Nano Global Capability Centres (GCCs) in India are marking a transformative shift in the outsourcing and offshoring landscape, especially in tier 2 and tier 3 cities. These GCCs are more adaptable and innovation-driven and typically focus on niche services, specialised tasks, or innovation-driven projects.
Last year, Metso Outotec, a global leader in sustainable technology and services for the mining, aggregates, recycling, and process industries, inaugurated a new engineering centre in Vadodara, Gujarat, India. The company also has a presence in Mumbai, Bengaluru, Kolkata, Chennai, Delhi, and Pune.
According to Metso Outotec, the new facility will soon employ more than 250 specialists and cover several functions and capabilities, including engineering for various products, modernisations and upgrades, quotation support, logistics, procurement, and training and learning professionals.
This is just one example among many.
The Zinnov-Nasscom India GCC Landscape report highlighted that tier 2 and tier 3 cities now house about 7% of total GCC units in FY2024, up from 5% in FY2019.
These emerging centres, termed Nano GCCs, are projected to grow by 15-20% by 2025, with a surge of 25-30% anticipated in subsequent years.
According to AIM Research, while Bengaluru and Hyderabad lead the way, cities like Chandigarh and Indore, each accounting for 4% of total GCCs, are signalling a strategic shift in GCC location preferences.
The Reason Behind Such a Move
There is no doubt that these GCCs in India have evolved into the AI innovation counterparts of their parent companies and are now expanding beyond major metropolitan areas to tap into the abundant talent pools available in tier 2 and tier 3 cities.
Tier 2 cities in India are home to a growing number of educational institutions that produce a steady stream of graduates in engineering, IT, and business disciplines.
Talking about the proliferation of GCCs in tier 2 and 3 cities during an interview with AIM, Piyush Jha, MD India and APAC of GlobalLogic, said, “Post-COVID, a lot of people have gone back to their [hometowns] and want to stay there. We don’t want to disrupt that ecosystem. When we go into these smaller cities and work with the talent there, the engagement levels are higher, and attrition levels are lower.”
Supporting this strategic shift, governments at both the central and state levels are increasingly recognising the potential of tier 2 cities as growth engines.
For example, according to the Karnataka GCC policy, while Bengaluru will continue to be the hub for new GCCs, the Karnataka government is committed to promoting equitable growth across the state through its ‘Beyond Bengaluru’ initiative.
The goal is to replicate Bengaluru’s efficiency and success in other parts of the state, catalysing the growth of similar ecosystems in cities beyond the capital. The policy will focus on incentivising GCCs to set up operations in these cities. It also aims to showcase the offerings and capabilities of these cities, including Mangaluru, Mysuru, the Hubballi-Dharwad-Belagavi cluster, Kalaburagi, Tumakuru, and Shivamogga.
The Ministry of Electronics and Information Technology (MeitY) also supports this GCC expansion throughout India. It is developing a comprehensive policy framework to offer fresh incentives for GCCs. These incentives aim to complement existing state-level policies and encourage the establishment of smaller GCCs in areas focused on niche sectors like healthcare and finance.
Meanwhile, the Indian government, under the UDAN scheme, is focusing on better air connectivity to tier-2 and tier-3 cities and providing necessary incentives. Tier-2 cities have recently seen a high growth in coworking spaces. For instance, Chandigarh, Jaipur, Kochi, Ahmedabad, Lucknow, and Indore have more than four flex operators, while Bhubaneshwar, Visakhapatnam, Thiruvananthapuram, and Coimbatore have more than one flex operator each.
What can Nano GCCs Achieve?
Speaking about how Nano GCCs are fueling mega innovations, Suchita Vishnoi, co-founder and CMO at gatewAI, said on LinkedIn, “While traditional GCCs often operate on a massive scale, with thousands of employees handling a wide array of tasks, nano GCCs offer a different approach. They are smaller, more agile versions, typically focusing on niche services, specialised tasks, or innovation-driven projects.”
“What distinguishes nano GCCs is their specialised focus. They excel in areas like AI, analytics, cybersecurity, and hi-tech, leveraging their agility to swiftly adapt to emerging trends and technologies,” she further said.
In another post, Ramkumar Ramamoorthy, partner at Catalincs, mentioned in a LinkedIn post, “While companies in the Fortune 500 and Global 2000 category continue to make a beeline for India, a silent revolution is happening concurrently in the GCC space.”
“Specialist companies as well as new-age venture capital and PE-backed companies are setting up their GCCs in large numbers, tapping into the diverse talent across India in newer areas such as analytics and AI, next-gen hardware, in-memory and edge computing, IoT, cyber security, space technology, genomics technology and synthetic biology, among others,” he added.
GlobalLogic Leads the Charge
In this mix, GlobalLogic, a leader in digital engineering, exemplifies this trend by facilitating GCC expansion into tier 2 and tier 3 cities by helping them use AI.
Over the years, this Hitachi group company has reported significant growth in its India business, driven by the rising number of GCCs in the country. The company is expanding its operations to smaller cities to tap into local talent and reduce the need for migration to larger hubs.
Currently operating in 10 cities across India, GlobalLogic has opened new centres in Mahabubnagar, near Hyderabad and Ahmedabad and is expanding its presence in Nagpur.
GlobalLogic is increasingly helping GCCs to move beyond their traditional roles as execution arms of global corporations. “A few years ago, they were execution arms for global corporates. Today, a lot of product development is happening in these GCCs,” Jha explained.
To accelerate AI adoption by GCCs, the company recently launched Velocity AI, a generative AI platform designed to enhance product development efficiency and reduce costs. “We hope to share 25-30% of development time using AI tools and make life simpler for our customers, including all GCCs,” Jha further said.
He stressed that the company maintains a synergistic relationship with GCCs, helping them grow as an innovation hub in India.
GlobalLogic’s Velocity AI seamlessly integrates with major cloud providers such as Google Cloud, AWS, and Microsoft Azure and supports local LLMs. This platform automates repetitive tasks, allowing developers to focus on complex and creative aspects of product development.
“When we launched it, it was already integrated with these three major providers. The beauty of this workbench, compared to others on the market, is that you can choose the tools you want to work with,” Jha added.
Addressing the skill gap in India, Jha said, “We’re trying to solve the…issue, which is why we’re calling it a hub…We are tying all these spokes to a hub centre. So, if you go to a city 200 kilometres from Bengaluru, Bengaluru will be a hub that will reinforce training and technology.”
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