Cost Centre
Also known as: Cost centre
A cost centre is a department, team, or function within an organisation that adds to costs without directly producing revenue — common examples include human resources, IT, legal, and administration. It is measured on how efficiently it manages its budget rather than on profit, in contrast to a profit centre, which is accountable for generating revenue.
The distinction matters because it shapes how a function is funded, judged, and prioritised. Support functions run as cost centres are under constant pressure to demonstrate value and control spend, which can affect investment decisions and how the function’s contribution is perceived by leadership. Being classified as a cost centre is not a criticism — it simply describes the accounting relationship, not the strategic importance, of the work.
For Global Capability Centres, the cost-centre-versus-value-centre framing is a defining strategic question. Many centres begin life justified purely as a cost-saving cost centre, delivering delegated work at a lower cost than the home market. As they mature — taking on global mandates, product ownership, and innovation — leading GCCs deliberately reposition themselves from cost centres to value or capability centres, arguing they should be measured by the business value and capability they create, not by labour arbitrage alone.
Frequently asked questions
What is a cost centre?
A cost centre is a part of an organisation that incurs costs but does not directly generate revenue, such as HR, IT, or a support function. It is measured on how well it controls spending rather than on profit.
What is the difference between a cost centre and a profit centre?
A cost centre incurs costs without directly generating revenue and is measured on cost control, while a profit centre is responsible for generating revenue and is measured on profitability. The distinction reflects the accounting relationship, not the importance of the work.
Is HR a cost centre?
HR is traditionally classified as a cost centre because it incurs costs but does not directly generate revenue. Many organisations now argue HR creates measurable value through retention, productivity, and capability, even if it remains a cost centre in accounting terms.
Are GCCs cost centres?
Many Global Capability Centres begin as cost centres justified by labour savings, but leading centres reposition themselves as value or capability centres over time. As they take on global mandates and innovation, they argue to be measured by business value created rather than cost alone.