MNCs Turning To Small Cities For Low-Cost GCCs

Those global firms, which have been in India for many years with centres in metro cities, are now opening their new centres in tier-II and tier-III cities as part their expansion plan. This is mainly because these companies know the cost of operations and are well-aware of the nuances of doing business here -- Pareekh Jain, founder, Pareekh Consulting, tells Bizz Buzz

Bengaluru: Tier-II cities like Ahmedabad, Kochi, Thiruvananthapuram, Coimbatore, Vishakhapatnam, and Bhubaneswar are slowly emerging as centres of attraction for setting up Global Capability Centres (GCCs) by global enterprises.

According to analysts, low cost of operation, availability of talent and maturity of Indian GCC ecosystem are the factors behind driving the new trend.

“Established GCCs are going to tier-II and tier-III centres. This is similar to the trend that we have seen in case of IT services firms. Those global firms, which have been in India for many years with centres in metro cities, are now opening their new centres in tier-II and tier-III cities as part of their expansion plan. This is mainly because these companies know the cost of operations and are well-aware of the nuances of doing business here,” Pareekh Jain, an IT outsourcing advisor, and founder, Pareekh Consulting, told Bizz Buzz.

“Those companies, which are coming for the first time to India are not venturing into tier-II & III cities. They prefer established centres like Bengaluru, Hyderabad and Pune among others,” he added.

The latest Nasscom-Zennov report said that over 220 GCC units are housed in emerging locations (tier-II and tier-III cities) in the country. Ahmedabad, Kochi, Thiruvananthapuram, and Coimbatore are building critical mass. In total, these GCC units employ around 82,000 people, the report has said.

According to sources in the know, India is witnessing a wave of GCC formation in recent years with mid-tier global companies (Fortune 2000-Fortune 5000) coming to India for setting up technology centres.

These companies are preferring established locations for opening up centres owing to their risk-averse nature during initial period of operation.

“While IT firms’ entry to tier-II cities has been slowed down in last two years owing to overall demand slump, this is not the case in case of GCCs. Because, growth is happening in the GCC space and they want to take the cost advantage of operating new centres in small cities,” Jain said.

Total number of global capability centres (GCCs) set up in India has increased to 1,700 in the fiscal year 2024 ending March, generating $64.6 billion in export revenue, the Nasscom-Zinnov report has said. In total, these GCCs have employed over 1.9 million people.

“The impact of GCCs on India’s economic fabric is profound and far-reaching. India now accounts for 17 per cent of the global technology capability centres’ footprint, the largest share in the world. It’s a testament to India’s emergence as the GCC capital of the world,” the report said.