The quick saturation of talent, infrastructure, and operational costs in Tier 1 cities has led to a transformation in the landscape of Indian Global Capability Centres (GCC). This change, supported by government initiatives and investment in infrastructure, has opened up new jobs and development prospects in Tier 2 and Tier 3 cities.
In this candid and insight-packed conversation, Rajesh Bharatiya, CEO, Peoplefy, explores the ground realities driving Tier 2 city adoption, the rise of distributed GCC models, the reverse talent movement, and what all of this means for India’s employment and infrastructure growth story.
Q/ If you look at the NASSCOM report from 2019, the share of GCCs in tier 2 and tier 3 cities has grown from 5% to 7% till now. How do you see the talent shifting in the GCCs, and how do you see its effect on the employment generation and infrastructure development in Tier 2 and Tier 3 cities?
Rajesh: That’s a great question. Currently, the Indian IT industry is worth about $270 billion and is projected to grow at a rate of around 8-9%. Out of this total, approximately $65 billion is attributed to Global Capability Centres (GCCs). As major cities become overcrowded, real estate prices rise, and commuting becomes more difficult, companies are beginning to explore opportunities in Tier 2 cities such as Indore, Coimbatore, and Ahmedabad.
Cities like Hyderabad and Pune are also gaining preference as they are considered to be somewhere between Tier 1 and Tier 2. Our Finance Minister, Nirmala Sitharaman, announced a new framework to promote the establishment of GCCs in these Tier 2 cities. According to the government, this initiative is expected to create around 500,000 jobs over the next 2-3 years, which will significantly impact the overall GCC ecosystem. Global companies will require high-quality commercial infrastructure to set up their offices successfully. That will push the developer community, the builder community to build premium infrastructure with support from the government. Secondly, I think, once GCCs announce that they want to set up in a Tier 2 city, a lot of local talent will have new avenues of employment.
You may see premium talent from Tier 2 cities, which earlier moved to Bangalore, or Gurugram, or Pune, may want to come back to their hometown, or base location, Tier 2 family. Especially post-COVID. The government will have to get involved to ensure that the city provides them with good commute, housing, etc.
While answering our question, Rajesh cited the example of Hyderabad and its infrastructural growth. He says, “Hyderabad has transformed as a city in the last 20 years. Kudos to the state leadership for the plan and the vision.”
He also hinted at Indore having huge potential to be another great city for GCC while mentioning major infrastructural changes. “While it will take time, it doesn’t mean that we don’t start. I think if the enabler is the government. While the GCC market in India is upbeat, it gets tough competition from similar markets in Vietnam and the Philippines.”
Q/ Could you also share insights around which sectors and which particular segments within the GCC are the first ones to move in tier 2 and tier 3 cities, or is the growth sector agnostic?
Rajesh: Good question. So, I would say it is sector-agnostic right now because there could be one or two cities like Coimbatore coming up more on the engineering side. Or if somebody is putting up something in engineering, they want to go there. Hyderabad, which is no longer a tier 2 anymore, has a lot of healthcare footprint.
In my view, sector-wise planning of GCCs in tier 2 cities is still too early to comment on. If a company moves to smaller cities, then to tap the local potential, they would primarily start with support functions like customer support, infrastructure support. So far, the space is open for any Tier 2 city to become specialised.
I feel we might see two outcomes:
- One is that some of the existing GCCs that are expanding within India will set up another smaller location to tap into the local talent for their ‘brownfield project.’ These firms have already acclimatised to the Indian market; they know how it works. Ultimately, the state is going to benefit big time.
- Also, we always come across a lot of candidates who have the willingness or mindset to go back to their hometown. Once that migration happens, the reverse migration of talent from big cities to tier 2 will start percolating into the local economy with more disposable income, more investment by themselves. It needs to be taken seriously by the governments. Gujarat is doing very well here, in my view. They have picked a lot of large projects because of the facilities available in the state, and the government has helped remove major hurdles for new companies. Like Gujarat, other governments will have to invest in that space to make a very clear noise to some of these prospective companies.
Must Read: 2 Million Minds Transforming GCCs into Genius Centres
Insights on the Talent Requirement for New vs Mature GCCs
The rapid advancement of technology is changing the overall nature of job requirements. I’m not just referring to tier 1 or tier 2 roles; this shift is happening across the board. With the emergence of generative AI and other groundbreaking technologies, many routine tasks can now be automated. This means that some workers will need to reskill and learn how to effectively use AI. Within the realm of AI, there are different levels of knowledge and expertise. Some individuals will need to learn how to use AI tools, others will focus on creating AI models, and some will become experts in the field. Additionally, there will be developers and designers involved as well. However, everyone needs to have at least a basic understanding of AI. As a result, the talent mix in the workforce is evolving.
For tier 2 cities, they will first establish themselves as a viable option. And once that first set of processes becomes successful, they will go through the regular path of other Tier 1 cities.
Q/ Concerning the high attrition rates, how can GCCs create meaningful pathways for their employees? What should be done to retain some of the top talent in the GCC?
Rajesh: We are at the cusp of the generational shift. Some decades ago, people would join a company and retire from that company. Today, that is not the case.
People will stay as long as they find meaning in their work. So, if a company is successful in showing how the work that one individual is doing is impacting either somebody’s life, something in society or some broader purpose, they will retain their top talent.
Of course, your compensation and other things have to be in line with the market, but you cannot retain talent only through compensation. The second or third thing would be your culture. If you are a very rigid employer with no flexibility, you’ll face troubles. Plus, a lot depends on how much the company invests in nurturing the talent.
If an employee for you is as a body working on some project, and you want to bill them per hour, and the moment billing is stopped, you want to chuck them out. If that is the approach, that won’t be sustainable.
Q/ What hiring or recruitment practices do GCCs follow that are different from other industries?
Rajesh: Based on our experience, it’s clear that they typically do not engage simultaneously with numerous vendor partners, issuing the same requirements to all.
This approach frequently leads to compromised hygiene checks and neglect of essential soft elements. In contrast, our collaboration with GCC clients as an exclusive vendor partner allows us to provide a comprehensive, end-to-end service, ensuring a more thorough and thoughtful recruitment process.
They may work with more than one partner like us, but the part given to us is given exclusively to us for maybe 2 months or something. It will only go to someone if we do not deliver. That way, we have the time to invest in talking to each candidate in detail, talking about why somebody should join.
Rajesh cited the example of Michelin Tyres – a client they work closely with.
“It is a French tyre manufacturing company which is doing data science and various other green tyre technology and other things out of their centre in Pune. So, we have that space to talk to the candidates in detail, make them interested and also rule out candidates who are not fitting, because with GCCs, a talent has to be ready to speak to any counterpart in any part of the world. There should be effective communication, and other elements must be well-established. GCCs follow the step-by-step routine.”
Hiring for GCCs is an exclusive and premium experience for both parties in comparison to the Indian IT industry, which works under a lot of pressure.
Movement of Premium Talent from IT to GCCs
GCCs are an extension of their headquarters unit. So, you are working for your own company, and whatever you develop directly impacts the top line or bottom line. So, these are some benefits candidates see in moving to GCCs. Sometimes, when a new GCC emerges, a leader gets to play multiple roles, which they may not have in a typical IT services company, where things are very much structured.
Q/ How can colleges and organisations collaborate to prepare fresh talent for a rapidly evolving industry?
That’s an extremely relevant question, especially in the context of India’s demographic dividend. With the country boasting the largest youth population, it’s concerning that over 70% of this demographic may not be readily employable due to gaps in both technical and soft skills.
To address this challenge, companies should develop a strategic plan for their talent pipeline. One effective approach is to collaborate with universities and educational institutions. For instance, implementing a model where one semester is dedicated to internships and the other to meeting specific skills required by the industry can be beneficial. Some of our clients have successfully adopted this model, partnering with institutes to tailor courses to their needs for one semester.
By proactively shaping the talent pipeline in this way, companies can ensure that graduates are equipped with the skills necessary for immediate involvement in the workforce. Ultimately, it is crucial to anticipate the skills and talent requirements of the future, planning three years and working backwards to bridge those gaps.
Rajesh concluded the conversation with his thoughts on India’s demographic dividend.
“I believe that while the demographic dividend has great potential, we are not fully leveraging it. Many projects are being shifted to countries like Vietnam or Thailand, which could have been developed in India. We need to accelerate our reform process, focusing on labour laws and simplifying land acquisition. The government should consider designating large areas of land near tier-2 cities for specific purposes and streamlining the process to avoid unnecessary complications.
Rajesh Bharatiya is a visionary leader whose forward-thinking approach is revolutionising the HR landscape. Having an illustrious career that cuts across various leadership positions in human resources as well as global HR tech firms, Rajesh has known how integral talent is to the functioning of an organisation, and thus, Peoplefy became the culmination of his vision and expertise.
