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IT Destinations in India

What does it take to draw Software companies to a city?
No doubt, it is sound infrastructure, government support, readily available talent, and a pleasant climate.

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. Software 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.

So why is it that IT companies cluster around certain cities?

A number of factors - beginning with the initial lure of the homeland for NRIs and the availability of proper infrastructure in their home state/city, help influence their decision to setup business in their home city. Also, a significant part of the success of a particular type of software industry in a city is attributed to the role played by respective state government. For instance, focus on hardware industry by the Pondicherry government led to Pondicherry becoming a hardware cluster, whereas focus on BPOs and Call Centers and the infrastructure facilities helped make Gurgaon and Noida as hubs for call centers.

Let us take a look at some of the IT success cities and what makes them so...

Bangalore as an IT destination

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 emerged as the hands-down winner in the IT arena in the country. Surveys conducted by CII and other organizations have most of the time 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 is the largest software exporter in the country and it leaves no doubt that the city is indeed the IT capital of India. More than 250 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 manpower with the right skills, low infrastructure costs as compared to Mumbai or Delhi, and a 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-is-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 this cosmopolitan city. Unless this happens Bangalore may loose its competitive edge.

Chennai as an IT destination

While Bangalore and Hyderabad went to town talking about their prowess in IT, Chennai went about it quietly. Tamil Nadu has crossed a milestone in software exports by achieving more than a billion dollars in exports and registering whopping growth rates even during the most difficult periods in the history of software sector worldwide. That is likely to catapult this state which is close to Karnataka.

Chennai has quietly attracted a large number of domestic companies and MNCs. There have been companies like EDS, and organizations like the World Bank who have enhanced their presence here. In one of the city-wise surveys, conducted by Business Today to ascertain India's Best Cities for Business, Chennai was ranked at 2nd position, based on perception, and at 5th position based on facts and figures.

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 focused IT Council, comprising members of the Government and the corporate sector, are working together and applying thought to take Tamil Nadu to the next level in IT. 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 as an IT destination

The financial capital of India, the city where Bollywood rubs shoulders with commoners, and the city that never sleeps - yes, that is Mumbai. Talk of Mumbai and you have a buzzing metro bustling with life.

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 150,000 trained IT graduates pouring out of colleges every year, 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 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 as an IT destination

This city of Pune 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 Auto players in the country. Bajaj Auto, Kinetic Engineering, Telco, Mercedes Benz and Bajaj Tempo.

IT 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 30% 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. The city's engineering colleges churn out 5000+ IT professionals every year. Pune STP's export turnover has been increasing over the past few years. Thanks to the six tracks of fiber optic cable along the Mumbai-Pune expressway, the city 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 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 as an IT destination

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 computerization efforts at the state government level is quite commendable.

The government of Andhra Pradesh have 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. Fiber is also available via Mumbai and that is how call centers 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.

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 as an IT destination

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 city 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 $50,000, while in India, it is only $5000.

Even as New Delhi continues to hog almost 50% of the total number of call centers 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. 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 generates a good sum of revenues and employs a considerable number of people.

Today Gurgaon boasts of numerous call centers, 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 as an IT destination

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 ₹15,000 crore. Pondicherry today boasts of more than 150 units in hardware. It is clear that the thrust continues to be on the hardware industry here.

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 the kind of incentives that are offered in Pondicherry. 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 techno-polis 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.


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About the Author

Rajeev Kumar
CEO, Computer Solutions
Jamshedpur, India

Rajeev Kumar is the primary author of How2Lab. He is a B.Tech. from IIT Kanpur with several years of experience in IT education and Software development. He has taught a wide spectrum of people including fresh young talents, students of XLRI, industry professionals, and govt. officials.

Rajeev has founded Computer Solutions & WebServicesWorldwide.com, and has hands-on experience of building variety of web applications and portals, that include - SAAS based ERP & e-commerce systems, independent B2B, B2C, Matrimonial & Job portals, and many more.

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