Multinational corporations (MNCs) are rapidly expanding their Global Capability Centers (GCCs) beyond traditional hubs like Bengaluru and Hyderabad, with Tier-2 cities such as Pune, Coimbatore, Jaipur, Chandigarh, and Indore emerging as strategic alternatives. According to the Zinnov-Nasscom India GCC Landscape Report, the share of GCCs in Tier-2 and Tier-3 cities has grown from 5% in FY2019 to 7% in FY2024, with a projected 15-20% rise by 2025 and 25-30% growth in the years that follow.
The 2025 Union Budget supports this shift, with Finance Minister Nirmala Sitharaman announcing a national framework to guide states in promoting GCCs in emerging Tier-2 cities. It will outline 16 measures to enhance talent availability, infrastructure, building bylaw reforms, and industry collaboration.
In an exclusive interview with All Things Talent, Karthik Padmanabhan, Managing Partner at Zinnov, discusses the critical role of these emerging regions in strengthening India’s global outsourcing position, the challenges companies face in this transition, and the strategic opportunities that lie ahead.
Q: Tier 2 and 3 cities are fast becoming key growth hubs for GCCs. What are the main factors driving this expansion, and what strategic advantages do these cities offer to the GCCs?
Karthik: The primary driver behind GCC expansion into Tier 2 and 3 cities is talent. Talent is the foundation of the industry, and its availability, quality, and scalability remain the biggest factors influencing location decisions for organisations setting up in India.
Historically, Tier 1 cities like Bangalore, Hyderabad, Pune, Chennai, and NCR have dominated, accounting for nearly 90% of the industry—a trend that has remained unchanged for the past five to six years. However, there has been a noticeable expansion into Tier 2 cities, though this is primarily through the extension of existing GCCs rather than entirely new setups.
While some new GCCs are emerging in select Tier 2 cities, the majority of activity is driven by established companies looking to tap into additional talent pools.
Key Factors Driving GCC Growth in Tier 2 Cities include:
Talent Availability & Quality
- The ability to attract and retain skilled professionals is a key factor.
- Companies are focusing on scale, expertise, and the ability to deliver.
Leadership & Expertise
- Beyond engineering talent, companies need leadership, deep technical expertise, and decision-makers.
- The shift triggered by COVID-19 has made senior talent more available in Tier 2 cities. Previously, leadership roles such as architecture, product management, and strategic decision-making were concentrated in Tier 1 cities.
- Today, GCCs are not just seeking technical talent but also leaders who can mentor teams and drive innovation.
Infrastructure Readiness
Infrastructure plays a crucial role in the long-term success of GCCs in Tier 2 cities. It can be categorised into three layers:
- a) Fundamental Infrastructure
- Reliable wired and wireless networks
- Secure and redundant IT systems
- Availability of high-end computing resources
- Well-established office spaces
- b) Growth Infrastructure
- The presence of co-working and incubation centres enables companies to scale operations.
- While cities like Bangalore and Hyderabad have a mature co-working ecosystem (e.g., WeWork, SmartWorks), Tier 2 cities are still developing in this area.
- c) Quality of Life Infrastructure
- Talent attraction isn't just about jobs—it’s also about lifestyle.
- Employees consider factors like schooling for children, job opportunities for spouses, healthcare, and overall living conditions before relocating.
- While some cities like Amaravati, Chandigarh, and Coimbatore are emerging as attractive hubs, migratory movement remains lower than in Tier 1 cities.
Tier 2 cities are steadily progressing, but for GCCs to expand further, continued improvements in infrastructure scalability, co-working spaces, and lifestyle factors will be essential. Organisations that invest in these aspects will have a competitive advantage in attracting and retaining top-tier talent.
Q: This trend of expansion into tier-2 and tier-3 cities, is it sector-specific, or is it a broader movement across industries?
Karthik: The expansion of GCCs into smaller cities is not limited to specific industries—it’s a broader trend, though government policies play a key role in shaping sectoral growth.
Cities like Ahmedabad are attracting semiconductor and financial services firms through targeted incentives. Similarly, government-backed initiatives in Chandigarh, Coimbatore, and other emerging hubs are fostering sector-specific expansions.
State-led policies are a major driver of this shift. Karnataka’s Beyond Bangalore initiative aims to extend tech-sector growth to cities like Mysore, while Gujarat’s semiconductor policy and Madhya Pradesh’s IT and ESDM (Electronics System Design & Manufacturing) policies are accelerating industry expansion beyond metros.
While industries such as semiconductors, IT, and fintech are benefiting from targeted incentives, the broader trend is driven by a combination of cost advantages, infrastructure development, and talent availability. This expansion is not just a business decision—it reflects a strategic push by state governments to decentralise growth and build new economic hubs.
Q: With remote and hybrid work options available in many cities and companies, is compensation the main differentiator when hiring for GCCs, or are other factors equally important?
Karthik: While compensation is undoubtedly a key factor influencing an employee’s decision, it is not the sole determinant. The three fundamental aspects that I mentioned earlier—challenging work, global exposure, and career growth—continue to play a crucial role in attracting talent to GCCs.
Meaningful and Challenging Work
- Employees want to work on high-impact projects that contribute to global solutions rather than being one among thousands in a massive team.
- GCCs provide a first-mover advantage, allowing professionals to gain greater visibility, take ownership of their work, and grow faster.
Global Exposure & Direct Impact
- Unlike traditional IT service providers where employees often follow predefined processes, GCC professionals interact directly with global stakeholders.
- They see their work reaching end customers worldwide, fostering a sense of ownership and purpose.
Problem-Solving & Innovation
- Employees in GCCs feel they are part of the solution, not just executing someone else’s instructions.
- They have opportunities to engage in strategic decision-making, innovation, and leadership.
Competitive Compensation
- While salaries in GCCs are often higher than those in service firms, professionals are not solely motivated by pay.
- The combination of better pay and challenging work makes GCCs an attractive choice.
Career Growth & Mobility
- GCCs have expanded rapidly, with some growing from a few hundred employees to 40,000+ within years.
- Organisations offer internal job posting (IJP) programs, allowing employees to explore lateral moves, leadership roles, and diverse career paths within the same company.
Why Talent Chooses GCCs?
Professionals considering GCCs are more focused on opportunities. They ask:
- What kind of work will I be doing?
- Will I have visibility and growth opportunities?
- How will this move impact my career long term?
Q: GCCs in India are actively driving gender diversity, with many women in leadership roles. Is this a strategic effort to attract diverse talent? Additionally, what factors contribute to their high retention rates for women?
Karthik: In India, diversity conversations primarily focus on gender, and GCCs are certainly leading the way in this area. Currently, women make up around 30-32% of the workforce in GCCs—a promising trend.
However, one of the key challenges we are addressing is increasing diversity at senior leadership levels. While we have made progress in hiring more women, representation tends to decline as we move up the corporate ladder. A major priority now is to build a strong pipeline for women in leadership roles to ensure sustained progress.
When it comes to retention, GCCs naturally foster long-term engagement. Employees stay not just because of career growth and meaningful work but also due to the flexibility GCCs offer. Unlike traditional corporate structures, GCCs empower employees to design and define their roles, promoting a sense of autonomy and ownership—key factors that contribute to higher retention, particularly for women professionals.
Q: Succession planning plays a key role in leadership continuity. Are GCCs taking a structured approach to leadership development, and does this support the retention and progression of women leaders?
Karthik: Absolutely. GCCs have a well-defined approach to leadership development, with a strong emphasis on succession planning. While leadership programs are designed for all employees, there is a conscious effort to improve diversity at senior levels.
Unlike traditional service firms, GCCs prioritise both technical expertise and leadership skills, ensuring a holistic growth path. Employees are encouraged to develop domain knowledge alongside managerial capabilities, making career progression more structured and meaningful.
Additionally, proactive investment in employee development aligns individual growth with the organization’s expansion. This structured approach not only helps retain top talent but also empowers more women to step into leadership roles, contributing to greater diversity at the top.
Q/Is pay equity a significant factor in hiring for GCCs, or does it still lag? Do these organisations demonstrate stronger pay equity compared to other industries?
Karthik: In my experience, pay equity is less of a challenge in GCCs. These organisations follow standardised pay structures with flat grids, ensuring minimal variation. While individual differences of 10-15% may exist based on career starting points, there is no deliberate pay disparity.
Looking at the bigger picture, can pay equity to be considered a key differentiator for GCCs? I believe so. Unlike traditional industries that often require course correction, GCCs are built with inclusivity in mind from the outset. As extensions of global enterprises, they benefit from international best practices and a strong commitment to equitable policies.
For instance, when new GCCs are established, companies are prioritising gender diversity in leadership from the start. Talent acquisition teams proactively build diverse candidate pools, ensuring inclusive hiring practices.
The rise of new GCCs and startups is expanding opportunities significantly. Unlike legacy corporations that need to retrofit diversity initiatives, these setups integrate equal pay structures, performance frameworks, and leadership pipelines from day one. This proactive approach makes GCCs a compelling choice for women professionals seeking fair pay, career growth, and long-term equity in the workplace.
Q/What are the top three challenges in expanding GCCs in India? Are there any gaps in policies or execution that still need addressing? How can GCCs improve as they grow rapidly?
Karthik: GCCs are still in the exploratory phase when expanding into tier 2 and tier 3 cities. While companies are testing these markets, most prefer to start in major metros and wait for the talent ecosystem to develop before making a larger commitment to locations like Madurai or Nagpur.
The first major challenge is leadership depth. While infrastructure is important, strong leadership talent is crucial, especially in niche areas like technical expertise and global stakeholder engagement.
The second challenge is talent acquisition, particularly for specialised skills. While reverse migration due to COVID-19 has increased talent availability in smaller cities, it is still difficult to find specialised professionals compared to metros like Bengaluru, Hyderabad, and Pune.
The third challenge is embedding diversity and inclusion into expansion strategies. As GCCs grow in new locations, ensuring diverse leadership pipelines and inclusive workplace cultures will be essential for long-term success.
Addressing these challenges will require a blend of government support, industry collaboration, and targeted talent development initiatives.
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Q/You mentioned the challenge of niche skills. Are GCCs investing in in-house upskilling programs, particularly for women or other targeted groups? Do you see upskilling as a viable solution for the expansion of GCCs into tier 2 cities?
Karthik: Absolutely. Upskilling is a strategic investment, and GCCs are already making significant efforts in this area. Learning and Development (L&D) programs are essential, not just for tier 2 cities, but across all centers. Many GCCs are investing in upskilling initiatives to address the talent gap, especially in high-demand fields like AI and data science. Since experienced professionals in these areas are scarce, companies are focused on nurturing promising talent internally through structured training programs.
Upskilling isn't limited to technical knowledge; global exposure and cross-border learning are also critical to aligning talent in India with international standards. Organizations are investing in product training and domain-specific expertise to create a robust workforce.
Another key aspect is unlearning. With the rapid pace of technological change, professionals must not only acquire new skills but also let go of outdated practices. Creating a culture of continuous learning is vital, where employees are encouraged to adapt proactively to technological advancements.
One significant challenge for expansion into tier 2 and tier 3 cities is connectivity. Many professionals are open to relocating or travelling for work if there are efficient and cost-effective transportation options. Improved connectivity would make it easier for talented professionals with leadership and technical expertise to move between cities, supporting smoother GCC expansion.
Mamta Sharma is a freelance journalist committed to sharing stories on talent management, DEIB, workplace culture alongside narratives on leadership, entrepreneurship, tech innovation and employee wellbeing.
