GCC Explained: The Rise of Tier-2 Cities as Emerging Hubs

Multinational corporations (MNCs) have created specialized units called Global Capability Centers (GCCs) to handle a range of corporate operations, including technology, finance, analytics, and research and development. These facilities have traditionally been found in large cities. Nonetheless, MNCs are increasingly establishing GCCs in Tier-2 cities in India. Several factors, such as cost advantages, access to a trained workforce pool, and supporting government legislation, are driving this transition.

The Pull of Tier-2 Cities

GCCs are increasingly drawn to Tier-2 cities like Jaipur, Vadodara, Coimbatore, and Kochi. These cities are financially beneficial to businesses and staff because they have a cost of living that is 10–35% cheaper than Tier-1 cities. With 11–15% of India's IT workers already located in Tier-2 and Tier-3 cities, the talent pool in these regions is also growing. In comparison to metropolitan hubs, real estate rentals are roughly 50% less expensive and recruiting costs are 25–30% lower in these areas. 

Government Programs to Encourage Growth

Both the federal and state governments are enacting measures to promote the growth of the GCC in recognition of the potential of these cities. Karnataka's 'Beyond Bengaluru' strategy, for example, promotes places like Mangaluru, Mysuru, and Kalaburagi as feasible possibilities for GCC operations to duplicate the success of its capital city in other areas. Likewise, Tamil Nadu provides payroll subsidies and advantageous laws to entice GCCs to places like Salem and Coimbatore.

Real-World Examples

In Tier-2 cities, several businesses have already set up GCCs. The sustainable energy firm Metso has increased its footprint in Vadodara. The liquor company Pernod Ricard has established a presence in Nashik. The financial services firm First American has opened a location in Salem, Tamil Nadu. In addition to saving businesses money, these relocations give local talent the chance to work without having to migrate to a bigger city.

Impact on the Economy and Society

There are several advantages to establishing GCCs in Tier-2 cities:

Job Creation: In industries like real estate, retail, and services, there are direct job openings as well as a knock-on impact that results in indirect job creation.

Development of Skills: Training and development in cutting-edge technology and business procedures are made available to local talent.

Decreased Migration: Professionals no longer need to relocate to larger cities because they can find good jobs in their hometowns.

Economic Growth: More commercial activity boosts regional economies, raising living standards and infrastructure.

Visions for the Future

It is anticipated that the trend of locating GCCs in Tier-2 cities will continue. By 2030, there may be almost 2,200 GCCs in India, with over 2.5 million professionals working for them, according to projections. This expansion shows the unrealized potential of India's Tier-2 cities and maintains the country's standing as a global centre for high-value business services.

In conclusion, a strategic shift towards utilizing cost efficiencies, gaining access to a variety of talent pools, and promoting regional growth is reflected in the emergence of Tier-2 cities as new GCC hubs. In addition to being advantageous to the participating businesses, this development makes an important difference to the socioeconomic fabric of these communities.