The Breeding Grounds

In the last two years the IT boom has spilled over to tier-2 cities. While
apprehensions still remain, some state governments are going all out to promote
tier-2 locations. Take the case of Tamil Nadu, which is a pioneer in the hub and
spoke model of developing IT, with Chennai as the nerve center. According to Dr
C Chandramouli, IT secretary, Government of Tamil Nadu, Tamil Nadu is one of
the most urbanized states in the country.Our hub and spoke model development is
aimed at promoting IT all across the state so that Chennai does not get choked.

Emerging IT Hotspot

When companies think of IT outside Chennai, one destination that tops the
agenda is Coimbatore, as it is the hub for a lot of SMEs manufacturing
ancillaries and has a culture of engineering design. But when we look at the SMB
spending on IT, its very minimal, with most of it spent toward the manual
processes segment. Though, there seems to be a huge opportunity for EPO kind of
services, both for local and global markets.

Industry bodies like CII believe Coimbatore is an ideal destination for
engineering process outsourcing (EPO). This primarily involves engineering
design and CAD-CAM work. The region has carved a niche for some of the
engineering sectors like pumps, foundry, auto components, and machine tools. The
EPOs will be an automatic extension to the inherent strength of the region.

CII has been highlighting Coimbatore as an ideal destination for IT and BPO
investments. CII, jointly with ELCOT, organizes the annual Connect Coimbatore
event to showcase the new business opportunity in the IT and BPO sectors, and
also to showcase Coimbatore as a suitable destination, says EB Rajesh, deputy
director and head, Coimbatore Zone, CII.

Meanwhile, on the IT and BPO services side, things have started rolling. The
government has identified Coimbatore as one of the most promising tier-2 cities
and has announced a TIDEL Park. The government has also launched a 56-acre ELCOT
SEZ with a proposed built up area of 4 mn sq ft. Companies like TCS and Wipro
are also developing their facilities in the SEZ.

Why Coimbatore?

According to industry sources, the locational advantage of Coimbatore, its
proximity to both Bangalore and Chennai, and the huge talent pool available,
makes it a good expansion base. Going by government statistics, Coimbatore has
27 engineering colleges, 72 arts and science institutions, and 18 polytechnics,
making it the ideal recruitment destination. Also, instead of moving the local
talent to facilities in Bangalore, Chennai, or elsewhere, companies feel that it
makes more sense to employ them in the same location, which in turn helps in
retention.

Take the case of IT major Cognizant that has around 2,000 employees in
Coimbatore. Says Vishnu Potty, vice president and head, Coimbatore Operations,
Cognizant: Historically, Coimbatore has been a strong sourcing base for our
operations across India. Over 10% of our annual fresher intake has been from
engineering campuses in and around Coimbatore.

Our growth in Coimbatore has surpassed our expectations. When we started
operations in 2005, our plan was to ramp up to 400 professionals in the first
year but we ended up with a headcount of 900, more than double the planned
number, adds Potty. Cognizants Coimbatore center focuses on four industry
clustersfinancial services, healthcare, manufacturing and retail, and
information, media and entertainment.

Meanwhile, IT major Wipro has been allotted ten acres for its facility in
Coimbatore, and TCS around five. Also, Cognizant is aggressively planning for
further expansion. It has plans of expanding its presence in Coimbatore with a
fully-owned techno complex in Keeranatham village, near Coimbatore.

There are some leading homegrown companies as well. One company that has deep
roots out of Coimbatore is KG Information Systems (KGISL), which provides IT and
BPO services. On the IT side it focuses on BFSI. The software technology campus
of KGISL in Coimbatore is spread over 25 acres, and the companys software and
BPO services divisions are housed in the campus in a four level 100,000 sq ft
state-of-the-art building.

Apart from being an IT company, KG is also into infrastructure development.
It has developed the Coimbatore Hitech Infrastructure (CHIL), which is a 34.7
hectare IT park, with companies like Robert Bosch, and Perot developing their
facilities. Says Jayamurali Balagurusamy, vice president, Corporate Affairs, KG
Information Systems: The combination of engineering, arts and science colleges
makes Coimbatore a good recruiting ground for IT services and BPO operations. We
have successfully leveraged the talent pool and created a highly successful
organization.

Another local company that made it big and lost focus somewhere in between is
CG VAK. The company started with ERP products and was quite successful initially
but lost out when biggies like SAP came in. After some tough times the company
is now on the threshold of a turnaround. Says G Suresh, managing director, CG
VAK: We are now into the outsourced product development (OPD) space. Our OPD
offerings revolve around domains like EDI and healthcare for clients in the US
and Canada. In terms of Coimbatore as an IT destination, I consider it is an
ideal base for companies to expand and tap fresh talent. But finding mid-level
management people is very difficult.

BPO Activities

Off late BPO is getting localized and many BPO companies are inking a tier-2
strategy. Take the case of Perot Systems, one of the big ticket BPO operations
in Coimbatore. Perot entered Coimbatore a year and half back and has
subsequently ramped up its operations to over 500 business process associates.
Its Coimbatore facility provides services in domains like healthcare, life
insurance, finance and accounting. Also, processes such as medical coding have
seen immense success at the facility.

Perot also operates a dedicated recruitment center in Coimbatore, and is
developing its own campus in Coimbatore. The facility will provide both
technology and BPO services.

Says Anurag Jain, regional managing director, Asia Pacific and president, CAS
and IBPS, Perot Systems; We view Coimbatore as a very exciting location in our
global delivery model. We were pleasantly surprised with the quality of talent
available, and started delivering complex healthcare processes such as medical
coding and accounts receivables management services.

Clearly, with companies like Perot Systems meeting their requirements in
Coimbatore and getting talent that is at par with the urban centers, is enough
indication of the potentials Coimbatore holds in both voice- and
transaction-based BPO work. The BPO edge comes due to its track record in
medical transcription, which actually started in small pockets in Coimbatore and
in a way has created awareness on process outsourcing.

Outlook

With big names like Cognizant and Perot Systems already in, and aggressive
plans by TCS and Wipro, plus local companies like KGISL showing interest,
Coimbatore seems to be firmly placed in the tier-2 map. Once completed, upcoming
IT parks would create a huge real estate of ready-made space suitable for
expansion.

That both the government and private players are active in building large
infrastructures augurs well for Coimbatore, but the activity has just started
and it needs to snowball. The proof points created in the IT, BPO, and
engineering design segments will act as catalysts in attracting more investments
in the days ahead.

Shrikanth G

shrikanthg@cybermedia.co.in