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Bengaluru has long been the heart of India’s Global Capability Center (GCC) landscape, but the tides are shifting. As businesses look for cost-effective expansion, diverse talent pools, and sustainable growth, Tier 2 cities are emerging as strategic hubs. This transformation is fueled by a combination of government initiatives, improved infrastructure, and the rapid development of skilled workforces outside the traditional metropolitan areas.
The evolution of GCCs in India is an ongoing journey. What began as offshore centers focused on cost arbitrage and transactional services has evolved into sophisticated hubs driving innovation and digital transformation. With the expansion beyond Bengaluru, businesses are unlocking new opportunities while overcoming location-based challenges.
Historically, the primary motivation for setting up GCCs in India was cost savings. The early 1990s saw the rise of offshore delivery centers that handled structured, execution-based work, often related to IT services and support functions. Over time, as the Indian workforce became more skilled and organizations realized the potential of these centers, the nature of work shifted.
According to NASSCOM, the number of GCCs in India has grown by 47% in the last five years, with over 1,700 GCCs now operating in multiple cities. More significantly, the role of these centers has expanded beyond simple execution to include high-value innovation in areas such as artificial intelligence, cybersecurity, cloud computing, and blockchain.
Organizations are increasingly looking to GCCs to drive business agility and digital transformation. These centers are no longer limited to performing backend support functions but are actively contributing to product development, research and development (R&D), and global strategic initiatives.
Bengaluru remains the dominant hub for GCCs in India, hosting 34% of these centers and employing 37% of the talent pool. However, the rapid growth of the sector has led to increasing operational costs, talent saturation, and infrastructure challenges such as traffic congestion. As a result, businesses are exploring Tier 2 cities as viable alternatives.
One of the key drivers for this expansion is cost efficiency. The rising real estate prices and increasing salary expectations in Bengaluru have made it difficult for companies to maintain cost-effectiveness. Tier 2 cities like Hyderabad, Pune, and Coimbatore offer a more affordable alternative, with operational costs typically 10-20% lower than in Bengaluru.
Infrastructure improvements have also played a crucial role in making Tier 2 cities more attractive. Cities like Hyderabad and Chennai have invested heavily in developing IT parks, special economic zones (SEZs), and improved public transport. These enhancements make it easier for companies to set up operations and for employees to commute efficiently.
Another significant factor is the availability of skilled talent. India produces over 300,000 STEM graduates annually, with many top engineering colleges and universities located in Tier 2 cities. Companies are increasingly tapping into this talent pool to build high-performing teams outside of the traditional metropolitan hubs.
Additionally, government policies have been instrumental in supporting GCC expansion beyond Bengaluru. The Indian Finance Ministry has emphasized the need for a national framework to promote GCCs in Tier 2 cities. State governments in Karnataka, Tamil Nadu, and Gujarat have also introduced incentives to attract businesses, such as tax benefits, infrastructure subsidies, and streamlined regulatory processes.
While Bengaluru continues to be a major IT and innovation hub, several Tier 2 cities have emerged as strong contenders for GCC expansion. Hyderabad, Pune, Coimbatore, and Chandigarh are among the leading cities attracting investments from global enterprises.
Hyderabad, often referred to as 'Cyberabad,' has established itself as a major IT and technology hub. The city boasts world-class infrastructure, a growing pool of skilled professionals, and relatively lower costs compared to Bengaluru. Companies looking for a well-connected city with excellent business support find Hyderabad to be an ideal destination.
Pune has also become a preferred choice for many companies, particularly those in the fintech and software development industries. With its strong academic ecosystem, including renowned institutions like IIT Pune and Symbiosis University, Pune provides businesses with a steady stream of talented professionals.
Coimbatore, traditionally known for its engineering and manufacturing sector, has been gaining traction as an IT and R&D hub. The city offers a lower cost of living, reduced operational expenses, and a highly skilled workforce, making it an attractive destination for GCCs looking to diversify their locations.
Chandigarh, often overshadowed by larger cities, has quietly become a hotspot for IT services and software engineering. With lower attrition rates and a high standard of living, the city provides a stable environment for businesses to establish and grow their operations.
While expanding into Tier 2 cities offers numerous advantages, companies must navigate several challenges to ensure a smooth transition. One of the most significant hurdles is the slower ramp-up time compared to Bengaluru. Since these cities have a smaller talent pool, businesses need to invest in training programs and collaborate with universities to build a pipeline of skilled professionals.
Cultural adaptation is another challenge, as work environments and employee expectations may differ from those in Tier 1 cities. To address this, companies must invest in leadership development programs, cross-cultural training, and mentorship initiatives that bridge the gap between global work culture and local expectations.
Infrastructure gaps, while improving, still pose challenges in some Tier 2 cities. Companies can mitigate these issues by working closely with state governments and leveraging public-private partnerships to ensure smooth business operations.
India's GCC sector is poised for significant growth, with 80% of the world's top 5,000 companies yet to establish a GCC presence. As more organizations recognize the potential of expanding beyond Bengaluru, India’s position as a global technology and innovation powerhouse will continue to strengthen.
In the coming years, we can expect:
Expanding GCCs beyond Bengaluru is more than just a cost-saving measure—it’s a strategic move that unlocks new talent pools, drives innovation, and ensures long-term sustainability. With the right approach, businesses can capitalize on India’s diverse workforce, government-backed incentives, and improved infrastructure to build high-performing teams in emerging talent hubs.
At InOrg, we specialize in helping companies set up and scale their GCC operations across India. Whether you're looking to establish a new center or optimize an existing one, our expertise ensures seamless expansion and long-term success.
Contact us today to explore how we can support your GCC expansion journey.
