Increased talent availability, reduced costs, and improved infrastructure – Why companies setting up GCCs in Tier-2 cities isn’t a shocker?
Along with welcoming the digital transformation wave during the pandemic, India became a lucrative country to set up Global Capability Centres (GCCs), a ‘sector of sectors’, for several global organisations which ultimately resulted in producing the biggest employment avenues for the country. The availability of digital talent, ease of doing business, improving infrastructure, conducive policy environment and flexible GCCs ecosystem are among the factors behind enabling over 500 global capability centres (GCCs) to be added to India’s existing tally of 1,500 GCCs by 2026, as per IT industry body Nasscom. As per a CNBC TV article, with more than 1.3 million employees, over $35 billion in annual revenue, and more than $100 billion in GDP, half of the GCCs are currently located in India.
New talent in the hinterlands –The emergence of tier 2 and tier 3 cities as suitable destinations for flexible high-tech work was one of the most important trends the pandemic brought along. The cheaper talent and infrastructure costs of these cities help in the optimization of the organization’s total cost of operation. There have been up to 40% savings in operational costs in tier 2 and tier 3 cities as compared to metros. The state governments also appear to have taken notice of this, as through various policies and programmes they are encouraging businesses to locate their GCCs in these cities. It is the result of the reverse migration and government initiatives that 140 GCC nations have established bases in India over the past three years, taking a total of over 1,430.
People’s Cost – The ‘pandemic epiphanies’ has shown that investment in people’s cost has continued with its upward trend, both in terms of the share of overall costs as well as the absolute INR value. In order to gain access to top talent in the GCCs while reducing costs and risks, a gig-based workforce has become an attractive proposition. This is especially true as more companies are becoming aware of their need for greater agility, employees’ changing perception towards work culture and the growing importance of ‘pay for performance’. In fact, the average salary increase for niche skill talent has become as much as 1.8 times the number of other employees.
Infrastructure Cost – With the ‘Hub-And-Spoke’, the office model of the future, multiple GCCs are promoting flexible and collaborative workplaces to employees. With the state-of-the-art infrastructure to build ‘Digital Workspaces’, employers have access to a wider talent pool for creating a global talent hub. Due to mass migration to their homelands, large organizations also have just enough employee density to put new spokes in Tier 2 & 3 cities, which saves employees from a long daily commute while keeping them culturally cohesive.
Conclusion
Many heads of GCC centres believe that having an India-based GCC has evolved as an imperative for businesses. As with the increase in ease of doing business, the rapidly maturing GCC landscape, the vibrant start-up ecosystem, improved infrastructure, and a conducive regulatory environment in tier 2/3 cities, the organizations will not only be benefited from the lower cost of operations but will also be ensured with a substantial cost advantage for India-based R&D centers as compared to HQ. As a result, many GCCs are now investing in platforms like Mikro Graffio, a strategic fulfilment partner for global companies looking to enter India via multiple routes. The platform invests in building enterprise capabilities and transforming middle and front office in India with the workforce, owing to the talent availability, reduced cost, improved infrastructure and attractive commercial real estate propositions available across Tier-2 and Tier-3 cities.
(This article is written by Mr. Santhosh Mahalingam, CEO & Co-Founder, Mikro Grafeio, and the views expressed in this article are his own)
