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 inhouse 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.
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