The growth of Global Capability Centres (GCC) in India’s tier-2 cities is being bolstered by the establishment of smaller GCCs, primarily by smaller multinationals and others. The proliferation to small towns is also aided by the expansion efforts of existing companies looking to diversify, and leverage talent and cost benefits outside major cities, according to data and estimates from ANSR, an end-to-end GCC solutions provider.

Presently, India has around 1,600 GCCs, with about 150 of them located in tier-2 cities. Ahmedabad, Mysuru, Vadodara, Nashik, Tirunelveli, Bhubaneswar, and Coimbatore have so far emerged as hubs. In the near term, a 30-40 per cent increase in demand for GCCs in tier-2 cities is expected, the company added.

Vikram Ahuja, Co-founder ANSR, CEO Talent500, said, “The demand will be driven by companies setting up in India for the first time, focusing exclusively on a tier-2 strategy and without the need for a large setup. Companies aiming to have a presence of about 400-500 people will be more gravitated towards small cities.”

Availability of talent, lower cost, and government incentivisation are some of the factors helping the budding growth of India’s small town story in the GCC landscape. Ahuja notes that increasing government incentives to companies for setting up a base in tier-2 cities promotes companies to establish a base.

He also points out that a sizable amount of talent has stayed back in smaller cities post-Covid, providing companies with a good talent pool to leverage. Additionally, the setup and talent costs are comparatively lower in tier-2 cities too.

Tier-2 cities typically have a 10-35 per cent lower cost of living as compared to the nearest tier-1 location. At present, 11-15 per cent of India’s tech talent resides in tier-2 and tier-3 cities, and talent pool costs are 25-30 per cent lower than those in mature hubs, with a 50 per cent cost savings in real estate rentals compared to mature hubs.

“We believe that by harnessing differentiated talent from tier-2 cities, we can drive innovation and foster excellence in our industry. We recently set up our centre in Bhubaneswar where we have a sizable chip design engineers and Electronic Design Automation engineers responsible for high-tech roles. Our commitment extends beyond metro cities as we tap into diverse talent pools across emerging regions,” Shivananda R Koteshwar, Vice President, Synopsys Inc, said.

This is in addition to the existing growing trend of multinationals present in tier-1 cities looking to diversify their presence. “While cities like Bangalore do phenomenal wonders for companies’ phase one growth, some of them are starting to think about what phase two looks like and are considering setting up in smaller cities to take advantage of talent at lower costs,” Ahuja said.