which accounts for 28% of the global STEM workforce and 23% of the global software engineering talent.
What is the impact on the IT Industry?
“Indian IT services firms are viewing GCCs as a new business opportunity. This is a significant shift from their stance before 2020 when they primarily saw GCCs as competitors,” said Everest Group vice-president Hrishi Raj Agarwalla.
Half of the new GCCs established in the past one-two years have leveraged external IT and business process services firms for setup support, as per Everest Group data.
According to ANSR’s (the company that has been instrumental in helping set up around 135 GCCs in India) co-founder Vikram Ahuja, GCCs and service providers are not rivals. According to him, the core capabilities — data and AI, analytics, product engineering, etc. — remain in GCCs while specialized and legacy functions, optimizations, and project-based work will continue to be managed by IT service providers.
GCC-related operations have helped Indian IT majors increase their revenue in the domestic market
Infosys’s India revenue, which was 3.1% in the three months through September 30, grew 19.9% and 16% sequentially in the first and second quarters of fiscal 2025, after shrinking 15.4% in the January-March period.
For market leader Tata Consultancy Services, India led growth with a 95.2% expansion in revenue from the home market that accounted for 5.6% of total revenue.
Indian IT firms collaborate with GCCs by providing expertise, talent, and infrastructure support to help them scale efficiently.
Newer GCCs rely on IT firms for accelerators and talent development, while mid-sized and long-established GCCs partner with them to move up the value chain and grow faster.
IT service providers assist in setting up operations, acquiring talent, and integrating advanced technologies.
Companies outside the tech sector, facing challenges in attracting skilled professionals, turn to IT firms for innovation support.
What have Indian IT Leaders said about GCC and its impact?
Nachiket Deshpande, COO, LTIMindtree: Stressed that GCCs and Indian IT firms will coexist, with IT companies playing a key role in supporting GCCs through office setup, talent acquisition, and skill augmentation. He highlighted financial services as a key vertical for GCCs.
Srini Pallia, CEO, Wipro: Highlighted that Wipro has trained 230,000 employees in generative AI and has 44,000 advanced AI experts, enabling it to partner with GCCs for project execution.
C Vijayakumar, CEO, HCLTech: Stated that while certain tasks are better suited for outsourcing, others align well with in-house operations. He dismissed concerns about GCCs eating into IT firms’ market share, pointing out that the $1 trillion global system integrator market presents ample growth opportunities.
