The landscape of Tier II and Tier III cities in southern India is changing. They are becoming the centre of the upcoming wave, comprising new global capability centres and IT services hubs. Such cities are no longer the outskirts of the services narrative of India’s growing economy. However, to convert this potential, the development of readily hireable talent must be a conscious goal of State education systems. Regional governments must make sure that these cities become more attractive to investors.
South India, the new frontier for GCCs and IT services
Across several studies, Coimbatore, Mysuru, and Visakhapatnam are routinely listed as high-potential Tier II locations. They point to a combination of maturing infrastructure, engineering prowess, and cost effectiveness. Almost 60% of India’s technology graduates, according to research, come from Tier II and Tier III cities. As a result, job advertisements in these areas have increased by more than 20 % per year. This indicates that these markets are being actively investigated by employers and investors alike.
This thesis on Tier II cities’ growing prowess is getting validated by corporations. An offshore centre was created in Mysuru by a U.S.-based SaaS firm, which reported faster ramp-up and better retention than metro areas. Coimbatore is home to more than 25 GCCs and technology services hubs, and the number of new centres is growing by double digits every year. Andhra Pradesh has made more progress by establishing a dedicated GCC innovation campus in the Madhurawada IT cluster in Visakhapatnam, with specialised tie-ups. In addition to a simultaneous push for data centres and AI infrastructure, the aim is to create 10,000 jobs over the next five years.
But there is a catch to every hopeful evaluation. According to industry experts, just 5–15% of new hires are hired locally in the technology services sector. The training ecosystems and surrounding higher education institutions are not yet in line with the demands of the industry. The crucial query still stands. Can universities and State education agencies in places like Mysuru, Coimbatore, and Visakhapatnam build a pipeline that turns academic promise into long-term, good jobs?
A crucial part of the emerging ecosystem is a stark contrast to what has been happening between 1990 and 2022. The technology sector, especially the GCC ecosystem, employs a huge variety of people from different domains. One can be a graduate with domain knowledge of business, finance, commerce, statistics, data, technology, or people from the human sciences including medicine, pharma, nursing, physiotherapy, dentistry, and cross disciplinary domains such as biotech, biostatistics, biomedical engineering, can all find their niche in the technology services ecosystem, which was starkly absent in the first wave of IT services in India.
The GCCs use people from the human sciences (doctors, nursing professionals, biostatisticians, biotech graduates, physiotherapists, and others) for medical technologies, health care, revenue cycle management, hospital data management, and medical records. Graduates in commerce, business and accounting find their niche in the banking and financial services or accounts receivable/payable part. Those from any engineering domain can find a specialised job in the GCCs of manufacturing, processing, energy, gas and petroleum sectors giants.
While IT services have had their verticals aligned to each such domain, the GCCs are focusing on IP creation, efficiency and productivity improvement areas, and so domain expertise gains traction. Domain expertise, along with technology capability seems to be a real killer combo as far as job scenarios are concerned.
Why the talent search has extended beyond Metros
This geographic change has a clear justification. When compared to its Tier I counterparts, Tier II cities usually offer a 10–35% savings in total operating costs. This covers expenses, salaries, and real estate. This is convincing to multinational corporations seeking profitability. However, having access to reliable, competent personnel and a sufficient infrastructure is necessary.
Pursuing a less crowded talent market is equally important. Metros have turned into zero-sum games, which IT services and GCC leaders are increasingly complaining about. The same experienced engineers are sought after by several companies, which raises wages and causes attrition. Smaller cities, on the other hand, provide a faithful workforce. They give recruits the chance to form long-term teams, especially when they work close to their hometowns.
Tier II cities have been assessed by consulting companies such as EY, which used more than 80 criteria in their studies. These include societal issues, infrastructure, business environment, expenses, and human resources. They see a definite benefit to setting up GCCs there. Corporate strategy and policy are starting to coincide. Tamil Nadu has signalled that Chennai shouldn’t be the only winner by announcing specialised GCC hubs in Coimbatore, Madurai, and Tiruchi. Under a similar vein, Visakhapatnam and other growing cities are specifically positioned as hubs for AI and digitalisation under Andhra Pradesh’s IT and GCC policy (4.0). Incentives and connection initiatives like the Bhogapuram International Airport support this.
The talent dilemma in tier II and III urban areas
Ironically, the corporates continue to cite “limited local talent” in smaller cities, despite the fact that most engineering graduates come from these areas. Proficiency and job preparation are the problem, not numbers. Soft skills are still lacking, exposure to contemporary tools is irregular, and curricula are outdated. The large number of institutions in cities like Mysuru or Madurai, according to analysts, is only the beginning.
Whether these institutions understand how global centres operate is the key variable. The GCCs of today go beyond back-office operations. They carry out design, data science, cybersecurity, product engineering, and international marketing. Such positions require expensive retraining for graduates who are only familiar with legacy programming and rote algorithms. A purposeful realignment of academic goals is necessary to close this gap. Increasing the number of engineers is not enough. Cities in Tiers II and III need engineers, managers, and recent graduates in the arts who are truly “GCC-ready.”
State education departments’ requirements
The State governments are mostly responsible. A large portion of higher education policy is still under their hands. It is crucial to use a cluster-oriented strategy. Cities having customized education plans, such as Mysuru, Vijayawada, and Nellore, ought to be regarded as separate IT or GCC hubs. It is imperative that curriculum modernization be co-owned with industry and cannot be compromised.
IT services and GCC advisory committees may be established at the municipal level by state institutions. These should include entrepreneurs, corporate leaders, and IT companies to update curricula every three years. Cloud computing, data engineering, cybersecurity, AI/ML, and digital operations must be priority areas. “Practice school” semesters that are required are essential. In order to ground learning in real-world projects rather than test manuals, students should spend six months working in the industry.
Second, states need to fund employment academies and top-notch finishing schools. Practical skills can be the focus of brief, intense programs created in collaboration with industry. These consist of cross-cultural cooperation, sprint rituals, and DevOps pipelines. Although they must function professionally, these centres may be located in engineering colleges or polytechnics. They need clear outcome measurements and placement targets.
Lastly, an update is required for the teacher pipeline. Cities with large IT hubs and GCC populations should provide faculty with incentives and sabbatical exchanges. To implement new methods in the classroom, teachers must spend a semester in a GCC. Faculty will continue to teach for yesterday’s labour market in the absence of such cross-pollination.
How colleges can produce graduates who are ‘GCC-ready’
Compared to governmental bureaucracies, universities in these cities are more nimble. Developing customised programs in line with new sectoral clusters is a clear place to start. Coimbatore can create programs in advanced manufacturing analytics and industrial IoT because of its industrial base. Mysuru may decide to focus on cybersecurity, financial, and SaaS. Cloud reliability engineering and AI operations can be developed in Visakhapatnam.
Multidisciplinary choices are essential. As mentioned earlier, the GCC teams are becoming more interdisciplinary. “Technology plus domain” paths should be established by universities. BCom (Analytics) and combined STEM-policy programs are two examples. These represent GCC responsibilities in HR, compliance, and international finance.
Beyond skill: Issues that governments need to address for investors
If investors believe that a city is unlivable, then even a great talent strategy will fail. Four non-negotiables for site selection are highlighted in analyst reports. These include a stable policy system, safe communities, first-rate office space, and dependable connectivity. Three aspects of infrastructure must be given top priority by governments.
First, there must be flawless physical connectivity. Cities like Tiruchi and Visakhapatnam must be connected to major metropolises and international gateways by frequent flights and quick trains. An excellent example is the investment made by Andhra Pradesh at Bhogapuram International Airport. Other places require a same level of foresight.
Second, it is imperative to have grade-A commercial real estate. It needs scalable high-speed connectivity and dependable electricity. Large amounts of office space in smaller cities are already in high demand due to the more than 200 GCCs. Pre-zoned, plug-and-play campuses with single-window clearances are needed to access this. This is hinted at in Tamil Nadu’s plan for official GCC hubs, but implementation is crucial.
Third, livability in cities is crucial. Cities are assessed by young professionals based on their cultural life, schools, and hospitals. Governments need to spend money on parks and public transportation. This guarantees that workers see places like Nellore as long-term residences rather than transient assignments.
A coherent branding and incentive plan
In a competitive environment, policy incentives are still important. Policy 4.0 for Andhra Pradesh proposes incentives tied to employment and capital subsidies. Tamil Nadu and Karnataka have implemented sector-specific programs to promote growth outside of their capital cities. But branding and execution will be the real differentiators.
Clear, predictable policies and efficient single-window systems are well-received by investors. They also appreciate data-driven, convincing tales. This covers success stories, retention rates, and graduate production. State agencies and business groupings ought to work together on “GCC prospectuses” tailored to each city. These brief documents need to gather infrastructure, policy, and talent in one location. By coordinating national skilling programs with these developing clusters, the Centre may assist with this. Additionally, it must make investments in digital public infrastructure that universities and companies can use together.
The possibility — and the danger of passing it up
The technology services sector’s ascent in India is a long-term trend and is acknowledged as a cornerstone of the nation’s development narrative. However, the location of this expansion is not fixed. Tier II cities in South India have the potential to transform from “backup locations” to major global hubs if they integrate academic reform with better governance. The tech industry will proceed with cautious experimentation if they don’t work. The majority of high-value jobs will remain in well-known urban areas. That would be a chance lost. Both the cities and the thousands of graduates who are eager to work abroad at home would suffer a loss.
(K. Ramachandran, a journalist turned entrepreneur, writes on higher education, education policy, skilling and talent development.)
Remove