Decoding Chennai

Chennai is conservative, re marked the spokesperson of a Bangalore-based
company in a press meet recently in the city, but it hardly had any impact on
the audience, who just brushed it aside. But on the contrary, this conservative
myth or perception, which many in the industry believe constitutes the social
fabric of Chennai, actually creates a cordial and tranquil atmosphere most
conducive for IT. However sociologists aver that a cosmopolitan or conservative
outlook is more a state of mind than a reality in India as no state in India can
claim it is truly cosmopolitan if one were to compare Indian cities with that of
its Asian counterparts. Meanwhile some political observers argue that the
destination wars were fraught with political opportunism in mind and such
personality driven campaigns always face the risk of the destination losing its
charm once political regime change happens. Cases in point being SM Krishna and
Chandrababu Naidu.

When deciding on a destination to do business in India, one should not,
according to social analysts, just go by the number of pubs and discos. Rather,
one should look for certain key parameters like physical and digital
connectivity, availability of manpower, real estate, physical infrastructure,
and law and order among others. On all these parameters, Chennai scores high and
despite the inherent strengths of the destination Chennai was sandwiched between
happening Bangalore and over-hyped Hyderabad in the past. But with both
Bangalore and Hyderabad witnessing change of political leadership, their IT
savvyness is losing its sheen by the day. In the bargain, Chennai is fast
becoming an expansion destination for many IT companies. Moreover Bangalore is
just 380 kilometers northwest of Chennai, and it is logical for Bangalore-based
companies to step into Chennai. Also the political neutrality towards IT is one
of the big advantages Tamil Nadu has. Whether it is the DMK or the AIADMK, the
IT sector does not get any negative impact as the respective parties have given
a free hand to various IT promotion agencies like ELCOT, TIDCO, SIPCOT, etc, to
move ahead with their projects. This, in a way, has ensured continuity of
various IT initiatives.

Opening up to a New Reality

So beyond the deceptive appearance and the conservative tag lies a
burgeoning IT industry that operates out of swanky technology parks like Tidel
or state-of-the-art company-owned facilities like Cognizant Technology Solutions'
Technocomplex. Anybody visiting Chennai these days can see the subtle
transformation the city has undergone in the last one year with tall buildings
laced with concrete and glass have sprung up throughout, enticing the IT
companies which are increasingly coming the Chennai way. Reflecting on that, R
Chandrasekaran, general manager, Cognizant Technology Solutions, says,
"Today Chennai is shining more than ever before for several reasons, two of
which are important. First, recognizing the intrinsic brand equity of Chennai,
more and more companies, especially reputable MNCs and large Indian enterprises,
are making a beeline to or expanding their base in Chennai. Second, Chennai-based
companies are getting aggressive with their branding and visibility management,
thereby ensuring that perception fast catches up with an incredible
reality."

That incredible reality is becoming quite evident by the day and if one were
to look at the scheme of things in the last few months, almost all the biggies
like Infosys, Satyam and Wipro have etched huge plans expanding out of Chennai.
Infosys, for instance, has acquired 129 acres out of Mahindra City and plans to
build a campus style development center. According to company sources, Infosys
plans to invest in phase one around Rs 250 crore for in the new facility at
Mahindra City, which will have a capacity of 5,000 people and a built up area of
1 mn sq ft. Upon full completion of the campus over the next four years, the
Infosys' campus will be one of the biggest in the world at 3.5 mn sq ft and be
able to house 25,000 professionals. The facility would require a whopping 22.5
MW of power. The total investment into the project will be around Rs 1,250 crore.

Quips BG Menon, COO, Mahindra Industrial Park (MITL), "Infosys has
commenced construction, and the first unit is expected to be operational by the
end of this financial year. We have additionally, confirmations for close to 100
acres in the IT segment and all these customers are expected to take possession
of their lands in the next one to three months. We have also signed an MoU with
Ascendas to develop 1 mn sq ft of premium ready-built space for the IT sector at
Mahindra City. Work on the first 250,000 sq ft will commence early next
year."

Infosys committing on huge expansion plans is a clear pointer of Chennai's
graduating into the big league. Infosys forayed into Chennai in 1995 and
currently operate out of its 450,000 sq ft facility, spread across 13 acres in
Sholinganallur in Chennai, that houses 2,800 employees. The Chennai center is
also the first to implement the CMMI model that provided measurable business
benefits to the clients. Exports from the Infosys Chennai center stood at Rs 742
crore for the year ended December 2003. Meanwhile, Infosys' key competitor
Wipro has also announced big expansion plans out of Chennai. According to Wipro's
spokesperson Arjun Viswanathan, "Wipro sees Chennai as one of the growth
hubs for IT and ITeS. The company plans to develop a new campus at the allotted
85-acre Knowledge Industry Township at Sholinganallur where we plan to

generate 15,000 jobs in the next five years."

Satyam's 100-acre Facility  Satyam Computer Services has inked major expansion plans out of Chennai. According to Tamil Nadu government sources, the company chairman B Ramalinga Raju, met state chief minister J Jayalalithaa and has put forth a proposal to acquire 100 acres of land. Satyam wishes to increase its headcount by 15,000 out of this new proposed facility in Chennai. Satyam already has a presence in Chennai with six offices here that employ around 3,500 professionals. For the year ended March 2004, Satyam's Chennai centers have notched up exports to the tune of Rs 154 crore. Sources say that by expanding further through Chennai, Satyam intends to grow its software exports to Rs 400 crore.

Growing Plans

Every destination has its inherent strengths. One of the biggest strengths
Chennai has is the abundant quality of skilled manpower. Hence several IT
companies base their most mission critical work out of Chennai. Chennai is a
critical hub for TCS' operations. The company has 10 development centers and
around 10,000 employees. TCS' state of the art facility in Sholinganallur is
one of the most modern facilities in India, constructed on a modular design that
enables different project groups to operate as individual business units
catering to the particular client. The 160,000 sq ft Sholinganallur center is
also a Linux competency center for TCS that has the distinction of implementing
IBM's 64-bit zSeries eServer, making it the first organization in the ASEAN
region to implement the Rs 25 crore most powerful commercial computer in India.

Clearly the mission critical nature of centers like TCS Sholinganallur slowly
made the Old Mahabalipuram Road into a IT corridor, and since 1999, companies
like Polaris, Infosys, Cognizant and others have reinforced the IT prowess of
Chennai. Says Arun Jain, chairman and ceo, Polaris Software Lab, "Chennai
has always been perceived as the knowledge capital of India and it is no
surprise that today Chennai is fast becoming a hot destination for most IT
companies. This is primarily due to the affordability factor with regard to the
infrastructure, excellent workforce, lesser attrition rates, high productivity,
and good government policies. In addition, other physical attributes like good
connectivity via road, rail and air make Chennai a holistic place."

Beyond Tidel Park Ascendas, along with the Tamil Nadu Industrial Development Corporation (TIDCO), is jointly developing a 1.5 mn sq ft IT Park in Chennai (International Tech Park, Chennai), on Taramani-CSIR Road, just behind Tidel Park. The first phase of 525,000 sq ft is slated for completion around mid-2005, and would be a world-class trend-setting work-play environment offering employees of multinational corporations and local companies an extremely attractive business lifestyle. Besides high quality business space, employees can look to enjoy a wide array of conveniences and amenities. These include a large modern food court, al-fresco dining, coffee bars, a well-equipped health club, and convenience stores. The International Tech Park Chennai is expected to attract IT, ITeS, and BPO companies employing a community of some 6,000 highly skilled staff.

"Chennai clearly is a key destination among the four 'tech-enabled'
geographies in India where we are looking to expand our footprint in the
future," says Phaneesh Murthy, CEO, iGATE Global Solutions. "Chennai
traditionally scores high on "hard" parameters such as availability of
software professionals to data communications. Besides the competitive cost of
setting up software units and on a host of "soft" parameters such as
low cost of living, less commuting time, affordable cost of housing and
excellent education facilities," adds Murthy.

Going Forward

The spate of investments and commitment by leading IT companies has
generated interest on Chennai among prospective investors. But with this sudden
spurt of interest, the facilities that are being currently sold are "build
your own campus" style. To attract and sustain the growth, Chennai needs
more ready-built space and industry analysts opine that the government must
further encourage private players to build such facilities. Quips Chandrasekaran,
"MNCs normally prefer to operate out of leased facilities for the first few
years before investing in real estate. To attract more MNCs, private realtors
need to come forward and construct more such commercial real estate as is
available in certain other locations."

Ramco: World-class Product Player The only Indian vendor in the ERP space who competes with the likes of Baan and SAP is Ramco Systems. Ramco Systems has a huge ten-storied facility in Chennai, which is its nerve center. Ramco is the first instance of a dedicated IT development center in Chennai. Says PR Venketrama Raja, CEO, Ramco Systems, “Ramco's solutions are developed using Ramco VirtualWorks, a virtual software factory that allows firms to address their unique and next practices over and above the standard best practices. VirtualWorks is a process-to-application platform that incorporates several patentable breakthrough concepts (multiple patents filed), a first for an Indian software company.” Over 80% of its employee base of over 1,500 people are based out of its Chennai facilities. Most of them are involved in R&D, development and implementation of mission critical enterprise solutions for global customers such as Swatch, Kardex, PHI, Bemis, Radisson Edwardian, Moser Baer among others.Â

Meanwhile the government should also devise various innovative campaigns
riding on the recent success and must further weaken the negative perceptions in
terms of infrastructure. For instance, the six-laning of the IT corridor has to
be made on a war footing and various encroachments have to be removed.
Meanwhile, other areas like an aging public transportation system and bad roads
in sub-urban areas merit government attention. In all, the government of Tamil
Nadu has to evolve a plan of action that improves the overall civic
infrastructure of the state, which will secure its rightful place in the IT
space.

Mahindra: the Ideal City Mahindra City is India's first integrated business city in a public-private partnership model that is promoted by Mahindra & Mahindra and the Tamil Nadu Industrial Development Corporation (TIDCO). Conceptualized as a suburban city to provide world-class infrastructure in a plug and play format to global businesses, the Mahindra City has several unique advantages: among other things, it is just 30 minutes from the airport. The current investment in the project is Rs 200 crore with an additional Rs 100 crore for further development.

Shrikanth G in
Chennai

Tamil Nadu: The Inherent Strengths

Foreign direct investments Tamil Nadu
stands number three in terms of FDI in India. Approval of over 2,052 FDI
applications, amounting to Rs 231 bn over the last ten years

High growth in per capita income Per
capita income at Rs 12,504 (all India equivalent Rs 10,067) has grown at a CAGR
of 5.7% (compared to the all-India equivalent of 4.6%)

High literacy rate Tamil Nadu spends
around 4—5% of total plan expenditure on education and has achieved a high
literacy rate of 73.5% (as compared to all India levels of 65%)

Abundant availability of manpower Given
the large number of universities, colleges, and technical institutions. The
state has 25 universities and 250 engineering colleges, which produce over
70,000 engineering graduates of whom 35,000 are from IT related fields.
According to UNIDO, Chennai has the highest density of software professionals.
Moreover, Chennai boasts of a huge population of finance professionals most
suitable for back-end accounting work.

Low attrition rates A work is worship
mindset makes attrition low in this part of the world and in BPO companies'
attrition rates are lower by 50% as compared to other locations

Lower real estate rates Compared to
Bangalore or Hyderabad, real estates are lower in Chennai. For instance, in
central business districts, the rentals are Rs 50-65 per sq ft per month and in
the outskirts it is around Rs 35—40 per sq ft per month

Stable Power 99.7% availability of power
almost makes it 24/7 with no scheduled power cuts. Tamil Nadu is the only state
to have mixture of hydro, thermal, and nuclear power generation

Education and Healthcare Called the
"Mecca for Medicine", Chennai has specialty centers in every branch of
medicine with a slew of private and government hospitals. On the education side,
a range of international and local schools provides for ample primary and
secondary education centers

Connectivity Landing point for submarine
cable and bandwidth in excess of 13 plus Tbps and 100% digital exchange network.
On the physical side, well connected by air with 205 international flights to
every global destination and two seaports.

Source: Tamil Nadu government, Nasscom / KPMG and ELCOT