"With vibe coding and fading entry-level grunt work, GCCs are shifting to business-led IT. Tier 2 cities—with deep talent and long-game mindset—are primed to nail it."
1. What are the primary factors driving Global Capability Centers (GCCs) to establish and expand their operations in Tier 2 and Tier 3 cities, compared to traditional Tier 1 locations?
As GCCs mature and move beyond innovation labs and pilot projects, a significant portion of their work revolves around enterprise IT systems that drive stability, compliance, and business continuity. For such work, Tier 2 and Tier 3 cities in India are becoming increasingly attractive due to talent readiness, operational advantages, and long-term retention potential.
Key factors driving this shift include:
- High retention for routine-focused roles
Enterprise IT involves structured, stable work. Tier 2/3 talent often seeks predictable career paths, resulting in much lower attrition than Tier 1 cities.
- Availability of employable, trainable talent
These cities offer a rich pool of graduates who may not be cutting-edge but are capable of effectively learning and delivering on business IT tasks.
- Stronger alignment with business IT, not just coding
GCCs can invest in teaching the application of technology within a business process—something Tier 2/3 talent is often more receptive to than those chasing flashy tech careers.
- Cost-efficient operations and expanding infrastructure
Lower real estate and living costs and improved digital and physical infrastructure make Tier 2/3 cities a sound choice for long-term setups.
- Ideal for sustaining “Tier 2 technologies”
These cities are well-suited for work involving ERP, legacy platforms, and integrations, which are critical to business continuity but not necessarily “cool.”
2. How is the presence of GCCs in Tier 2/3 cities impacting the state economies, talent pools, and overall socio-economic development of these regions? Please share examples of some emerging hubs in Tier 2/3 cities.
Expanding Global Capability Centers (GCCs) into India's Tier 2 and 3 cities catalyzes significant socio-economic transformations. These developments are invigorating state economies, reshaping local talent pools, and fostering inclusive growth.
Key Impacts:
- Economic Upliftment and Infrastructure Development:
The establishment of GCCs brings substantial investments, leading to improved infrastructure, increased demand for local services, and overall economic growth in these regions.
- Talent Pool Enhancement:
Local educational institutions are aligning curricula with industry needs, resulting in a more skilled workforce ready to meet the demands of enterprise IT roles.
- Socio-Economic Inclusion:
The presence of GCCs in smaller cities provides employment opportunities closer to home, reducing migration pressures on metropolitan areas and promoting balanced regional development.
Emerging GCC Hubs:
- Indore:
Rakuten Symphony, a telecom subsidiary of Japan's Rakuten Group, has established a significant presence in Indore. The company has already filed over 300 patents from its Indore center, delivering world-class software on telecom automation to clients globally.
- Ahmedabad:
Kraft Heinz launched its first Global Capability Center in Ahmedabad, planning to hire over 1,800 professionals over three years. This move underscores the city's growing prominence as a hub for global operations.
- Coimbatore:
Schlumberger expanded its operations here following the acquisition of Cameron, establishing both IT and R&D centers to leverage the local engineering talent and mitigate concentration risks associated with a single location.
- Mohali:
Emerson has established operations in Mohali, contributing to the local economy and providing employment opportunities in the region.
3. What are the key challenges and opportunities that GCCs face when operating in Tier 2/3 cities, particularly concerning infrastructure, connectivity, and the availability of a skilled workforce?
As GCCs move into Tier 2 and 3 cities, they gain clear benefits—lower costs, greater stability, and access to untapped talent—but they also face serious structural and ecosystem challenges. While these cities are ideal for scaling enterprise IT operations, success depends on proactive skilling, ecosystem building, and leadership support.
Key Challenges:
- Infrastructure Limitations
Power reliability, premium office space, and public amenities are still catching up to Tier 1 standards in many Tier 2/3 cities.
- Limited Availability of Job-Ready Talent
Fresh graduates often require significant upskilling to align with enterprise-grade IT work, especially in understanding the business context, legacy systems, or compliance-heavy processes.
- Weak Leadership Talent Pool
Senior architects, product owners, and functional leaders are still concentrated in metros, making it challenging to drive autonomy or scale high-value work locally.
- Underdeveloped Industry Ecosystem
Fewer industry bodies (like NASSCOM), analyst firms, or peer networking opportunities exist locally, making benchmarking, learning, and collaboration harder.
- Connectivity and Accessibility
Air and rail connectivity may limit leadership mobility and client access, especially for global governance or program oversight.
- Constrained Growth Pathways
Fewer lateral industry options or cross-functional exposure means junior staff in Tier 2/3 locations often lack clear paths for career progression into senior roles.
Key Opportunities:
- High Retention and Workforce Stability
Employees are more likely to stay long-term, especially when offered structured roles with predictable growth, which is critical for enterprise IT continuity.
- Cost-Effective Scale
Lower operational costs make these cities ideal for support, maintenance, analytics, QA, and reporting, where scale matters more than cutting-edge innovation.
- Favorable Talent Mindset
Professionals are more open to training in business-contextual tech skills and long-cycle delivery, rather than hopping between roles or startups.
- Partnering for Talent Pipeline
Local colleges and government skilling programs offer a fertile ground for co-creating job-ready, loyal talent with enterprise orientation.
4. What functions and business processes are most commonly being outsourced or established by GCCs in Tier 2/3 cities, and are there any trends in the evolution of these functions?
Tier 2/3 cities are fast becoming preferred hubs for specific GCC functions that demand scale, stability, and cost-efficiency rather than cutting-edge innovation. These functions typically support enterprise IT operations and shared services, with a growing trend toward expanding value-added roles as talent matures.
Commonly Established Functions:
- Enterprise IT Support
Includes application maintenance, legacy system management, incident handling, and ticket resolution for ERP (SAP, Oracle), CRM, and middleware platforms.
- Testing and Quality Assurance
Manual and automated testing for business applications, especially in regulated industries like manufacturing, BFSI, and healthcare.
- Shared Services and GBS
Finance & accounting, HR operations, procurement support, and data management functions that follow transparent processes and SLAs.
- Data & Reporting
Standardized analytics/reporting, dashboard maintenance, data cleansing, and master data management—especially in supply chain and finance domains.
- Infrastructure Management
L1/L2 support, network monitoring, and cloud infra operations run out of lower-cost locations with high availability.
Emerging Trends and Evolution:
- Movement Up the Value Chain
Some centers are transitioning from pure support to light development, configuration, and functional testing roles—especially in SAP, Salesforce, and ServiceNow environments.
- Embedded Business Context Roles
Functions like process mining, audit compliance, and enterprise data stewardship are being piloted, combining IT skills with domain fluency.
- Automation & RPA Operations
RPA bot monitoring, bot enhancement, and workflow orchestration support are increasingly shifting to Tier 2/3 hubs.
- Gradual Entry into Productized Services
GCCs are testing digital factory models, where local teams own stable releases, testing cycles, or CI/CD operations for internal products.
5. How are government policies and initiatives at both the national and state levels in India supporting or hindering the growth and expansion of GCCs in Tier 2 and Tier 3 cities?
The Indian government, at both national and state levels, has taken several proactive steps to enable the spread of IT and GCC ecosystems beyond Tier 1 metros. However, while policies are generally favorable, execution and consistency remain key challenges in effectively activating Tier 2/3 markets.
Supportive Policies and Initiatives:
- IT/ITES SEZ & STPI Incentives
Income tax exemptions, infrastructure support, and single-window clearances for IT/ITES units under SEZ and STPI schemes have encouraged GCCs to set up in non-metro zones.
- PLI and Digital India Push
National programs like Digital India and the Production-Linked Incentive (PLI) scheme have created indirect tailwinds by improving digital infrastructure and promoting cloud-first government services.
- State-Level IT Policies
States like Madhya Pradesh, Tamil Nadu, Gujarat, and Telangana offer capital subsidies, power tariff concessions, and plug-and-play IT parks in cities like Indore, Coimbatore, and Ahmedabad.
- Skilling and Employability
Programs like Skill India, FutureSkills Prime, and partnerships with NASSCOM help create job-ready tech talent pools aligned with enterprise IT needs.
- Tier 2/3 Infrastructure Development
Targeted investments in digital connectivity, expressways, and airport upgrades are making Tier 2/3 cities more accessible for business continuity and client oversight.
Policy and Execution Gaps:
- Inconsistent Policy Implementation
While incentives exist on paper, slow or inconsistent implementation across states often frustrates GCCs evaluating Tier 2/3 entry.
- Limited Ecosystem Development Support
Lack of analyst firms, accelerators, and industry bodies like NASSCOM in smaller cities limits collaboration, benchmarking, and exposure.
- Urban Planning Lag
Housing, transportation, and social infrastructure often lag behind business infrastructure, making attracting senior talent and returning professionals harder.
