Tier-1 vs Tier-2 Cities for GCC: A Comparative Guide

India’s Global Capability Center (GCC) landscape is shifting—and fast. For years, Tier-1 cities like Bengaluru, Hyderabad, and Pune dominated the narrative. But today, the conversation is expanding beyond the usual suspects. Tier-2 cities are making a strong case, backed by talent, infrastructure, and serious cost advantages.

In fact, according to a 2024 NASSCOM report, nearly 28% of new GCCs in India were set up in Tier-2 cities, signaling a clear move toward more distributed, cost-efficient, and talent-rich locations.

Choosing the right city for your GCC isn’t just about where the industry has historically gone—it’s about where it should go next. And that means weighing the real differences between Tier-1 and Tier-2 locations. From operating costs and talent depth to lifestyle and scalability, each brings a unique value proposition to the table.

In this blog, we break down the comparison factor by factor—so you can decide where your next big move should land.

Comparing Tier 1 Vs Tier 2 for GCCS

1. Talent Pool: Quality, Availability, and Retention

When it comes to setting up a GCC, the talent equation is everything. It affects delivery capability, scaling velocity, and long-term competitiveness. Here’s how Tier-1 and Tier-2 cities compare:

Tier-1 Cities: Mature but Saturated

Tier-1 cities—Bengaluru, Hyderabad, Pune, and Chennai—offer a deep, specialized talent pool. They’re home to India’s top engineering institutions (IITs, NITs, IIITs) and attract seasoned professionals from across the country. Whether you’re looking for cloud architects, AI/ML engineers, or finance controllers, the expertise exists and it’s readily available.

However, this maturity comes at a price:

• Talent wars are fierce. Startups, product companies, and established GCCs are all fishing in the same pond.
• Attrition rates are high, often ranging between 18%–24% annually.
• Salary inflation is real, especially in high-demand verticals like cybersecurity, data science, and DevOps.

While Tier-1 cities offer volume and specialization, they’re becoming less viable for companies prioritizing retention and cost-efficiency.

Tier-2 Cities: Fresh Talent and Long-Term Loyalty

Tier-2 cities like Indore, Coimbatore, Nagpur, and Jaipur are fast becoming breeding grounds for GCC-ready talent. These cities produce a steady stream of engineering and management graduates, many of whom are eager to stay local—especially post-pandemic, when reverse migration became a significant trend.

Key differentiators:

• Lower attrition, often below 10%, due to limited local competition and higher employer loyalty.
• Upskilling ecosystem is evolving, with state-supported IT finishing schools, partnerships with platforms like NASSCOM FutureSkills, and employer-driven bootcamps.
• Access to untapped potential. These cities often offer highly trainable engineers with strong fundamentals who may lack enterprise exposure—but can be quickly groomed.

Our Take: If you need highly experienced talent from day one, Tier-1 cities are still your best bet. But if you’re planning a scalable, cost-optimized team with long-term stability, Tier-2 cities provide a competitive edge—especially when combined with a strong in-house training framework.

2. Cost of Operations: Maximize ROI Without Sacrificing Quality

Tier-1 Cities: High Baseline Costs That Escalate with Scale

Operating a GCC in cities like Bengaluru or Hyderabad means preparing for steep costs across the board. Here’s how it breaks down:

• Real estate costs in Grade A IT parks can exceed ₹120 per sq. ft/month, with long lock-in periods and high CAM (common area maintenance) charges.
• Mid-level software engineers command ₹14–18 LPA for standard roles, while niche skills (e.g., AI/ML, cybersecurity) can touch ₹30+ LPA.
• Overhead costs include business continuity services (diesel generators, UPS, security), compliance management, and employee perks needed to stay competitive in saturated job markets.

Even large enterprises are seeing diminishing marginal returns as incremental hiring drives costs up but not necessarily productivity.

Tier-2 Cities: Up to 40% Cost Savings with No Quality Trade-Off

Cities like Indore, Coimbatore, and Nagpur offer Grade A spaces at ₹35–₹55 per sq. ft/month. But cost savings go deeper:

• Average salaries for the same roles are 25–40% lower, without compromising on quality—thanks to reduced demand competition.
• Infrastructure costs (power, internet, facility management) are lower and often subsidized by state governments.
• You avoid the “perks inflation” seen in Tier-1 cities. Employees value job security, learning, and growth over in-office cafes and fancy gym memberships.

If you’re building a 200+ member team, shifting to a Tier-2 city can save ₹12–18 crore annually, which can be redirected to R&D, leadership hiring, or innovation labs.

3. Infrastructure and Connectivity: Are You Paying for What You Really Need?

Tier-1 Cities: World-Class Infrastructure, But Also Bottlenecks

India’s Tier-1 metros have long been infrastructure leaders for IT and ITeS operations, offering GCCs access to:

• Tier-4 data centers with 99.999% uptime (e.g., CtrlS and NTT facilities in Hyderabad and Mumbai).
• Dual-redundancy fiber internet from multiple ISPs including Airtel, Tata, and Jio—averaging 200–400 Mbps dedicated enterprise lines.
• Established SEZ zones like Electronic City (Bengaluru) and HITEC City (Hyderabad), with power backup, regulatory clearance support, and tax incentives.
• Global connectivity through international airports with direct links to major business hubs in the US, Europe, and APAC.

However, demand now often outstrips supply, creating operational friction:

• In Bengaluru, the average office space wait time for Grade A inventory in Whitefield or ORR is 6–8 months, with rental rates hitting ₹125–₹160/sq. ft in 2024.
• Chronic water shortages in peak summer (especially in peripheral zones like Bellandur) require companies to arrange private tankers, adding ₹8–₹12/sq. ft to facility costs.
• In Chennai, daily peak-hour commutes from residential zones (Velachery to Taramani) average 70–90 minutes, even with metro access, impacting work-life balance and attendance.
• Electricity infrastructure in older districts often requires private grid tie-ins or DG setups for 24×7 uptime—raising infra CAPEX.

Tier-2 Cities: Infrastructure on the Rise, Built for Today’s Needs

While historically overlooked, cities like Bhubaneswar, Surat, and Vijayawada have quietly modernized:

• Dedicated IT parks with fiber optics, 99.99% uptime guarantees, and backup grids.
• Proximity to domestic airports and expressways—many now connected to major metros within 1–2 hours.
• Smart city upgrades have brought public Wi-Fi, intelligent traffic management, and smart grids to the forefront.

Most Tier-2 cities now meet the 8-point “GCC Readiness” checklist: connectivity, utilities, talent access, safety, livability, regulatory ease, vendor ecosystem, and education pipeline.

4. Business Ecosystem: Are You Plugging into a Network or Shaping It?

Tier-1 Cities: Dense Ecosystems, But Limited Customization

Cities like Bengaluru, Hyderabad, and Pune host over 1,600 active GCCs, creating a well-oiled ecosystem for enterprise operations:

• Access to top-tier legal firms, payroll processors, and IT compliance vendors with proven experience in supporting Fortune 500 clients.
• Specialized talent agencies for niche hiring (AI/ML, Web3, DevSecOps).
• Proximity to co-location data centers and cloud zones (e.g., AWS in Hyderabad, Azure in Pune).

However, this density comes at a cost:

• Vendor saturation: With 10–15 clients per vertical, most vendors operate on standard SLAs, leaving limited scope for agility.
• Reduced influence: Your GCC is one among hundreds. Negotiating custom support or innovation partnerships becomes harder unless you’re hiring at scale.
• Innovation competition: You’re competing with dozens of accelerators, startup hubs, and existing R&D centers for visibility and top-tier partnerships.

Tier-2 Cities: Agile Ecosystems with High Stakeholder Attention

Tier-2 cities like Indore, Bhubaneswar, and Coimbatore may have fewer players, but that’s exactly why GCCs here are thriving:

• Governments, industry bodies, and academic institutions prioritize partnerships with early entrants.
• Vendor responsiveness is higher. Whether it’s facility management, IT setup, or local HR firms, turnaround times are shorter and pricing more flexible.
• Ecosystem shaping is possible. GCCs can co-create ESG frameworks, DEI strategies, or even contribute to local policy via GCC clusters.

If your GCC model is innovation-led or built for long-term IP creation, Tier-2 ecosystems offer the trust, attention, and customization that Tier-1 cannot.

5. Government Support: Incentives Aren’t Just Checklists—They’re Relationships

Tier-1 Cities: Standard Schemes, Slower Approvals

States like Karnataka and Maharashtra offer broad incentive frameworks—SEZ benefits, R&D tax rebates, and skill development subsidies. However:

• Schemes are oversubscribed. Approvals often take 6–12 months, with tiered benefit caps based on investment thresholds.
• For mid-sized GCCs (200–400 employees), it’s harder to secure customized support unless you commit to massive job creation.
• Most benefits are standard: CapEx subsidies of 15–20%, stamp duty waivers, and fixed-term tax holidays—with limited room for negotiation.

Tier-2 Cities: Personalized, Accelerated Support

States actively targeting Tier-2 GCC development—like Telangana (Warangal), MP (Indore), and Odisha (Bhubaneswar)—offer:

• Customized MoUs based on job creation, diversity hiring, or upskilling commitments.
• Single-window clearance for labor, fire safety, land acquisition, and electricity—a process that helps fast-track in under 45 days for some clients.
• Access to free or subsidized plug-and-play space in government-backed IT parks for the first 2–3 years.
• Reimbursement-based grants for training costs, up to ₹50,000 per candidate for deep-tech roles.

The ROI on government partnerships in Tier-2 cities is higher—because you’re early in the queue, not buried under legacy commitments.

6. Quality of Life: Hidden Driver of Retention and Productivity

Tier-1 Cities: Amenities Galore, But at a Personal Cost

While Bengaluru and Mumbai offer a global lifestyle, for employees:

• Housing costs in IT hubs like Koramangala or Powai range from ₹30K–₹60K/month, often consuming 35–45% of mid-level salaries.
• Commutes of 90+ minutes each way result in 3–5 hours/week of lost productivity and fatigue.
• According to a 2023 LinkedIn Workforce report, burnout rates in metro tech hubs reached 48%, driven by long hours, pollution, and lack of community life.
• This directly affects retention. GCCs in Tier-1 cities report attrition rates of 18–22%, especially among Gen Z and young millennial workers.

Tier-2 Cities: Affordable, Balanced, and Employee-Centric

Employees in Tier-2 locations enjoy:

• Affordable housing: 2BHK apartments in central Indore or Kochi cost ₹10K–₹15K/month.
• Commute times under 25 minutes, translating to 15+ additional hours/month for rest, upskilling, or family.
• Strong ties to community, family, and place—reducing migration-driven attrition.

Post-pandemic data shows that 42% of tech workers originally from Tier-2 cities would prefer working from or relocating to their hometowns if career opportunities matched.

In fact, GCCs in Tier-2 cities often see attrition below 10%, especially when combined with structured L&D programs and internal mobility options.

7. Scalability: Scaling Headcount is Easy—Scaling Culture is Strategic

Tier-1 Cities: Proven Scale, Limited Customization

You can scale to 500 or even 1000+ employees fast—but:

• Culture often becomes an inherited artifact of the broader job market.
• Scaling beyond a point requires diversification to satellite locations due to hiring saturation.

Tier-2 Cities: High Scalability Potential with Cultural Control

In Tier 2 cities, scaling may be slower initially, but:

• You build a tailored culture aligned with your GCC vision—from the ground up.
• You avoid the ‘attrition treadmill’ by creating local career growth paths for young professionals who don’t want to migrate.
• Governments often help you plan 3–5 year expansions with built-in land, subsidy, and infra guarantees.

Expert Tip: If you’re building a Center of Excellence or Innovation Hub, starting in a Tier-2 city ensures you scale differentiated, not just larger.

Conclusion: 

Choosing between a Tier-1 vs Tier-2 city for your GCC isn’t just a matter of cost or convenience—it’s a decision that defines the culture, agility, and long-term ROI of your global operations.

• If your priority is speed-to-scale, experienced leadership, and enterprise-grade ecosystems, Tier-1 cities like Bengaluru or Hyderabad may serve you well—but at a premium.
• If you’re aiming for long-term value creation, loyalty, and cultural ownership, Tier-2 cities like Indore, Coimbatore, or Bhubaneswar offer strategic advantages that go beyond just cost savings.

At Supersourcing, we’ve helped brands transition from Tier-1 saturation to Tier-2 opportunity—without compromising on talent quality, performance, or global standards. Our GCC site selection frameworks go beyond real estate—we assess talent readiness, ecosystem maturity, compliance speed, and government support across 40+ Indian cities.

Bottom line: It’s not Tier-1 vs. Tier-2—it’s what works best for your business model, stage of growth, and strategic vision. Let us help you make that decision with data, not guesswork.

FAQs: 

Can Tier-2 cities really support high-tech functions like AI/ML or product engineering?

Absolutely. While Tier-2 cities may not have the same volume of deep-tech talent as Tier-1, many have niche expertise—especially with custom upskilling programs. Supersourcing has helped set up GCC teams in Indore and Bhubaneswar that deliver advanced data engineering and cloud architecture functions with 95% local hires.

Are government incentives in Tier-2 cities just marketing talk, or do they actually get implemented?

They’re real—but only if you know how to unlock them. Supersourcing works directly with state IT departments to structure MoUs, fast-track approvals, and ensure fund disbursals happen on time. Incentives can include rent subsidies, tax rebates, and even employee skilling reimbursements.

How do Tier-2 cities handle infrastructure reliability—power, internet, data security?

Most Tier-2 GCC hubs now have redundant fiber connections, 24/7 backup power, and access to Tier-3 data centers. Locations like Coimbatore and Visakhapatnam have been part of India’s Smart Cities Mission, ensuring high-quality digital and civic infrastructure. Security compliance (SOC 2, ISO 27001) is fully achievable here.

What’s the minimum scale required to consider a Tier-2 city viable?

Even with a 50–100 member plan, Tier-2 cities offer strong ROI—especially if you’re planning to scale over 3–5 years. The lower costs, better retention, and government support make small-to-mid-scale GCCs extremely viable outside Tier-1 hotspots.

Can we build a hybrid GCC model—leadership in Tier-1, execution in Tier-2?

Yes—and it’s increasingly common. Several of our clients use a hub-and-spoke model, with CXOs and heads of product in Pune or Bangalore, and engineering, QA, or support teams in Tier-2 cities. It balances access to senior talent with operational efficiency.