How India’s Smaller Cities Are Powering the Next Wave of Enterprise Offshoring

For nearly twenty years, discussions about India’s offshoring potential focused on a few tier-1 cities—Bengaluru, Hyderabad, Chennai, Pune, NCR, and Mumbai. These metros became linked to IT outsourcing, BPO services, and global back-office functions. However, in the early 2010s, rising operating costs and a new talent pool in smaller cities led analysts to predict a significant change: tier-2 hubs would emerge as the next outsourcing frontier in India.

This vision never fully materialized for the BPO sector. While companies explored options in Coimbatore, Indore, Jaipur, Kolkata, and Kochi for customer support and operations, many centers quietly closed. Issues with scalability, ecosystem maturity, and access to skilled management created obstacles that BPOs couldn’t overcome.

Today, the story is changing—not through BPOs but through Global Capability Centres (GCCs). These high-skill, innovation-driven units are set up by multinational corporations (MNCs) to handle advanced technology, engineering, and digital functions. Unlike the earlier BPO wave, GCC growth in tier-2 cities seems more promising and sustainable.

Cities like Coimbatore, Ahmedabad, Kochi, Indore, Bhubaneswar, and Jaipur are attracting significant interest from global companies. This interest is driven not just by cost savings but also by talent availability, better infrastructure, flexible work models, and a broader trend toward AI-driven enterprise change.

A New GCC Geography: How India’s Tier-2 Cities Are Rising

India currently has more than 1,800 GCCs, with projections suggesting this number will exceed 2,100 by FY2028. Traditionally, these centers were concentrated in tier-1 tech hubs, but the landscape is rapidly evolving.

GIFT City: India’s Fastest-Growing Global Hub

Ahmedabad’s GIFT City has emerged as a key player in India’s next wave of GCCs. With regulatory clarity, top-notch infrastructure, and a unified financial ecosystem, it is drawing global firms seeking to establish high-skill engineering and digital centers.

Companies like Infineon Technologies and Technip Energies have selected GIFT City for more than just cost advantages. They are attracted to its environment, which supports fintech innovation, global finance operations, and specialized research and development.

Coimbatore: From BPO Footnote to Engineering Powerhouse

Once a city with several BPO centers that struggled to grow, Coimbatore is now revitalizing through its engineering talent. In 2023, Bosch Global Software Technologies opened a cutting-edge Vehicle Validation Center, demonstrating the city’s potential as a mobility engineering hub.

Kochi, Indore & Jaipur: The New Specialist Hubs

Industry data shows these cities are becoming key regions for specialized skills such as:

Cloud engineering
Med-tech and healthcare R&D
Cybersecurity operations
Product testing and quality assurance
AI model validation and automation engineering

These hubs benefit from strong academic ecosystems, better IT parks, and lower turnover rates.

The Economics Behind the Shift

The move toward smaller cities is not just emotional or patriotic; it’s based on clear economic factors:

10–12% lower turnover than tier-1 cities
20–35% reduced talent costs
30–50% cheaper office rents
Access to a large untapped talent pool willing to work from their hometowns
Less competition for specialized talent

Varun Sachdeva, SVP and APAC Head at NLB Services, believes this shift is structural and long-lasting:

“By 2030, nearly 39% of the GCC workforce will work from tier-2 and tier-3 cities. Emerging hubs like Coimbatore, Ahmedabad, and Bhubaneswar are quickly becoming specialized delivery centers. This could create over 700,000 new GCC jobs by 2030.”

This transformation is not just about expanding operations; it’s about forming distributed, resilient capability networks.

Why GCCs Could Succeed Where BPOs Failed

The BPO sector faced challenges in tier-2 expansion for a primary reason: the nature of the work. BPO roles were often process-driven, repetitive, and easily centralized in larger hubs. Scaling them in smaller cities needed substantial management oversight, customer-facing skills, and large talent pools—all of which tier-2 cities lacked at that time.

GCCs, however, work quite differently.

1. GCCs Are Doing High-Skill, Innovation-Led Work

Modern GCCs are not merely back-office units; they are central to the enterprise:

- AI/ML model engineering
- Cloud transformation
- Cybersecurity and threat intelligence
- Digital product and platform engineering
- Advanced analytics and automation
- Global R&D and innovation programs

These functions attract engineers, data scientists, and digital specialists—talent that is readily available in tier-2 regions due to India’s widespread education system.

2. Talent Wants to Stay Local When Opportunities Match

A decade ago, most engineering graduates moved to metro cities for work. Today, if comparable high-skill roles are available in their hometowns, candidates prefer:

Lower living costs
Strong family support
Shorter commutes
Better quality of life

The hybrid work trend has further emphasized this preference.

3. The “Hub-and-Spoke” GCC Model Has Changed the Game

While leadership and client-facing roles may stay in metro areas, engineering, QA, product operations, and automation teams are relocating to satellite centers. This decentralized model:

Reduces congestion in tier-1 cities
Improves business continuity
Allows for multi-location delivery
Enables faster team scaling at a lower cost

4. State Governments Are Competing Aggressively

Unlike during the BPO boom, state governments have learned from past mistakes.

Examples include:

Uttar Pradesh’s GCC-specific incentives like stamp duty waivers, land subsidies, and employee reimbursement
Gujarat’s SEZ-friendly policies in GIFT City
Tamil Nadu’s engineering initiatives in Coimbatore
Kerala’s digital innovation efforts in Kochi

As Kapil Joshi, CEO of Quess IT Staffing, points out:

“India’s GCCs are no longer just delivery hubs; they are innovation powerhouses.”

The Challenges: Not Every City Is Ready for the GCC Boom

Despite positive momentum, several challenges persist.

1. Infrastructure Gaps Are Still Real

Many tier-2 cities face issues like:

- Limited international flights
- Unreliable power supply
- Fewer Class A office spaces
- Limited high-speed data redundancy

These problems can hinder R&D and critical engineering projects.

2. Leadership Is Still Concentrated in Tier-1 Cities

A senior HR leader at a U.S. financial GCC warns:

“Unless leadership and innovation roles move out of metros, tier-2 centers risk being delivery back-ends and not real capability hubs.”

Innovation autonomy suffers without local leadership.

3. Ecosystem Maturity Remains Uneven

Bengaluru has built its ecosystem over 30 years, fostering startups, R&D labs, universities, vendors, community events, venture capital, and tech culture. Tier-2 cities are still developing in these areas.

Some cities have skilled talent (like Coimbatore’s engineering depth) but:

- - - Fewer deep-tech startups
    - Limited R&D labs
    - Weak venture ecosystems
    - Limited mobility for managerial talent

These factors can restrict career growth for mid-senior professionals.

Positive Signals: What’s Working in Favor of Tier-2 GCCs

Despite the challenges, many encouraging signs suggest this shift is here to stay.

1. Coimbatore’s IoT-Led Engineering Future

The city is being considered for a potential global engineering Center of Excellence (CoE) for IoT, testing, and automotive technologies.

2. GIFT City’s Talent Pipeline Partnerships

Partnerships with global universities are producing specialized mid-level talent in fintech, trading systems, engineering, and cybersecurity.

3. Rapid Growth Beyond the Big Six

Bengaluru has over 285 GCCs. Hyderabad has more than 110. Jaipur, Vadodara, Coimbatore, and Kochi together now account for 8% of all GCC units—up from 5% in FY2019.

4. Massive Untapped Opportunity

According to ANSR CEO Lalit Ahuja:

“Since 80% of global firms have yet to establish GCCs in India, the potential is enormous.”

5. Companies Are Actively Expanding in Non-Metro Regions

GlobalLogic’s growth into Mahabubnagar, Ahmedabad, and Nagpur shows how firms are skipping metros altogether to attract local graduates. More than 60% of India’s graduates now come from smaller towns, hinting that decentralization is a natural step forward.

What Will Determine Whether This Shift Succeeds?

The next three years will be critical. The sustainability of GCC expansion into tier-2 and tier-3 cities will depend on whether companies and governments can work together to strengthen the ecosystem by:

1. Local Leadership Development

Finding, training, and empowering leaders in smaller cities will be crucial for moving innovation roles beyond metros.

2. Industry-Academic Partnership

Working together on curriculum, internships, labs, and industry-led programs can help create a pipeline of job-ready engineers.

3. Strengthening IT, Infrastructure & Connectivity

Investment in data centers, airports, transport, and commercial hubs will be vital for scalability.

4. Encouraging Startup and Innovation Ecosystems

Startups can accelerate growth—attracting talent, promoting an R&D culture, and enhancing innovation at the city level.

5. Creating City-Specific Specializations

For instance:

Coimbatore → automotive and IoT
Kochi → cybersecurity and med-tech
Indore → cloud engineering and DevOps
Jaipur → fintech and analytics
Ahmedabad → financial engineering, chip design

Focusing on city specialties will help create depth rather than just broad IT growth.

The Road Ahead: Can Tier-2 Cities Define India’s Offshoring Future?

India’s next chapter in offshoring may not center on established metros. Instead, it may emerge from cities that have long been seen as peripheral. The GCC model is distinct from the BPO approach—it is strategic, technology-driven, and aligned with global enterprise goals of AI, automation, and digital resilience.

While challenges persist—especially regarding leadership, ecosystem maturity, and infrastructure—the momentum is clear.

The opportunity is vast, the timing is right, and the foundations are much stronger than during the BPO boom-and-bust cycle.

If India can maintain this shift, tier-2 cities could help create a more distributed, resilient, and innovation-driven offshoring model—one that not only supports global enterprises but also reshapes the country’s economic landscape for years to come.