New Delhi, Nov. 21 -- A decade ago, India's tier-2 cities were touted as the next big frontier for BPO expansion. Lower rentals, cheaper labour and proximity to metros were pitched as unbeatable advantages. Yet the promise fizzled. Many centres shut down quietly, weighed down by scalability issues, limited talent pools and a fragile ecosystem that couldn't support long-term growth. Today, the offshoring narrative is being rewritten - not by BPOs, but by Global Capability Centres (GCCs) - captive units set up by a multinational to manage its technology and business operations - and this time, the momentum seems far more sustainable.

From Coimbatore and Kochi to Indore, Jaipur and Ahmedabad, multinational firms are setting up or geography is anchored in AI-led innovation, product engineering, and digital-first enterprise transformation.

A new GCC geography takes shape

India now hosts more than 1,800 GCCs and is expected to exceed 2,100 by FY2028. What's changing rapidly is where these centres are being built. Ahmedabad's GIFT City has emerged as a magnet for global firms creating high-skill capability hubs. New entrants such as Infineon Technologies and Technip Energies chose GIFT City for its modern infrastructure, regulatory clarity and attractive incentives. Coimbatore, which once struggled to retain BPO operations, is seeing interest from engineering-led companies. Bosch Global Software Technologies inaugurated a Vehicle Validation Center there in 2023, delivering end-to-end engineering services for global mobility clients. Industry reports note that Kochi, Coimbatore, Indore and Jaipur are gaining traction for domain-specific competencies - cloud engineering, med-tech, cybersecurity, and product testing.

Companies are increasingly drawn by the tangible economics: 10-12% lower attrition, 20-35% talent cost advantages, and 30-50% lower office rentals than in tier-1 metros. Varun Sachdeva, SVP & APAC Head at NLB Services, believes this shift is structural, not cyclical. "By 2030, nearly 39% of the GCC workforce will operate from tier-2 and tier-3 cities. While Tier-1 locations will continue to anchor leadership and R&D, emerging hubs like Coimbatore, Ahmedabad and Bhubaneswar are rapidly becoming specialised delivery centres. This synergy will help create 0.715 million new GCC jobs by 2030."

Why the bet could work this time

The biggest difference from the BPO era is the nature of work. GCCs today are not back-office engines; they sit at the core of enterprise strategy - handling AI model development, cloud modernisation, cybersecurity operations, and digital product engineering and global R&D programs.

This work attracts a more specialised talent pool, often composed of engineers and data science professionals who prefer staying closer to their hometowns if comparable opportunities exist. Hybrid work models have also unlocked flexibility. Leadership and client-facing teams remain in metros, while engineering, QA, automation and operations shift to satellite hubs - a "hub-and-spoke" GCC model that has gained momentum since the pandemic.

State governments, having learned from the BPO fallout, are aggressively competing for GCC investments. Uttar Pradesh rolled out a GCC-focused policy that includes land subsidies, stamp duty waivers, operational support and employee reimbursements for centres outside Noida and Lucknow. "India's GCCs are no longer just delivery hubs - they are innovation powerhouses," said Kapil Joshi, CEO, Quess IT Staffing. "The pivot toward AI-first, cloud-native and cyber-resilient ecosystems marks a strategic inflection point."

Bottlenecks persist but opportunities aplenty

Despite the momentum, challenges remain. Infrastructure gaps - international flight access, grade- A workspace availability, power reliability - continue to be a barrier in several smaller cities. Leadership roles and decision-making mandates remain concentrated in metros, risking a split where tier-2 centres act as execution engines rather than true capability hubs. An HR leader at a U.S. financial GCC, in anonymity, cautioned, "Unless leadership and innovation mandates move out of metros, these centres risk remaining delivery back-ends - not true capabilityhu bs."

Ecosystems also vary significantly. Coimbatore may boast engineering depth, but startup density, R&D labs and vendor networks remain well below Bengaluru levels. Without a broader innovation ecosystem, career mobility for mid-senior talent may be limited. Industry leaders say the next three years will determine whether this shift sticks. If companies invest in leadership development, co-create curriculum with academic institutions and build partnerships with local innovation ecosystems, tier-2 cities could unlock the balanced offshoring geography India has long sought.

Signs are emerging. Coimbatore is being evaluated as a potential engineering CoE with an IoT-led focus. GIFT City is partnering with global universities to fortify mid-level talent pipelines. More than 450 Forbes Global 2000 companies already have India-based GCCs. Bengaluru hosts over 285 such centres, followed by Hyderabad with more than 110. But cities like Jaipur, Vadodara, Coimbatore and Kochi are rapidly rising, now accounting for 8% of all GCC units - up from 5% in FY2019.

ANSR CEO Lalit Ahuja believes the momentum is strong because global firms are still early in their India GCC journey. "With 80% of global firms yet to establish GCCs in India, the opportunity is massive. Tier-2 cities offer deep engineering and IT talent, helping broaden economic benefits."

GlobalLogic MD Piyush Jha added in a recent TechCircle interview that government incentives, talent depth and significantly lower costs are accelerating expansion. The company recently launched operations in Mahabubnagar and expanded in Ahmedabad and Nagpur to tap local talent pools. Also, given that over 60% of India's graduates now come from smaller towns, he sees the decentralisation a natural progression.

The Road Ahead

The next chapter of India's offshoring story may well be written in cities once dismissed as peripheral. But unlike the BPO era, the GCC playbook is more strategic - shaped by AI, automation and global resilience needs. Whether tier-2 and tier-3 cities can sustain this momentum once the novelty fades remains to be seen. But for now, the shift is undeniable, with experts keeping the lessons from the BPO bust in mind.

Published by HT Digital Content Services with permission from TechCircle.