With a low-to-moderate risk of business disruption; moderate-to-high stability of financial environment; and a high-to-moderate regulatory environment, these tier 2 cities are rapidly turning into new IT hubs or technology hubs for a large number of tech companies in the country.
Many tier 2 cities of India dole out a complete pack of advantages including access to a fresh, skilled talent pool, cost-effective and robust infrastructure, high-quality educational infrastructure, comprehensive healthcare facilities, and a relatively low cost of living.
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India’s technology industry has grown manyfold in the last decade and tremendous growth has been seen in the services offered by the industry. Along with the traditional information technology and Business Process Management (BPM) services, the engineering, research and development (ER&D) and software product segments have also been showing robust growth.
The government’s emphasis on e-governance and the availability of a cost-effective, skilled workforce has also contributed to the growth of the technology sector. According to the report titled “Emerging Technology Hubs of India” by Deloitte and Nasscom, the technology industry in India has been growing at a CAGR of 9% since 2019.
The technology sector is making a substantial contribution to India’s gross domestic product (GDP) as well. In the fiscal year 2018, the technology sector contributed about 7.9% of India’s GDP. By 2025, it is projected to make about 10% contribution to the country’s GDP. In terms of revenue earnings, during the fiscal year 2022, the technology sector’s total revenue was about US$ 227 billion and is expected to be at US$ 245 billion in 2023.
Although the industry had been experiencing rapid growth previously, the outbreak of the COVID-19 pandemic proved to be a critical turning point. The pandemic determined not only the demand shift but also guided the industry’s aberration towards a highly distributed work model. It also compelled many organizations to accelerate digital transformation and to substantially modify their existing work models.
The post-pandemic era continues to witness the decentralization-of-work model getting more and more common. This model is increasingly gaining acceptance even within the traditional corporate settings. Be it in any form, from people working independently from their homes to multinational companies setting up their centres in non-metro cities (to leverage their talent pool), the decentralization of work continues to thrive.
With rapidly increasing startups, non-traditional work arrangements, and shared workspaces, there are many forthcoming possibilities and opportunities for the development of new IT hubs in the country.
Proliferating start-ups and incubators are playing a critical role in the evolution of larger and more mature companies in emerging locations. According to the report,
This signifies that investors are comfortably venturing into tier-2 cities looking for potential unicorns.
The tier 2 cities in India include Amritsar, Bhopal, Bhubaneswar, Chandigarh, Faridabad, Ghaziabad, Jamshedpur, Jaipur, Kochi, Lucknow, Nagpur, Patna, Raipur, Surat, Visakhapatnam, Agra, Ajmer, Kanpur, Mysuru, and Srinagar.
As of January 2020, there were seven primary IT hubs in the country. The 7 major technology hubs were Delhi National Capital Region (NCR), Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, and Pune.
The technology industry is now seen to be progressively spreading from these Tier 1 cities to the emerging Tier 2 locations. The Deloitte report “Emerging Technology Hubs of India” has identified twenty-six (26) emerging cities, that represent the ‘next wave of technology hubs’ in the country. These cities provide numerous opportunities for sustainable and evolutionary growth of the technology sector. Following is the list of emerging technology hubs across the country.
Table: 26 emerging IT hubs
What is facilitating the expansion of the technology industry in Tier-2 cities
The increasing acceptance of remote working, reverse migration due to the pandemic and the growing size of the talent pool, are some of the major factors behind the emergence of new technology hubs in the country.
Let us have a glimpse of some challenges that established/matured technology hubs are currently facing, and also the key benefits being offered by emerging technology hubs.
Benefits offered by emerging hubs:
Some important characteristics of the emerging tech locations, as stated in the report are:
The presence of many business/knowledge process outsourcing (BPO/KPO) centres in emerging cities has further enhanced the development of a service-oriented culture in emerging technology hubs. Various operations that are being undertaken include- finance and accounting, logistics, HR functions, payroll, telecom, market research, data analytics, telemarketing services, tech support, and helpdesk services. Although international voice operations in some emerging cities are still in the early stages of development, due to language challenges. Persistent efforts are ongoing to address such issues.
Role of Skill India initiative: a collaboration of government and corporates
The Government of India recognizes the value of skill development in emerging cities and has therefore launched the Skill India initiative. This initiative collaborates with corporations to include innovative technical training into its curriculum. More than 50 companies are actively collaborating under this initiative. Many of these organizations have made skills development an integral part of their corporate social responsibility (CSR) efforts.
A large number of technology enterprises have strategically established their operational centres in emerging tier-2 cities. These include;
AGS Health, Concentrix, Conneqt, Eclerx, EXL, Firstsource, Genpact, HCL Tech, HGS, Infosys, Nextwealth, Sutherland, Technotask, Wipro, WNS.
The rapid development of infrastructure, skill diversity, increasing start-up presence, and several governmental initiatives like smart cities, tech parks, and incubation centres, are enabling these emerging tier-2 locations to achieve ‘tier 1 status’.
The Tier-2/smaller towns, producing about 60% of India’s overall graduates (engineering, arts, and science), are offering companies a competitive advantage wherein they may identify the roles/goals to be delivered from these towns. As many as 100,000 people (the target talent pool) living in the emerging hubs are highly proficient in the latest digital technologies
With a robust inter and intra-city connectivity between these emerging hubs and metros along with fast Internet connections across India, many jobs are now being delivered from different parts of the country.
The systematically organized government policy interventions and investments are further making the emerging technology hubs an attractive destination for the workforce, consequently facilitating better employee retention.
In addition, emerging cities have a low-to-moderate risk of business disruption; moderate-to-high stability of financial environment; and a high-to-moderate regulatory environment. The presence of high-quality educational infrastructure, comprehensive healthcare facilities, a relatively low cost of living that is about 25–35% lower than tier 1 cities, and an overall high quality of life characterize the emerging technology hubs.
In times when companies are re-examining their ways of working and seeking to optimise their costs, outcomes and talent, the emerging hubs in tier 2 cities across the country offer all the benefits/facilities that may be sought by business enterprises.
Impressive…
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