Tier II-III Cities in India Become Pivotal in Scaling Up GCCs GCCs are increasingly moving to tier-II cities due to factors like labour arbitrage, availability of human resources specially engineering talent, and cost factor

India's tier-II and tier-III cities are becoming pivotal in scaling up global capability centers (GCCs) due to significant cost advantages and access to a growing talent pool. Tier II-III cities accounted for 7 per cent of the total GCCs in FY24, up from 5 per cent in FY19, according to the latest 'India GCC Landscape' report by Nasscom-Zinnov.

GCCs, earlier known as global in-house centers or captives, emerged in the early 1990s as offshore units of large multinationals (MNCs) such as General Electric, Texas Instruments, Citigroup, and American Express, to perform designated technology operations. Over the years, they have become an integral part of their parent organizations, mirroring their tasks and almost becoming like digital twins of their headquarters.

While new GCCs prefer tier-I cities, established GCCs expand to tier-II cities. Ahmedabad, Mysuru, Vadodara, Nashik, Tirunelveli, Bhubaneswar, and Coimbatore have emerged as key hubs for expansion of the established GCCs. More than 140 GCCs are estimated to be established in these locations.

There has been a 30-40 per cent increase in demand for the workforce across sectors in tier-II cities, according to GCC consulting firm ANSR. Currently, 11-15 per cent of India's tech talent resides in tier-II and tier-III cities. Tier-II cities typically have 10-35 per cent lower cost of living as compared to the nearest tier-I location. Also, talent pool costs are 25-30 per cent lower than those in mature hubs, with 50 per cent cost savings in real estate rentals compared with mature hubs.

"Post-Covid, talent has become more distributed, and we are seeing a growing opportunity in tier-II cities as emerging GCC destinations. These locations offer a compelling value proposition—enhanced quality of life, lower cost of living, and less competition for talent. However, there are still challenges to address, particularly around infrastructure and connectivity, with limited access to international airports being a key hurdle. While tier-II cities are evolving, we need to continue improving these aspects to fully unlock their potential as strategic GCC hubs," said Vikram Ahuja, Co-founder ANSR and CEO Talent500.

Some of the GCCs set up in tier–II and tier–III cities in the last five years include Pernod Ricard, ThoughtSpot, o9, Mahale, Flex, First American, and Metso. Among them, Metso, a sustainable energy company has expanded presence to Vadodara; spirits maker Pernod Ricard has set up presence in Nashik; and First American has set up a centre in Salem in Tamil Nadu.

"GCCs are increasingly moving to tier-II cities due to factors like labour arbitrage, availability of human resources specially engineering talent, cost factor as compared to tier-I cities, recent infrastructure development in tier-II cities by the government, and social and cultural factors as tier-II cities becoming more cosmopolitan," said Vivek Rath, National Director- Research, Knight Frank India.

In Expansion Mode

In October, Arctic Wolf, a US-based security operations company, launched its first GCC in Bengaluru. The new India office location will play a pivotal role in scaling and advancing the Arctic Wolf platform, along with its entire suite of security operations solutions.

"While our current focus is on expanding in Bengaluru, moving into India's smaller cities is certainly a consideration for Arctic Wolf in the future. Hiring in tier-II and tier-III cities presents technology organizations with a unique chance to tap into a diverse, highly skilled talent pool that is often overlooked but brings fresh perspectives, a strong work ethic, and a commitment to long-term growth," said Jeff Green, Senior Vice President, Research and Development, Arctic Wolf.

Recently, insurance major AXA opened its GCC in Kharadi, Pune for its 4,000-strong team in India. "The growing talent pool in tier-II and -III cities in India offers a unique opportunity for GCCs to access a diverse range of perspectives and capabilities. This diversity is a crucial driver to develop innovative and creative solutions. The competitive advantage provided by a multicultural and multi-skilled talent pool has been successfully enhancing the impact of GCCs in India for corporations. As a value-added partner to the AXA entities and a skill-first organization, the talent strategy at AXA Global Business Services is designed to tap into this diversity to further accelerate our growth. Our new office in Pune is a testament to this commitment – by providing a state-of-the-art, tech-integrated workspace that will acquire, nurture, and retain talent," said Michele Rochefort, CEO, AXA Global Business Services.

To be sure, metro cities still dominate the share of GCCs in India. According to TeamLease Digital, a leading tech staffing and learning solutions provider, Bengaluru stands out as a prominent hub for GCCs, hosting 36 per cent of TeamLease Digital's total client base for the first two quarters of FY25. This city is notably characterized by its dominance in the high-tech industry, which comprises 37 per cent of the talent concentration.

The findings also showed Hyderabad accounted for 14 per cent of TeamLease Digital's client base. The city excels in the high-tech industry, which contributes 45 per cent to the GCC headcount. Hyderabad's GCCs are at the cutting edge of digital transformation, leveraging advancements in cloud computing, AI, cybersecurity, blockchain, and data analytics to enhance global operations.

"Over the past few years, GCCs have emerged as powerhouses of innovation and job creation across industries. As GCCs continue to evolve, we are increasingly partnering with them across locations to address their demand for niche skills, while also co-creating new job functions," said Neeti Sharma, CEO, TeamLease Digital.