One thing today in tech – How India’s tier-2 cities could become global innovation hubs

One Thing Today in Tech

In today’s episode, we take a quick look at India’s opportunity to expand its digital technologies ecosystem to tier-2 cities, but first, some headlines that caught my attention.

Headlines that caught our attention

Google is expanding its generative AI search experience to markets outside the US, starting with India and Japan, TechCrunch reports. The new AI-powered search feature, also known as SGE (Search Generative Experience), will be available through Google’s Search Labs.

Meanwhile, Chinese tech giant Baidu said that its ChatGPT-like Ernie bot was now open to the public at large, signalling a green light from Beijing, and another indication of a more relaxed policy stance on artificial intelligence, CNBC reports.

In some cheer for the SaaS sector, Salesforce, cloud software bellwether, yesterday announced quarterly results and guidance that beat Wall Street’s expectations, CNBC reports. As many of you might remember, India’s Freshworks beat expectations with its June quarter earnings results on Aug. 2.

One thing today

Now, speaking of India’s tech talent, that workforce is making it a destination for the next wave of foreign companies looking to establish centres for R&D, software development and engineering. And there is an opportunity to expand the ecosystem to tier-2 cities, Nasscom, the country’s biggest tech lobby, and accounting consultancy firm Deloitte, say in a new report.

The report examines talent, infrastructure, risk and regulatory environment, start-up ecosystem, and social and living environment, which are vital for establishing a flourishing technological landscape.

And it spolights the potential of 26 cities in the country – from Chandigarh to Indore to Mysuru and Vishakapatnam – which could become an integrated part of India’s tech ecosystem, Nasscom and Deloitte said in a press release on Aug. 29. Helped by rapid infrastructure growth, diverse skills, burgeoning start-ups, and governmental initiatives, these emerging hubs are gearing to achieve tier-1 status, according to the press release.

“While big cities were the focus in the past, the post-pandemic era witnesses a remarkable decentralisation of work across the nation,” Sumeet Salwan, a partner at Deloitte India, said the press release.

Today, about 60 percent of India’s graduates in engineering, arts, and science come from smaller towns and 30 percent of total graduates relocate to tier-1 cities seeking employment, he said.

The 26 promising locations identified in the report have the potential to become the epicentre of innovation and growth, according to the report. This trend is supported by a workforce skilled in cutting-edge digital technologies, with about 800,000 individuals located in these emerging hubs. And these cities are seeing strong additions to the number of people skilled in digital technologies.

These locations currently account for 10-15 percent of India’s tech talent. They provide promising growth potential when supported by the governments’ commitment to world-class infrastructure, Salwan says. Take the “if you build it, they will come” approach, he says.

Startups in these locations grew 50 percent from 2014-2018, with expectations of 2.2X growth by 2025, according to the report.

These tier-2 locations also offer a cost advantage, including a 25-30 percent lower cost of talent and a 50 percent lower cost of real estate rentals compared with the large cities. So far, some 140 global capability centres have found a home in these locations, highlighting the growing interest of foreign companies in these emerging hubs, according to the report.

“As companies worldwide revisit ways of working with an eye on optimising outcomes, costs, and talent, alternative tech hubs are becoming essential” Sukanya Roy, head, GCC and BPM, at Nasscom, says in the release.

About 39 percent of the country’s 7,000 or so startups operate in emerging hubs spanning industries from Deep Tech to Business Process Management (BPM), according to the report.