New Talent is in the Hinterlands: How Tier 2/3 Cities will Drive the Next Technology Revolution

By Jaishankar Seetharaman, CEO & Co-founder, Mikro Grafeio

The technology landscape is evolving at an unprecedented pace, and the driving force behind this transformation is not confined to the bustling metropolises that we often associate with innovation. Instead, a seismic shift is underway, as Tier 2 and Tier 3 cities emerge as hotbeds of technological prowess.

The Rise of Tier 2/3 Cities

Traditionally, the world’s technology hubs have been concentrated in megacities such as New Delhi, Mumbai, and Bangalore. However, over the past decade, a remarkable shift has taken place. Tier 2 and Tier 3 cities, often located in regions far from conventional tech epicenters, have been quietly but steadily making their mark.

The Numbers Speak Volumes

● Job Market Growth: According to recent job market data, Tier 2 and Tier 3 cities in India have seen an impressive increase in tech job opportunities. For instance, there has been a 30-40% increase in demand for workforce in tier-2 cities within tech teams across sectors. Cities like Chandigarh, Vadodara, Indore, Coimbatore, Kochi, and Trivandrum are growing in importance as IT employment hubs.

● Tech Education Centers: The number of engineering and technology institutes in these cities has skyrocketed. In the last five years alone, Tier 2/3 cities have witnessed a 40% increase in the establishment of such institutions. Tech giants like Apple are expanding their workforce in India and recruiting talent in places like Hubbali and Dharwad. This growth is attributed to the fact that many MNCs are now in the process of further ramping up their teams in the country.

● Startup Ecosystems: Startups are indeed flourishing outside of conventional tech hubs in India. Tier 2 and Tier 3 cities in India have witnessed significant growth in the number of tech startups in the past decade. In current times, around 50% of the recognised startups in India are operating in Tier 2 and Tier 3 cities.

Factors Driving This Shift

Several factors are contributing to the rise of Tier 2/3 cities as technology hubs:

● Cost Advantage: While operating costs in major cities are soaring, Tier 2/3 cities offer a substantial cost advantage for businesses. Lower office rents, reduced living expenses, and competitive salaries make them attractive destinations for startups and tech giants alike.

● Government Initiatives: Many governments have recognised the potential of these cities and are investing in infrastructure, connectivity, and skill development programs. These initiatives are laying the foundation for a robust tech ecosystem.

● Quality Education: Tier 2/3 cities are no longer lagging behind in providing quality education in technology-related fields. Several institutes are now on par with their counterparts in Tier 1 cities.

● Remote Work: The pandemic accelerated the acceptance of remote work, enabling companies to tap into talent pools beyond major cities. This newfound flexibility has further fueled the growth of Tier 2/3 city job markets.

New Talent in the Hinterlands

India has been the leading technology sourcing destination in the world, creating fertile soil for Global Capability Centers (GCCs). However, most of these centres operate out of Tier 1 cities, which are home to only 35% of the Indian population. The pandemic has changed this paradigm. There has been a 30-40% increase in demand for workforce in Tier-2 cities within tech teams across sectors.

The ‘Hub-And-Spoke’ Model

The ‘Hub-And-Spoke’ model with one central office hub and smaller spokes (satellite offices) provides greater flexibility as employees can go to an office close to their home. It also gives employers access to a wider talent pool for recruitment, while maintaining the company culture that they have worked so hard to attain.

Nurturing Innovation

Innovation is not limited to geography. Tier 2/3 cities are nurturing their own unique brand of innovation, often influenced by local needs and culture.

● Local Solutions for Global Challenges: Innovators in these cities are solving problems that are specific to their regions but have global implications. For example, agriculture-centric tech solutions developed in Tier 3 cities are gaining traction worldwide.

● Cultural Diversity: Tier 2/3 cities bring a rich cultural diversity that can foster innovation. Different perspectives and experiences can lead to unconventional solutions and creative breakthroughs.

Conclusion

The technological revolution is no longer confined to metropolitan areas; Tier 2/3 cities are now at the forefront, driving innovation with their unique blend of resources and opportunities. Platforms have a pivotal role in this transformation, providing Global Capability Centers (GCCs) with comprehensive solutions that address workspace, workforce, government regulations, and technology needs. These platforms are becoming instrumental in harnessing the potential of these cities, facilitating their growth into technology hubs by leveraging lower costs, government support, and a vast talent pool. The future of technology is being shaped in these emerging centers of innovation, underscoring the significant role of Tier 2/3 cities in leading the next wave of technological advancement.