If we have learned something from the past couple of years, it’s that creating options for contingency situations is a must. Depending on just one or two sources wouldn’t be wise anymore to thrive in the dynamic environment of rising inflation and rapid adoption of cutting-edge technologies. That indeed validates the fact that GCCs are highly investing in tier-2 & tier-3 cities because tier-1 economies are not enough anymore. If we talk about the growing popularity of tier-2 & 3 cities among corporates, nearly 50% of the recognized startups are found in these cities in India.
This strategic migration is fueled by a quest for cost-effectiveness and access to talent with niche skills lurking in the boundaries of lesser-known areas. Besides, these cities are well equipped with infrastructure so it’s easier for companies to invest in them to set up their GCCs.
What if you are given the option to invest at a place where there’s increased talent availability at reduced costs with good infrastructure and social security? Tier-2,3 cities are emerging as attractive alternatives for the Global Captive Centers. The reason for this transformative shift is due to factors such as a favorable business environment, lower operational costs, and an abundance of skilled professionals. Unlike in the tier-1 cities, the cost of operating backend and frontend operations is quite inexpensive in these cities.
Companies are investing their resources in tier-2, and 3 cities, right from IT and manufacturing companies to an organization offering financial services. In fact, some of the key locations for these companies are Vadodara, Chandigarh, Jaipur, Kochi, Surat, Nagpur, Madurai, Coimbatore, etc.
Now after understanding the constant popularity of these regions in the industry, let’s delve into the factors that nudged sought-after companies to build their Global Captive Centers in these regions.
One of the reasons for companies to set up their GCCs in tier-2 cities is because of cost optimization. Not only is it possible to operate in these regions but it’s low on the pockets, from real-estate costs to employee salaries. Not to mention that the overall cost of living in these cities is lower, which makes it a perfect place for companies to optimize their operational expenses without compromising on quality.
A recent report by Deloitte and Nasscom states that businesses experience a 25%-30% advantage in talent pool costs and a 50% lower real estate rental cost when compared to big cities and mature hubs. This cost advantage makes these cities a good choice for GCCs.
The investment made by the Indian government in developing Indian cities has been increasing rapidly in the past couple of years. Whether it’s improved connectivity or enhanced industrial zones, the investments by the Indian government are enhancing the industrial environment while creating a base for the companies to establish their operations. And the burgeoning infrastructure is a significant factor in the decision-making process of the companies. Not to mention that improved transportation, modern office spaces, and reliable utilities contribute to smoother operations and enhanced business continuity.
Tier-2 cities are home to many skilled professionals possessing niche skill sets that we fail to find otherwise. Professionals with backgrounds in IT, engineering, finance, healthcare, and various other fields are often found in these areas with diverse skill sets that can be valuable for Global Captive Centers, which require a multifaceted workforce to support different functions, from software development to customer support. Moreover, access to a diverse talent pool can help GCCs adapt to changing market demands and technological advancements. Another advantage is that many Tier-2 cities have universities and educational institutions, which can serve as talent pipelines for organizations looking to hire recent graduates and nurture their skills.
By expanding its operations to a new city, an organization not only seeks help from local professionals but also gets the chance to build an employer brand in those areas. Not to mention that as the word spreads in an area, localities get more aware of the brand’s USPs and use cases. This can benefit the brand in increasing its customer base in these tier-2,3 cities. With that, businesses also understand the needs of local consumers, increasing their market exposure.
The shift of Global Captive Centers to tier-2 cities marks a transformative shift in the operations of the global. By expanding their footprints in tier-2,3 cities, organizations can achieve a balance between cost optimizations and access to a diverse talent pool. However, this shift requires cautious consideration of factors such as infrastructure, talent availability, and cultural dynamics.
Are you wanting to expand your footprints in emerging cities but don’t know where to begin? NLB Services has end-to-end Global Captive Center solutions that can help you boost your business.
APAC Recruitment & Business Leader