| Kerala IT minister P. K. Kunahalikutty reels out a long list of names of companies: Infosys Technologies, Tata Consultancy Services, 24*7, the Southerland group, consultancy firms Ernst & Young and McKinsey (both of which are establishing business process outsourcing operations). |
| "In the last six to eight months all these companies have set shop in the large software parks that we developed at Trivandrum and Kochi." |
| On India's east coast, a transformation is under way at Vizag. The HSBC group recently invested Rs 50 crore in setting up a group service centre at Vizag. This is expected to hire 2,000 employees. |
| Explains a senior group executive: "Vizag has a 50-60 per cent cost advantage in terms of real estate and manpower " The US based Visual Soft Technologies has acquired 100 acres of land and is putting up a BPO centre at the port city. |
| IT companies are also flocking to Bhubaneshwar, also on the east coast. Infosys has just acquired 50 acres of land in "Infocity," a 205 acre IT hub, where it will set up a sprawling software development centre. Enterprise Software Solutions, HP Micro System and Computer Lab too are rediscovering the city of temples. |
| Suddenly, the hottest IT game in town involves heading for second-tier towns and cities. Bangalore, Hyderabad, Chennai, Delhi and Mumbai might be the temples of the IT revolution, but infrastructure is cheaper in second-rung towns and a big pool of talent is available at low, low salary bills. |
| Indeed, sensing the potential, savvy state governments are already creating infrastructure in cities and states like Vizag, Coimbatore, Hubli, Mysore, Mangalore, Trivandrum, Kochi, Goa, Chandigarh-Mohali and Bhubaneshwar. |
| Take the Kerala government. The state has lost out to other southern states like Karnataka and Andhra Pradesh in the IT sweepstakes. |
| But it is trying to make up for lost time: it has invested around Rs 200 crore in the 180-acre Technopark in Trivandrum, apart from a software park in Kochi, and is aggressively conducting roadshows in the US to attract software companies to the state. |
| Now it's preparing the blueprint for an even more ambitious two-year project: a 240-acre software park at Kochi. Here, 10 million square feet of space will be offered to IT companies. |
| Not to be left behind, Karnataka is seeking to promote towns and cities other than Bangalore as IT hubs. Says Vivek Kulkarni, Karnataka's IT secretary: "We are promoting Mangalore, Mysore and Hubli as the new IT destinations." |
| Kulkarni says that Hubli's unique selling proposition (USP) is its proximity to Mumbai and its well developed IT park. Mangalore, on the other hand, has lots of people who speak English (higher than the state average), apart from local state-owned companies as potential clients. |
| Mysore is being marketed as a destination close to the IT heartland of Bangalore. The construction of a six-lane highway between the two cities, he says, will give a fillip to Mysore's IT prospects. That argument seems to have been persuasive "� GE, for example, is planning to set up operations in Mangalore. |
| Even Goa, better known for its balmy beaches and relaxed lifestyle, is throwing its hat into the IT ring. The state's new government has identified land for two software parks. The one in Panjim is to go up on 75 acres of land. The other, in north Goa, is to come up on 400 acres of land. |
| Says Bhupendra Bhalla, the state's IT and tourism secretary: "We have identified IT and tourism as the two key growth areas. A new IT policy is under way and we will bring in private joint venture partners to develop the parks. We have also committed ourselves to setting up an international gateway in Goa." |
| Still, all the new IT centres are not being set up in south India. Punjab too has decided to clamber on the IT bandwagon. It's setting up a 15-acre park at Mohali and tooting the advantages of the town's large pool of educated people and good life. |
| When completed, the project will cost over Rs 300 crore. That's not all. The state government is also roping in a private partner to develop another park on 50 acres of land at a cost of Rs 500 crore. The sum will also include integrated residential and commercial facilities. |
| Says Punjab principal industries secretary Subodh Aggarwal: "The key requirement is good space and that is what we are concentrating on. " |
| Why exactly are IT companies seeking alternative destinations? Explains Harish Krishnan, director (IT) at the Confederation of Indian Industry (CII): "The traditional cities are getting more expensive and margins in the BPO or IT business are under pressure. So everyone is looking for lower cost options, provided infrastructure exists there." |
| Agrees K Nandkumar, managing director of Suntec Business Solutions, which has operations in Kerala: "Start up and operational costs are 50 per cent lower than in other Indian states. Bandwidth costs, for example, are the cheapest in the country and availability is similar to that in Mumbai because three international cable lines land at Kochi." |
| In Bhubaneshwar, Manas Panda, director, Software Technology Park of India, says: "Land at Infocity costs only Rs 12 lakh an acre. In Hyderabad, it costs over Rs 1 crore. And rents are only Rs 12.50 a feet, versus Rs 35-40 in the bigger cities. The difference is huge." |
| Secondly, the demand for IT professionals outweighs supply, especially in the larger cities. BPO companies in combine require over 1 lakh more workers this year. |
| Argues Sanjay Verma, executive director at Cushman and Wakefield, the real estate consultants: "In the grade A cities too many companies are fighting over the same pool of talent. So they are facing serious retention problems. One way out is to go to new locations where a talent pool is available, is cheaper and attrition rates are lower." |
| Companies back the point. KG Information Systems, Asia's largest medical transcription company, is based in Coimbatore and employs over 1,000 people there. |
| S Sridharan executive director at KG, explains why the company decided to locate itself at Coimbatore: "We have 25 engineering colleges and over 1 lakh students pass out of them every year. And the entry-level salary for BPO is only Rs 5,000, half of the Rs 10,000 in, say, Delhi or Bangalore. So there is a large talent pool to tap in the city. In fact, companies from outside are coming to recruit people here." |
| KG Information Systems received 60,000 applications for the 2,000 posts it sought to fill. |
| Coimbatore offers other advantages too "� domain knowledge in CAD CAM software and designing, for instance. That's attracting many start-ups to the city. |
| Says V Raghavendra Prasad, executive director at the Coimbatore-based IT incubation company, PSG Science and Technology: "The city has 4,000 small and medium enterprises (SMEs) and a strong textile engineering base. It has developed special domain strengths in CAD CAM and embedded software which can be leveraged." |
| For the other cities like Vizag, the availability of people is a big attraction. |
| Confirms G V Prasanna, president of the Vishakapatnam Information Technology Association: "More than 40 per cent of Andhra IT professionals working abroad hail from coastal Andhra. The large resource pool makes Vizag an attractive destination. And the city has good infrastructure." |
| Prasanna has a point. The city's urban authority has tapped Larsen & Toubro to construct jointly an IT park. L&T is investing Rs 50 crore in the project, which could come with an IT village for expats on 50 acres of land, complete with a holiday resort. |
| IT companies also cite the necessity of being close to clients as another reason for setting up a base in smaller cities. |
| "The key reasons for starting operations in Coimbatore, Chandigarh, Kochi and so on are to ensure that we have a distributed model, as well as proximity to clients," says a TCS spokesman. |
| TCS has clients such as the Unit Trust of India, the EMC group and banks that operate in smaller cities. |
| Still, don't overestimate the phenomenon either. India's new IT destinations don't account for more than Rs 1,000 crore a year in direct exports, though the figure could reflect some under reporting since many companies in the smaller cities bill the work they do there to their headquarters. |
| Notes Verma: "The second-tier cities are on the active radar screens of IT companies. But I don't think many large companies have started operations there and the volume of business is not significant." |
| Some states have a couple of clear disadvantages. Kerala, for example, is less than well connected by air to overseas destinations. |
| Says Suntec vice president Mohan Das: "Flight connections are not good, one has to waste a lot of time. That is a big disadvantage. Also, many might not find the fast active life of a city here." |
| Adds a senior executive at one of India's biggest software companies which has a presence in the state: "There is no large pool of trained staff waiting in Kerala and the legacy of labour unionism is still fresh in people's minds." |
| Many IT company executives say that they are just testing the waters. Says one senior executive: "We have bought land in several parks. We are looking at this as a long-term investment (rates are low now). But we are not sure whether we will set up business operations there. At the moment they can be used as training centres." |
| Nor will IT companies admit it, but many in small cities are confronted with a slightly different staff retention problem. |
| Says an executive at an IT company in Karnataka: "It's great on paper to say that Mangalore and Mysore produce so many graduates and engineers. But they all want to work in Bangalore or in another metro and walk out once they get jobs there." |
| Clearly, the jury is still out on how many of these new destinations will make it to the league of big Indian IT centres. For a verdict, watch this space, two years from now. |
| Chandigarh-Mohali |
| |
| |
| Goa |
| |
| |
| Coimbatore |
| |
| |
| Bhubaneshwar |
| |
| |
| Vishakapatnam |
| |
| |
| Trivandrum & Kochi |
| |
| |
Top Section
Explore Business Standard