Hyderabad as a tech hub is scaling the AI ecosystem—enterprises should take notice

Enterprises face multiple internal and external challenges that impact their top and bottom lines. In their ongoing pursuit for solutions to reduce costs and increase productivity, they often adjust their existing business, digital, and AI strategies. An effective cost-reduction approach involves establishing offshore locations for IT, business, innovation, and research and development (R&D) operations, with the goal to vault ahead of the competition by quickly bringing products to market at a lower cost. Indian cities, such as Bangalore, Delhi, Hyderabad, Pune, and Chennai, are popular destinations for such business operations.

Bangalore has long been at the forefront of India’s IT industry, but Hyderabad in Telangana is writing a new chapter of the story. No longer seen merely as a city of potential, it’s recognized for its relatively safe seismic zone (lower risk of natural disasters) and low cost of living. The city also offers ample opportunities for expansion, a wealth of skilled AI talent, robust infrastructure, and a strong IT/ITeS and AI ecosystem (see Exhibit 1).

The 32nd HYSEA National Summit and Awards 2025 held in February, centered on the theme ‘AI & Beyond: Redefining the Future’, explored how AI and other emerging technologies transform business and society, highlighting Hyderabad as India’s leading tech hub. It included themed sessions, panel discussions, and policy announcements. The event also featured start-up awards and launched the HYSEA Scale@Hyderabad 2025 report, a guide for investment and growth in Telangana’s tech ecosystem.

Exhibit 1: Telangana’s IT/ITeS presence aligns with the HFS OneEcosystem

Source: HFS Research, February 2025

The challenging FOBO—fear of becoming obsolete to take lead in the AI revolution

Enterprises scrambling to adopt AI without an effective strategy are already losing ground. The future belongs to those that embrace Services-as-Software—the trillion-dollar shift in which AI-first enterprises replace traditional services models. Hyderabad’s business community is adapting to this change and making significant progress in the AI revolution with start-ups, innovations from service providers, and the adoption of AI in global capability centers (GCC). The city is actively working to bridge the gap between digital and AI talent through partnerships with academic institutions, public organizations, and private companies.

Photo: HFS Research CEO and Chief Analyst Phil Fersht delivering a keynote at the 32^nd HYSEA National Summit

AI drives productivity, not just automation, as the lines between services and software, verticals and horizontals are blurring. The transition from task-based AI to agentic AI enables the development of self-learning systems that reduce manual effort and accelerate decision-making processes. AI-first solutions can decrease costs by 30–50%, prompting SaaS companies to reevaluate their pricing strategies and value delivery methods.

By 2030, six out of 10 enterprises will replace human-driven services with AI, and Hyderabad is at the epicenter of this change. The city’s strategy isn’t about playing catch-up—it’s about leading the AI revolution from the front.

Enterprises are investing to go beyond the service factory to a global nerve center

The era when GCCs in India were seen merely as cost-saving back offices has changed. The focus has shifted from support functions to full-stack innovation hubs. Companies such as Google, Microsoft, JP Morgan, DBS Bank, Bosch, Hyundai Mobis, Eastman Chemical, Meta, and Goldman Sachs are transforming their Hyderabad centers into AI-driven research and development labs.

Enterprises are moving beyond basic automation to adopt AI-driven workflows, achieving 40% cost reductions and increased output. Hyderabad is key to global projects, housing 14% of India’s digital tech talent and more than 300,000 new graduates yearly, second only to Bangalore. The city currently hosts 20% of India’s global capability centers (GCC), and this figure is growing.

Greenfield investments are rising, making Hyderabad the world’s fastest-growing GCC hub. The city’s industry diversification in banking, financial services, insurance (BFSI), pharmaceuticals, aerospace, and gaming capitalize on its robust IT ecosystem, positioning it as a multi-domain tech powerhouse.

Develop AI talent, support startups, and improve infrastructure to attract businesses

At the launch of its GCC in Hyderabad, a technology and innovation leader from a US-based chemical manufacturer said the company chose the location for its talent, accessibility to global markets, and affordable infrastructure. The executive also noted that the innovation center will facilitate the rapid development of new and emerging applications, allowing for quick responses to new product development and application queries.

This example highlights the importance of affordability, talent availability, and accessibility to global markets for establishing businesses. Hyderabad satisfies these criteria and should foster a collaborative and supportive business environment by involving the appropriate stakeholders.

Creating an environment for investors, venture capitalists, and private equity firms is essential for encouraging innovative startups and incubation centers. Additionally, developing AI-ready skills requires a clear vision supported by public-private partnerships focused on training, coaching, and transition to the AI world. Encouraging public transportation solutions and improving biodiversity will also motivate businesses to establish and expand new centers.

The Bottom Line: Enterprises must consider Hyderabad as a cost-effective AI hub to implement their AI strategies, benefiting from better access to talent, infrastructure, and innovation.

Hyderabad’s cultural diversity, lower cost of living, and talent availability make it an ideal location for businesses and employees to innovate. By developing the talent and ecosystem partnerships roadmap, companies can successfully establish themselves in the city and achieve sustainable growth.