Just 6 metros hold the lion’s share in GCC location, talent in India

A report by industry body Nasscom and consulting firm Zinnov showed that these six cities hold 92 percent of total GCC units

The majority of India's Global Capability Centres (GCCs) are concentrated in just six Tier I cities of Bengaluru, Hyderabad, Chennai, Pune, Mumbai, and the National Capital Region (NCR) with Tier II locations holding a minuscule share.

Reports suggest that these six cities collectively host between 55 percent and 92 percent of all GCC units, owing to their premium real estate, strong information technology system, international connectivity, and better law and order situation.

Arindam Sen, partner and GCC sector leader – Telecom, Media, and Telecommunications at EY India, said Tier I cities are still the primary locations for GCC setups in India.

“If you look at places like Coimbatore and Kochi, we have seen an uptick but not to the scale at which we've seen at the hubs like Bengaluru, Delhi NCR, Mumbai, Pune, Chennai and Hyderabad. So there's still a lot of runway in terms of Tier 2 cities catching up with the hubs,” said Sen.

GCCs, which are dedicated offshore centres set up by a company in a foreign country to in-source IT and other related business functions, have been expanding at a frenetic pace in India in the last few years, with more global corporations looking to build their software service and products.

The total number of GCC units is over 2,740 with a total employee base of over 16 lakhs. Installed capacity at Tier II locations is more than 71,000, the report highlights which is based till financial year 2022-23.

The reports

A report by industry body Nasscom and consulting firm Zinnov showed that these six cities hold 92 percent of total GCC units, while holding a cent percent of the talent. This implies other GCCs have minuscule working in those locations.

The total number of GCC units in India is over 2,740 with a total employee base of over 16 lakh. Installed capacity at Tier II locations is more than 71,000 as of financial year 2022-23, the report said.

Another report by EY titled ‘GCC Pulse Survey 2023’ revealed that six cities account for 55 percent share in GCC establishments while the rest of India accounts for the remaining captive centres.

Also read: Only 8% of GCCs present in Tier II cities in India as Tier I maintains dominance

“There is no business case, we are currently in conversation with almost 100 companies (to set up their GCC) and not one has demanded a Tier II city,” said Lalit Ahuja, founder & chief executive officer of ANSR Inc, a firm that builds, manages, and scales GCCs. Adding that among all the factors that are important for the location criteria of a GCC, Tier II will not check any of the boxes.

The reports suggest there are many barriers in the way of the proliferation of GCC establishments beyond the urban areas.

The Tier I preference

Experts point out five major reasons why companies prioritise Tier I cities for these captive units.

Firstly, infrastructure is a paramount concern, with the availability of premium A-grade real estate which acts as an enabler for companies seeking optimal work environments. Tier I cities also boast Special Economic Zones (SEZs) and tech parks, offering bespoke solutions to accommodate the operational needs of these global entities, an advantage yet to be rivaled by Tier II locations.

Secondly, connectivity is another pivotal consideration, particularly for companies with global footprints necessitating frequent cross-border travel. The absence of a direct international airport in Tier II cities presents a challenge for organisations.

Third, concerns regarding safety and security loom large, with Tier I cities enjoying a perceived advantage on the back of better law enforcement. This, coupled with the added advantage of expat-friendliness and the availability of a vibrant hospitality industry, renders Tier II cities less appealing for both short- and long-term assignments.

And lastly, the talent pool constitutes a critical factor for companies to set up their GCC in Tier I cities. GCCs, renowned for their recruitment of lateral talent and seasoned professionals, witness a dearth of leadership and managerial expertise in Tier II cities. The presence of educational institutions and social infrastructure also meet the expectations of skilled professionals.

Snehil Gambhir, Partner & Director, at consulting firm BCG, said that Tier II cities face an uphill battle when trying to attract global organisations for their talent hubs. He further said the lack of good international connectivity is critical since these centers tend to attract significant number of executives and functional process leaders every year.

"It is imperative for authorities to not just look at promoting Tier 2 cities in their state, but to also launch urgent efforts to ease congestion in these metropolitan cities," Gambhir said.

He said the authorities should make an effort to reach out to key players who influence decisions and hear directly from global leaders as well.

While Tier I cities may lead to higher operational costs such as property prices, strategic location trumps financial savings from operating from a Tier II location.

Also read: GCCs gain traction among foreign SMBs seeking Indian tech talent

Tier II cities may hold promise for select service industries or niche GCCs, but Tier I cities will maintain the overwhelming lead by major companies, experts said.

Also read: Bengaluru dominates chip GCC's in India with 42% of total units, says report