Indian IT’s Hot Spots

India has become synonymous with expertise in the IT discipline. A World

Bank-funded study has confirmed that MNC vendors rate India as their top choice

for software outsourcing. SW development is not confined to the top few cities

in India, and cities like Bangalore, Hyderabad, Mumbai, Pune, Chennai, Kolkata,

the Delhi-Noida-Gurgaon belt, Vadodara, Bhubaneswar, Ahmedabad, Goa, Chandigarh

and Trivandrum are all developing rapidly. They boast state-of-the-art

facilities and a large number of overseas vendors. A large part of software’s

success is due to the role played by state governments. Pondicherry is

synonymous with hardware and Gurgaon and Noida with call centers. Just why is it

that IT clusters get formed in any given city? A number of factors–beginning

with the initial lure of the homeland for NRIs and the availability of proper

infrastructure–help influence the final decision. We took a look at some of

the IT success cities and what makes them so...

Bangalore



Call

it what you will–the ‘Garden City of India or the ‘Silicon Valley of India’.

Despite pretenders to the throne, it is Bangalore that has been emerged as the

hands-down winner in the IT arena in the country. A recent survey conducted by

CII rated Karnataka as the second-most desired state in the country by

industrialists.

Little wonder then, that industry giants like Infosys and Wipro preferred the

city to establish base. The city went onto notch a stupendous export figure of $

2 billion for the year 2001-02 recording a growth of 67 %. This still makes it

the largest software exporter in the country and leaving no further doubt that

the city is indeed the IT capital of India. More than 150 companies here are

multinationals with a strong base in VLSI, telecom, and other high technology

services. Most MNC IT companies chose Bangalore as their base in India over

other cities due to easy availability of people with the right skills, low

infrastructure costs, and the favorable climate

The period between 1995-98 saw a number of MNCs coming to Bangalore.

Currently, the list of companies in Bangalore reads like the who’s who of the

worldwide IT industry. The results are there for all to see. There are certainly

infrastructures that could be further developed and improved like better traffic

control, roads, electricity and other infrastructural needs, which plays a major

role in the economic growth of the cosmopolitan city. Unless this happens

Bangalore can loose its competitive edge.

Chennai



While Bangalore and Hyderabad went to town talking about their prowess in

IT, Chennai went about its work quietly. Tamil Nadu has crossed a milestone in

software exports by achieving $1.1 billion (Rs 5223 crore) in exports during

2001-02, registering a whopping growth of 67.8 %. This staggering growth, during

the most difficult period in the history of software sector worldwide, is likely

to catapult the state close to Karnataka.

Chennai

has quietly attracted a large number of domestic companies and MNCs. Most

recently there have been companies like EDS, and organizations like the World

Bank enhancing their presence here. In one of the latest city-wise surveys,

conducted by Business Today to ascertain India’s ‘Best Cities for Business’,

Chennai was ranked at #2, based on perception, and factually at #5. Chennai

remains a very accommodative and adaptive environment for IT corporates, in

terms of availability of skilled labor, educational facilities, excellent

knowledge culture, cost of living, quality of infrastructure, telecom

facilities, public transport, and the work culture.

The government has taken excellent measures to create and sustain Tamil Nadu’s

IT competitive advantage. A specific IT Council, comprising members of the

Government and the corporate sector, are already putting their thoughts together

and are preparing a draft strategy to take Tamil Nadu onto the next plane of

operations. Practical issues like infrastructure, foreign investment in human

capital, connectivity, favorable government IT policies have all been identified

and sorted out over the past decade. The government should now focus on building

the ‘Made in Tamil Nadu’ brand and making it reputed.

Mumbai



The financial capital of the country... the city where Bollywood rubs

shoulders with commoners... and a city that never sleeps.

Think Mumbai and you have a buzzing metro bustling with life.

But

the infrastructure offered by the city can certainly give the other cities a run

for their money. Maharashtra made an early beginning for facilitating the growth

of IT. Over 32 %of the Internet subscribers in the country are based in

Maharashtra. The state accounts for more than 35 % of PC penetration in the

country. Over 30% of software export from India comes from Maharashtra. 25% of

the top software companies in India are located here. 24% of the ERP and another

25% of the LAN/WAN market in the country is in Maharashtra. With over 1,58,000

trained IT graduates pouring out of colleges including the prestigious IIT,

Powai, human resource is available in abundance.

The state government has played a major role in facilitating the growth of

the industry. SEEPZ has already been converted into a SEZ, a specifically

delineated enclave. Add to it the initiative taken by the state government to

promote the country’s first Knowledge Corridor between Mumbai-Navi Mumbai-Pune–a

six-lane, dual-carriage expressway built to link the two cities. An optic fiber

cable link provided between the two cities along India’s first expressway. But

operating costs are typically high and there is considerable scope for

infrastructure to be improved.

Pune



This city has earned a number of sobriquets over the years–pensioners’

paradise, Queen of the Deccan, Oxford of the East… But this sleepy pensioner’s

paradise has certainly woken up to a new awakening. This mini Detroit boasts of

almost all the major players in the country–Bajaj Auto, Kinetic Engineering,

Telco, Mercedes Benz and Bajaj Tempo. Biggies like Infosys, Wipro, Geometric

Software, Tata Technologies, Kanbay, Syntel, could no longer afford to ignore

the city. Well, the reasons are many. But this could be one of them. An IDC

(India) report on ‘Exploring the IT Goldmines: Indian Homes’ to ascertain

the level of penetration of PC in households reveals that Pune outsets Bangalore

to top the list. Pune with a penetration of 26.6% easily replaced the IT savvy

Bangalore to top the list of cities having the highest proportion of households

with PCs.

Pune is a base for major industrial units. It has led to an appreciation of

professional management techniques and practices, a cosmopolitan culture and

spread of IT usage in business. IT investments in Pune totaled over Rs 100 crore

in the year 2001.

The city’s engineering colleges churn out 3,000 IT professionals every

year. Pune STP’s export turnover was Rs 2,000 crore for the year 2002. Thanks

to the six tracks of fiber optic cable along the Mumbai-Pune expressway, the

city is has a lot in its favor. The city’s telephone network runs on E-10B

digital exchanges connected through optical fiber links. The existing earth

station at Arvi near Pune connects to international networks through high-speed

satellite links. Then there is the Internet over cable service launched by

Silicon Mountains and Global Electronic Commerce Services touted to be the first

of its kind in the country.

And the government also offers lot of incentives to strengthen the software

industries with its new policy guidelines. Although the city has a lot going for

it, a number of issues await a solution. The network of roads, its quality and

traffic discipline needs a lot of attention. The quality of power and its

availability is another major issue.

Hyderabad



A charming blend of the ancient and the modern, Hyderabad, is also known as

the Istanbul of India. Hyderabad retains the old-world atmosphere, unlike other

cities in South India. That was until Chandrababu Naidu came along. More

popularly known as the CEO, this man has single-handedly catapulted the state of

Andhra Pradesh to the forefront of IT. This old and culturally rich city is now

fast emerging as the center for all computer-related activities in India. The

pro-active CM is a hands-on manager. He is the only chief executive of any state

in the country who has daily information reports on virtually every subject and

happenings in every corner of the state. The chief minister’s integrated

information system (CMIS) is a three-tier architecture offering detailed

information on almost everything ranging from thermal generating stations, to

law and order, and industry.

Recently,

the government of Andhra Pradesh launched APFIRST, the Agency for Promoting and

Facilitating Investment in Remote Services and Technology within the state of

AP. APFIRST’s mission is to make AP a preferred BPO/ITeS destination. Power

was always good in Hyderabad. Bandwidth was a problem till 2000 when

additionally STPI installed four gateways and bandwidth position was eased

considerably. Fibre is also available via Mumbai and that is how call centres

like GE, HSBC are operating using both fiber and satellite media.

Hyderabad was mainly an application maintenance decision and software

services destination. But now, companies have begun work in niche areas like

telecom, networking, switching, design automation, VLSI, wireless security. In

addition to the facilitation through the EXIM Policy, the government has brought

about certain enactments like the Infrastructure Development Enabling Act to

focus on the growth of the industry. The total capital investment by the

software export houses under STPH is of the order of Rs 2337 crore as on March

31, 2002. Of course, the city does have some issues to address.

Some of the hurdles could include understanding the local language and

identifying of available resources. The political stability, long-term vision,

and good law and order condition add to its appeal.

Gurgaon



The story goes that during the times of the Mahabharata, Gurgaon was a thick

forest in which the ashram of Guru Dronacharya existed. Because of Guru

Dronacharya’s ashram, people started calling it the ‘Gurugram’ which later

on changed into ‘Gurgaon’. Now Gurgaon has become one of the most important

corporate and industrial hubs of Haryana.

Haryana

Govt through its enterprise namely Haryana State Electronics Development

Corporation Limited (HARTRON), has been undertaking various schemes and

activities for the development of Electronics and Information Technology

industry in a systematic and scientific manner in the state since its formation

in January, 1983. Here the focus is on ITeS.

Many companies have or are considering opening call centers in India, most

often in partnerships with local firms. The country has a vast supply of

educated, low-cost labor. Its voice/data infrastructure is also improving, in

part through deregulation. But there are special construction and design

features that must be considered when locating there, like robust on-site power

and additional training space, as the experience of global outsourcers. And this

is where Gurgaon scores over other destinations in India. In a call center

operation, manpower typically accounts for 55 to 60 % of the total cost. In

India, the manpower cost is approximately one-tenth of what it is overseas. Per

agent cost in the US is approximately $40,000, while in India, it is only

$5,000.

Even as New Delhi continues to hog almost 50% of the total number of call

centres in India, the remainder prefers to stay on in major cities like Mumbai,

Hyderabad and Bangalore. Most players are reluctant to move to B class cities

that include Bhopal, Nagpur, Kanpur, Indore, Patna, Jaipur, Chandigarh, Cochin,

and Goa, thanks to several roadblocks. These are low bandwidth supply, lack of

infrastructure, transport, non-availability of human resources and poor

technology support seem to be some of the major deterrents. Again, this is where

Gurgaon scores over the others. The call center business already generates Rs

5.5 million in revenues and employs 14,000 people in India, adds Nasscom.

Today Gurgaon boasts of about 20 odd call centres, large and small. In fact,

ITeS accounts for 30% of the total revenues in this region. Although an internal

survey reveals that Gurgaon is still a hot destination for call centers, the

industry believes that the local pool has been exhausted and is therefore

looking at second tier towns for growth.

Pondicherry



‘A slice of paradise by the seashore’–is how most describe this city

with the French connection. With a heritage that dates back to 100 BC,

Pondicherry’s monuments bear the imprint of its colonial invaders–the

Europeans, the Portuguese, the Dutch, the Danes, the English and the French.

Pondicherry has been the hardware capital of India long before Bangalore became

the Silicon Valley of the country. Pondicherry has as much as 50% share of the

total hardware industry in India. Today these industries produce goods worth Rs

6,000 crore. Pondicherry today boasts of more than 68-odd units that account for

a turnover of Rs 3,000 crore in hardware. With the value of production of these

hardware manufacturers (about 70) standing at an impressive Rs 2,810.5 crore per

annum, it is clear that the thrust continues to be on the hardware industry.

Classified

as Category A, with a hassle-free environment and proactive investment policies

and industry friendly administration, the industrial development here has been

excellent. Few states offer these kind of incentives–an income tax holiday for

a period of 5 years to units which commence production at the earliest, sales

tax exempted for the sale of goods manufactured by all the IT industries for a

period of 10 years, stamp duty exempted for IT industries on sale or lease of

property in the IT Park. A venture capital fund has been established for the IT

related industries through PIPDIC, SIDBI, and the private sector. An Industrial

Guidance Bureau has been established to function as a single window clearance

agency for the setting up of industries. The Bureau also acts as a consulting

agency to help IT industries obtain quality certification from the International

Standards Organization (ISO) and Software Engineering Institute (SEI).

Providing the required impetus to metamorphose the city into a technopolis is

the new age Electronic Park. But some minor rumblings have begun. The industry

that has been here for long is obviously cut up with the fact that the long tax

holiday comes to an end. The government, meanwhile, maintains that IBM proposes

to establish a second unit.

All said and done, this little Union Territory has done itself proud by

attracting majors. Having carved a niche for itself in the hardware arena, there

are plans to diversify into software. There are ambitious plans to capitalize on

the French connection and get more business going in the state.

Nanda Kasabe/CNS With inputs from Rahul

Gupta, Zia Askari and Nisha

Kurien