Will the City of Pearls overtake India’s Silicon Valley as the top global services destination?

Will Hyderabad unseat Bengaluru as the top global services destination? It may happen in a few years if the current trend continues, as Hyderabad surpassed Bengaluru for Global Capability Center (GCC) setups during H1 2023, according to global research firm Everest Group. During this period, over 40 global companies established or expanded their Acceleration Centers, Centers of Excellence (CoEs), Centers of Innovation, and R&D centers in Hyderabad, it said.

Since the early 1990s, when India started its services journey, Bengaluru has been the top city, attracting maximum interest for global services delivery. Other tier-1 Indian cities, such as Delhi NCR, Hyderabad, Mumbai, and Pune, have also recorded impressive growth. However, it was not until H1 2023 that the City of Pearls (Hyderabad) surpassed Bengaluru, (Silicon Valley) in GCC setup activity.

This trend is also reflected in the growth of technology jobs. Hyderabad’s share of technology jobs, as a percentage of overall technology jobs in India, surged to 44 per cent during 2021-22 from 33 per cent. Simultaneously, the demand for non-tech services continues to grow, reflecting strong investor sentiment.

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Hyderabad has traditionally been a stronghold for pharmaceutical enterprises. However, the city’s appeal has now expanded beyond this industry. Over the years, it has also attracted multiple Fortune 500 giants from aerospace, manufacturing, retail services, pharmaceuticals, and professional services industry verticals.

The diversity extends beyond industries and also encompasses the types of services being delivered to clients from these centers across the globe. For example, Goldman Sachs is expanding its delivery footprint for engineering services; FedEx is establishing a center of innovation for supply chain optimisation; and Lloyds Banking Group is utilising the location for delivering cybersecurity services. Other companies like Apollo Tyres, DAZN, Ocugen, Pi Square, Warner Bros., and Discovery are also leveraging Hyderabad for a wide variety of services, the research firm said.

Winning formula

The skilled talent pool from institutes like IIT, IIIT, ISB, and BITS Pilani has contributed to the growth of various industries, including IT, biotechnology, pharmaceuticals, and finance. Hyderabad Pharma City, the proposed world’s largest integrated pharmaceutical industry cluster, has received interest from 500 companies. Additionally, the government’s Hyderabad Vision 2023 plan prioritises infrastructural development, skill enhancement programmes, and improving the ease of doing business.

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Bengaluru is and will continue to operate as the largest and most mature global services destination in India for the short term, riding on its solid talent proposition, especially the ability to support niche and emerging technology skills. “However, when gazing into the crystal ball and contemplating the next 7-10 years, we see Hyderabad in a captivating race, with Bengaluru positioning itself as a formidable competitor for the crown of the Top Global Services Destination in India,” the research firm says.

Kamal Karanth, Co-founder of Xpheno, a Bengaluru-based specialist staffing company, said Hyderabad is seen as making all the right moves on the infrastructure and ease of business front to be a high-potential option for new Captives entering India.

Hyderabad currently holds a strong position as the second or third expansion center for many Captives operating in other mature GCC locations. However, taking a lead over Bengaluru may not be on the cards for the next 5 to 6 years. Hyderabad can and will emerge as a strong contender and put up a tough competition against Bengaluru and other mature locations.

Hyderabad, trailing behind Bengaluru by nearly 4,00,000 active tech talent, will be a key factor to consider on the scale of talent front. Also, Bengaluru still holds a higher spot on the desirability curve for talent from across the country, and that adds to the speed of talent.

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