Hyderabad will take second place in IT after Bangalore

FIRST PERSON/ M Vijay Kumar

Colonel M Vijay Kumar, the director of Software Technology Parks of India - Hyderabad (STPH), is cherished by the IT industry in Andhra Pradesh as its friend, philosopher and guide.

It is during his five plus years' tenure as the regulator and facilitator that the industry here grew by leaps and bounds. The 52-year-old ex-army man has passionately nurtured the local IT industry during the last five years because of which the number of IT units working under the STPH grew from a mere 70 in 1998 to 1165 now.

It is under his visionary leadership that IT exports from the state shot up from Rs 284 crore in 1997-98 to Rs 3,668 crore last fiscal. The state currently ranks fourth in terms of volume of software exports in the country.

Going forward, Vijay Kumar expects that Hyderabad will soon emerge as the second ranker after Bangalore. He shares his plans for the same in an exclusive interview with Business Standard.
Excerpts:

What makes you believe Hyderabad will emerge second in IT exports in the near future?
Currently Noida with Rs 7,450 crore worth IT exports and Chennai with Rs 6,315 crore exports stand at the second and the third positions in IT exports after Bangalore, while Hyderabad stands at fourth position.

For Chennai, the advantage is that Tata Consultancy Services (TCS) reports a major portion of its revenues from that city and the major end-user industries for IT like manufacturing, and automobile are located there.

Similarly, Noida is a cluster of seven states and there is no real comparison between Hyderabad and Noida. However, the recent developments like TCS building its largest development in the country "" Deccan Park ""here with plans to recruit about 3,500 people in the short term, as well as announcements by a number of Fortune 500 companies like Computer Associates, Computer Science Corporation, Continuum etc to locate their development centers here, will definitely narrow the gap among us, Chennai and Noida.

Expansion plans taken up by HSBC, Virtusa, Convergys, Keane, Satyam etc. will also help the numbers grow fast. We expect that within the next two years, Hyderabad will reach the second slot.

What, in your view, are the strengths of Andhra Pradesh?
Today, people are able to see our strengths vis-a-vis other states. For example, if you take Bangalore, the utilities are under strain, commuting has become very difficult, and attrition rate is very high.

If you consider alternative cities, once Pune used to be an alternative especially as a research and development (R&D) hub for the country but it lost its prominence primarily because the government there was not moving fast. Hyderabad will emerge a big player in the next two to three years.

The cost and competence advantages and the focus of the government are some of the strengths of Hyderabad. Lack of supportive infrastructure in Chennai makes us better than that city. The cosmopolitan culture of Hyderabad is also an added advantage.

Cheaper real estate prices in Hyderabad compared to other cities are another major attraction for the IT companies. For instance, according to the latest Cushman Wakefields report, the monthly lease rentals in Bangalore vary between Rs 35 to 45 per sqft depending on the area, while the same costs Rs 25 to 35 in Hyderabad. In Chennai rentals vary between Rs 31 and Rs 36.

What are the weaknesses here?
The techno-entrepreneurial spirit of the Andhrites needs to be stimulated. A majority of the entrepreneurs see the business as a profit generating activity but they should see it as an instrument for professional advancement, processes improvement and wealth distribution. That refinement is needed.

There's a criticism that not much of high value work is being generated here?
Unless you densely populate yourself with low value-high volume work, you can not generate huge employment potential. Innovation and constant improvisation will automatically follow as you grow in size. One peculiarity in AP is there is dearth of people for the industry in the middle level management because one in every three engineering graduates goes for higher education overseas.

We are now graduating towards the higher end of the spectrum because a lot of people with four to five years of experience are reverse migrating from US and other countries.

For example, Motorola's CDMA job is entirely done from here; Mentor Graphics is getting its total design job here. Pratt and Whitney is also getting a majority of its design work done at Infotech Enterprises.

How is the exports performance of STPH units in the current fiscal?
For the half-year ended September we did Rs 1660 crore, which is slightly short of the targeted Rs 2,000 crore mark. Last year we did a great job in ITES exports which were at Rs 1,411 crore out of the total exports of Rs 3,668 crore.

This year we expect the second-half to be much better because so many new units have set up their centers here in the last two quarters, and they are expected to start reporting their performance from now. We are confident of touching the $1 billion mark by end of the year.

What are the total investments so far made by IT companies in the state?
The cumulative investment figure exceeds Rs 2,800 crore upto March 2003, of which Rs 542 crore came last year. This year investments are expected to cross Rs 600 crore with Cyber Pearl project and TCS's Deccan Park coming up.

Do you think that there will be a negative the impact on the industry if there is a change in leadership in the state?
Whichever party comes into power, with the bureaucratic response to the entrepreneurial needs institutionalised, they can not afford to take retrograde steps that hamper the progress of the industry. I don't think that there will be any negative impact on the industry's growth. The train has already been flagged and nobody can stop it now.