India’s robust talent pool and favourable business environment have long attracted multinational corporations' Global Capability Centres (GCCs). When GCCs were first established in India in the 1990s, they were primarily cost-saving pools for the US and European markets. Over the past decade, the strategic value and scope of these centres have expanded widely.
Today, the country is home to more than 1500 GCCs, and about 15-20% more are expected to be added by 2025. While Tier-1 cities like Bangalore, Mumbai, and Delhi-NCR remain gateway cities that rule the office demand dynamics, Tier-2 cities are also growing in demand.
However, Tier-1 cities are posing some challenges for organisations looking to expand in India, which is prompting them to seek alternatives. Let’s look at what these challenges are:
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Escalating expenses – Cost for office premises and utilities in Tier-1 cities are roughly 60-80% higher than other cities. Companies are now looking to cap real estate and operational expenditures and therefore seeking to set up operations in Tier-2 cities.
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Higher talent attrition – The average attrition rate of Tier-1 cities is 15.2%, posing a challenge in attracting and retaining skilled talent due to employee turnover.
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Elevated infrastructure issues – More and more Tier-1 cities are facing the stress of infrastructural problems like water shortage, declining sanitation, poor air quality index (AQI), and so on.
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Decline in quality of life – Traffic congestion, environmental pollution, lack of good and affordable housing, etc. in Tier-1 cities are making them increasingly less attractive.
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Limited incentives – Tier-I cities are experiencing a decline in government incentives such as fewer tax exemptions, in addition to facing complex regulations, leading to higher costs and administrative burdens.
Tier-2 Cities in India Rise to the Occasion
Tier-2 cities in India are now raising the bar, offering MNCs the opportunity to set up their GCCs, complementing the primary hubs in Tier-1 cities, and broadening the scope of operations. These cities also have the potential to strengthen the overall capabilities of organisations, reinforcing their strategic resilience and operational robustness.
Let’s look at the advantages of setting up operations in Tier-2 cities of India.
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Availability of skilled resources – Tier-2 cities are exhibiting better talent advantage due to reasons like the presence of premium educational institutions, better retention rates, stronger communities, the need for a better quality of life, etc. These factors encourage skilled human resources to stay back in Tier-2 cities instead of migrating to Tier-1 cities.
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Cost favourability – Tier-2 cities offer lower costs of infrastructure and talent, bringing down the Total Cost of Operations (TCO) by 10-35% compared to the nearest Tier-1 city.
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High on social parameters – Lower pollution levels, better AQI, lower crime rates, lower cost of living, etc. are factors that contribute to a high rating on social parameters, making Tier-2 cities increasingly attractive.
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Excellent connectivity – The connectivity of Tier-2 cities to Tier-1 cities, and in some cases, even international destinations has improved greatly at Tier-2 cities, reducing distance and time hurdles like never before.
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Business environment – Special Economic Zones (SEZs) have been established in Tier-2 cities to foster the growth of the IT/ITeS sector, in addition to State Governments offering incentives to businesses that either launch new centres or expand their operations beyond Tier-1 locations.
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Expanding infrastructure – Tier-2 cities have been witnessing better road infrastructure and improved air connectivity, in addition to expanding workspace availability, facilitated by investors, and the growth of flex operators offering coworking spaces.
Trivandrum Making Waves with Technopark
In a recent Cushman and Wakefield India Research report, which evaluated 17 Tier-2 cities in India, Trivandrum was among the top 10 emerging markets.
The capital city of Kerala is attracting large private-sector developers to deliver quality Grade-A projects in the commercial office and retail segments. The state itself ranks high in urbanisation – Kerala recorded an urbanisation rate of 48%, much higher than the overall India average urbanisation rate of 31%.
At Trivandrum, Technopark, the largest IT hub in Kerala, is also the first IT park in India and is known for its world-class infrastructure and availability of advanced facilities. Since its inception 25 years ago, the IT park in Kerala capital has changed the digital landscape of the state, provided job opportunities and remarkable career growth to lakhs of professionals, and opened up the country to investments from reputable overseas businesses.
Today, this revolutionary IT park in Kerala is spread across five campuses, including one in the neighbouring city of Kollam. At Trivandrum alone, the 768.63 acres
campus seamlessly integrates cutting-edge technology, eco-conscious designs, and sustainable practices that promise a harmonious work environment like none other!
More about Technopark here: Discover Technopark: The Iconic IT Park in Trivandrum
Technopark’s seamless connectivity to Tier-1 cities via road, rail, and air, and to international destinations, plus its proximity to the Trivandrum International Airport – a mere 20-minute drive – make it a compelling destination for global enterprises.
The IT park in Kerala’s capital offers international organisations, looking to set shop in an accessible and premium location, the added advantage of connectivity, growth prospects, and entertainment.
Learn more about Technopark’s strategic location here: How Technopark’s Strategic Location Supports Global Connectivity
Trivandrum’s Favourable Business Environment
The state ranks high on several parameters that make it an ideal business environment for MNCs seeking to set up GCCs in India’s Tier-2 cities.
Let’s look at some of these numbers:
Trivandrum ranked 21st in the Ease of Living Index, 2020, and as of the 2011 census has a 95% literacy rate. Under quality of life parameters, various CBRE researchers have ranked Trivandrum low on crime rates, and a frontrunner in health and well-being as well as education quality.
The city has ranked high on sustainability parameters like climate action, AQI, sustainable consumption and production patterns, and clean energy.
Trivandrum is also doing well in industrial ratings, innovation, and economic growth.
The state’s business policies are highly favourable, real estate growth is on top of most Indian cities, and connectivity is improving as we speak – in brief, the city’s dynamics ought to be leveraged, and now is the right time!
In conclusion
GCC hires in India are projected to touch 2.2 million by 2026 and 800 new GCCs are expected to be set in the coming years. Although Tier-1 cities will continue to attract niche, high-end talent for specialised roles, India’s emergence as a global tech hub will see Tier-2 cities like Trivandrum increasingly becoming attractive destinations for GCCs.
With their lower costs, skilled talent pool, improved infrastructure, and hybrid/remote working options, these cities offer a compelling proposition for organizations seeking to expand their operations while optimizing costs and enhancing strategic capabilities. By tapping into the potential of Tier-2 cities, GCCs can unlock new opportunities, drive innovation, and contribute to India's growing economic landscape.
Technopark in Trivandrum is a fantastic location for global companies looking to establish their GCC. With its strategic location, world-class infrastructure, skilled talent pool, and seamless global connectivity, Technopark can cater to a wide range of industries, including automobile, IT, healthcare, and finance. Whether you're seeking to optimize costs or enhance your global operations, Technopark offers the perfect environment for growth and innovation.
For more details on how to invest in your GCC at Technopark or assistance with the setup, contact us at marketing@technopark.org.