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Emerging Delivery Locations in India Report
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Emerging Delivery Locations in India:
The Rising Tide
Emerging Delivery Locations in India
The Rising Tide
Foreword
With revenues of USD 118 billion in FY2013-14 and a large multicultural and highly aspirational workforce of over 3.1 million employees, the Indian IT-BPM industry is cementing its leadership position in the global sourcing arena and highlighting its increasing importance in the domestic market. The industry today is the largest private sector employer in India and about 85 per cent of the current revenues are generated by the six Leader Indian cities of Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune. However, around 50 per cent of the employee workforce in these cities originates in other Indian cities. In order to control rising costs in the established destinations, hire and retain more talent (if possible, at cheaper costs) and mitigate risks to ensure business continuity; various domestic and international firms are exploring other locations within India and abroad.
In continuation to the previous report by NASSCOM and AT Kearney India: Location Roadmap for IT-BPO Growth, Assessment of 50 Leading Cities published in 2008, six years later, NASSCOM and Cushman & Wakefield have come together to present an updated and in-depth analysis of 10 emerging IT-BPM destinations (previously identified as Challengers in the earlier report) in India. This report Emerging Delivery Locations in India: The Rising Tide details the factors, opportunities and risks associated with transformation of the 10 cities, into potential IT-BPM destinations. Factors taken into consideration include:
Demographics
Availability of talent pool
Skill set assessment
Educational infrastructure
Physical infrastructure
Social and living environment
Economic assessment
Key trends witnessed in the growth of real estate sector and their implications for the industry
Government initiatives and subsidies
4
Whilst the six leading destinations have held prominent positions even during the last six years, through this report we are highlighting the overall growth of the IT-BPM industry in select 10 Challenger cities and how their development has opened the doors for further growth of the industry in India. The significant merits that these cities enjoy over other emerging cities in India have transformed them into alternate IT-BPM locations that will help achieve a more balanced growth in this sector.
We hope that this report would prove useful to you. We welcome your suggestions and comments at [email protected]
SanjayDutt RChandrashekharExecutive Managing Director, South Asia PresidentCushman & Wakefield NASSCOM
5
Executive Summary
The Indian IT-BPM industry has grown manifold in the last 15-20 years. With revenues of USD 118 billion in 2013-14 and employment opportunities to over three million professionals directly, the industry has emerged as Indias premier growth engine. The Indian IT-BPM industry has been the front-runner of economic development, providing direct and indirect employment to a large number of people across the country, a major chunk of which lies within six leading locations that include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune. These cities are typically the first choice destinations for IT-BPM organisations to start and/or expand their operations and are ranked highest in both quality and quantity (availability) on account of several parameters like better talent availability, physical and social infrastructure, connectivity, conducive ecosystem and excellent business environment. Consequently, they were identified as Leader cities in the 2008 report titledIndia:LocationRoadmapforIT-BPOGrowthAssessmentof50LeadingCities, prepared and published jointly by NASSCOM and AT Kearney.
During the last five years, the industry has undergone numerous changes due to external and domestic conditions involving economic, political and social factors that has led to the emergence of many new delivery locations to serve the needs of this growing industry. Increased focus on non-linear growth, the need to serve new customer segments, verticals and geographic markets, attracting domain knowledge, and emergence of digital technologies has led to tectonic shifts in global delivery models. This has enabled expansion of existing Leader locations and development of the hub and spoke delivery model, where smaller locations co-exist in tandem, working with and complementing Leader locations. The emergence of smaller cities offers promising growth and sustenance for the IT-BPM industry through availability of quality infrastructure, talent pool and conducive business environment at lower costs.
The industry is expected to generate around USD 225 billion by 2020, while employee base is set to more than double during this period. This will require massive expansion of infrastructure which cannot be met by the leading six IT-BPM destinations alone; hence, alternate delivery centres in emerging locations will augment the growing
6
business needs of domestic and international organisations. Many state governments are looking to replicate the success of established locations to ensure broad-based growth of their cities. The vision to repeat the success story of Leaders has aided infrastructure and connectivity improvements, making these cities more livable and viable business destinations.
ThecitiesofAhmedabad,Bhubaneswar,Chandigarh,Coimbatore,Indore,Jaipur,Kochi,Kolkata,ThiruvananthapuramandVisakhapatnamwereidentifiedasChallengersinthepreviousreport. On both qualitative and quantitative parameters, these cities have shown enough potential to attract IT-BPM organisations to setup and expand their operations.
NASSCOM and Cushman & Wakefield are delighted to present this report titledEmergingDeliveryLocationsInIndia:TheRisingTide, which specifically examines the changes that have taken place in select 10 Challenger cities to help decision makers in their medium to long-term growth strategies. Additionally, the study enumerates the advantages offered by these cities along with challenges (if any) and seeks to find solutions which can make these locations even more conducive to the growth of IT-BPM industry. With increased participation from key industry stakeholders state governments, industry bodies, academic institutions and public authorities, there is a strong likelihood that these locations will become crucial cogs in Indias endeavour to further grow its share within the global IT-BPM industry.
A detailed research exercise was carried out by researchers from Cushman & Wakefield to collect quantitative and qualitative data through primary and secondary sources. The process involved field visits, personal interviews and group discussions with various government officials, stakeholders and industry experts while evaluating various parameters for location selection rationale in each city.
7
Someofthekeyfindingspresentedinthisreportare:
The Leader cities have witnessed IT-BPM organisations expanding their footprints to suburban and peripheral locations aided by enhanced connectivity and scalability options with respect to real estate
The leading IT-BPM locations witness more demand than supply for talent along with higher cost of hiring and retaining talent. Other locations assure availability of talent in abundance, along with higher retention rates, thus pointing towards a need for organisations to reconsider their location strategy in India
Increasingly expensive and stressful quality of life in Leader cities is beginning to pre-empt reverse migration of senior and mid-level management to some Challenger cities
Although, Leader cities are far ahead in terms of infrastructure, there are noticeable improvements in both physical and social infrastructure such as connectivity, hotel keys, real estate in Challengercities over the last five years
Challenger cities offer operational cost savings of upto 25 per cent compared to Leader cities. However, this is not the primary reason for organisations to shift their base to these cities
The Challenger cities have the potential to increase attractiveness and promote balanced growth across the country as the IT-BPM industry is progressing to newer verticals, services and delivery models. Some of the important steps that need to be taken on a sustained basis to promote these cities as established IT hubs are:
8
A dedicated policy aimed at further growth of the industry with adequate support from the state government. It should not be an ad-hoc approach with shared/part resources
Ensuring regular supply of infrastructure real estate in the form of land, physical infrastructure (such as roads, public transportation, security, uninterrupted power supply, etc.) and social infrastructure (such as medical, educational and recreational facilities); should be developed within easy reach of IT parks and SEZs
Developing educational curriculum in partnership with the industry to ensure that it maintains its qualitative and financial competitive advantage; ensure that firms can provide more diverse and higher skilled jobs and not just low paid, low skilled jobs within these cities
Encouraging a cosmopolitan culture within the city to ensure that firms can attract and retain the best talent from all over; catering to global lifestyles that IT-BPM employees are used/exposed to
9
Section I: Overview of the IT-BPM Industry
Acknowledgement Pg. 12Executive Summary Pg. 6
Section II: Location Selection
A Complex Case
Section III: Challenger Locations -
Increasingly Viable Destinations
Section IV: Challenger Locations Driving the
Next Phase of Growth for IndiaTable of Contents
Indian IT-BPM industry Current scenario
India advantage Strategic Country with over 50 Delivery Locations
Challenger Locations Offering Unique Benefits
Emerging Business Trends - Altering Location Expansion Strategy
Location Attractiveness Parameters
Analysis and Comparison with Leader Locations
Pg. 15-20 Pg. 21-24 Pg. 25-28
Pg. 33 Pg. 35-36
Pg. 45-57
Appendix Pg. 84 Bibliography Pg. 86
Transformation of Leaders
Conclusion
Performance of Challenger Locations
City Profiles
Challengers Following the Leaders
Best Practices
Pg. 29 Pg. 30-31
Pg. 37-43
Pg. 58-77
Pg. 79-80 Pg. 81
Acknowledgement
The preparation of this report has been facilitated by a number of organisations and people who have extended great help to the NASSCOM and Cushman & Wakefield teams. We wish to sincerely thank all of them for their valuable contributions without which this report would not have been possible.
Firstly, we would like to thank all the participating industry members, who went out of their way to provide detailed inputs and perspectives of their firms as well as clients/markets. They offered great support to this project by providing the requisite data and assisting the study team with individual meetings to discuss the analysis as well as future strategies.
We would also like to thank the central and state government departments especially Software Technology Parks of India (STPI), education department and local municipal corporations, educational institutions, infrastructure providers and recruitment agencies who participated in this study, provided data as well as assisted the study team with individual meetings to develop the studys outcome.
We also wish to thank the executives working at these firms who gave us valuable inputs, shared their experiences, as well as offered suggestions and necessary direction to this project.
We would like to specially acknowledge the support offered by NASSCOM research and Cushman & Wakefield teams for their efforts and contribution towards the execution and completion of this report.
12
13
SummaryWith revenues of USD 118 billion and employment in excess of 3.1 million, the Indian IT-BPM industry has achieved leadership position in the global sourcing landscape
In the past few years, increased focus on non-linear growth, serving new customer segments, verticals and geographic markets, attracting domain knowledge and emergence of digital technologies have led to tectonic shifts in global delivery models. This has enabled expansion of existing Leader locations and development of the hub and spoke delivery model
Presence of 50 delivery locations within the country is one of the key reasons why India is the Leader in the global sourcing landscape
Certain Indian emerging locations such as Kolkata, Ahmedabad, Kochi and Jaipur have significantly improved their value proposition for IT-BPM services delivery
14
Indian IT-BPM Industry: Current Scenario
Evolution/Background
With revenues of USD 118 billion, the Indian IT-BPM industry has cemented its leadership position in the global sourcing arena.
Theindustryhasbeengrowingandevolvingrapidlysincethelast15yearsatacompoundedannualgrowthrateof22percentandhasreachedanestimatedlevelofUSD118billionbytheendofFY2014fromamereUSD5billioninFY1998. The increasing ability to offer end-to-end services and providing niche domain capabilities are the crucial factors behind this remarkable growth journey of the Indian IT-BPM industry.
FY2014
86
32
118
FY2013
108
76
32
FY2009
69
47
22
FY2005
28
CAGR* 22%
18
10
Exports
*In the last 16 yearsSource: NASSCOM
Domestic
FY1998
52
3
IT-BPM Revenues Break-up (USD billion)*
IT-BPMexportshaverecordedacompoundedannualgrowthrateof13percentinthelastfiveyearsandisestimatedtocrossUSD86billioninFY2014
ThedomesticIT-BPMmarket(includinghardware)accountsforalittleover27percentoftheoverallindustryrevenuesandisestimatedatUSD32billioninFY2014
*includes hardware
15
Increased consumer play, emergence of digital technology, consumer-centric services, unmet demand from emerging cities and higher adoption of IT in emerging verticals like retail, healthcare, education, amongst others are the key factors driving the domestic growth
GeographicalTrends
The USA still continues to have the largest market share at 62 per cent
The last two years have seen a rapid upturn in revenues from Europe which now constitutes 29 per cent of the total revenues in FY2014
Industry exposure to Rest of World (RoW) and APAC is low but these segments are growing fast
47
86
FY2009 FY2014E
53
15
107
UK
Europe (Excl. UK)
USA
Geography Break-down (USD billion)*
RoW
*In the last ve yearsSource: NASSCOM
Asia Pacic
28
96
2
3
1 CAGR 11%
CAGR 15%
CAGR 16%
CAGR 11%
CAGR 14%
VerticalTrends
The BFSI industry accounts for the largest revenue share of ~41 per cent
Emerging verticals like retail, healthcare, utilities, travel & transportation and media are the new growth drivers for the industry
Emerging segments account for about ~25 per cent share in total IT-BPM exports16
47
86
FY2009
Hi-Tech/Telecom
Manufacturing
BFSI
Verticals Break-down (USD billion)*
Emerging
FY2014E
19
9
8
11
CAGR 12%
CAGR 14%
CAGR 11%
CAGR 13%
*In the last ve yearsSource: NASSCOM
22
35
15
14
IT-BPMIndustryKeySegments
Each of the fourcomponentsoftheIT-BPMindustry have matured in a unique manner by following different strategies.
Changingbusinessmodels,solutionsarounddisruptivetechnologiesandverticalisedstructuresare enabling the industry to emerge as a strategic partner for their customers.
FY2009 FY2014E
BPM
CAGR 10%
CAGR 11%
CAGR 14%
IT Services
*In the last ve yearsSource: NASSCOM
IT-BPM Export Revenues Segment-wise (USD billion)*
Hardware
Software Products and ER&D
52
20
27
119
14
0.4
0.4
17
1.ITServices
3. EngineeringandR&DServices(ER&D)
2. BusinessProcessManagement
4.SoftwareProducts
a. Expected to grow at ~14.3 per cent in FY2014 to reach nearly USD 52 billion
b. >60 per cent share in total IT-BPM exports
c. Traditional segments sustaining average growth rates CADM: ~13.6 per cent and system integration: ~13 per cent in the last five years
d. Emerging segments growing faster; IS outsourcing and software testing witnessed an uptake with CAGR of 18 per cent and ~16 per cent respectively
a. USD 12.4 billion in revenues; driven by domain-specific solutions
b. One-fifth share in total exports; Growing at >11 per cent year on year
c. ~200 R&D centres by G500 firms
d. ~50 per cent of ER&D exports from telecom & semiconductors
e. Engineering analytics an upcoming opportunity; ~3X growth expected by the end of 2017
f. Convergence, fuel efficiencies, localisation along with digitisation
a. Strong ecosystem with >500 players, Indian players contribute almost 50 per cent to the export revenues, MNCs (15-20 per cent) and the rest is contributed by GICs (>20 per cent)
b. Nearly one-fourth of industry exports; expected growth of over 11 per cent over FY2013 to reach USD 20 billion
c. Knowledge services fastest growing segment with >15 per cent growth rate
d. Data analytics, legal services - fastest growing sub-segments
a. Software exports grew steadily at a rate of ~9 per cent over `2013
b. Landscape maturing: Time taken to cross INR 5 crore down 2.5X since 2006
c. 3,500+ product firms in India
d. 500 firms setup yearly; ~3X growth since 2005
e. Retail, healthcare, education hot emerging verticals
f. Investment avenues like PE/VC, incubation centres and angel funding
Key Highlights
18
IT-BPMIndustry:AllPervasiveimpactonIndia
The IT-BPM industry has become one of the most significant growth catalysts for the country. In addition to fuelling Indias economy through significant addition to the countrys GDP and foreign exchange earnings, the industry is also positively influencing the lives of its people through active direct and indirect contribution to various socio-economic parameters such as employment generation, improvements in income resulting in improvements in standard of living and promoting diversity of economic activities.
Highest relative industry share in national GDP8.1%
Highest net value-add sector60-70%
Largest private sector employer
3.1million
Largest private sector women employer
>1million
Largest share in total services exports
38%share
Source: NASSCOM
Highest outsourcing experience25+years
Leadership position in global sourcing market
55%share
19
GrowthDriversoftheIndustry
The Indian IT-BPM industry has demonstrated its existence and establishment on six core pillars that it has nurtured and evolved over the years to acquire its unique value proposition.
With global customers increasingly engaging with Indian service providers as a strategic partner, rather than just dealing with pure technology service providers, the industry has re-aligned its synergies to capitalise on growing opportunities across verticals.
*Overseas Delivery Centers
Human Capital Leadership >5 million workforce, 5 million graduates
Scalability, Security, Leadership
~78 countries, ~600 ODCs*
Cost Leadership 3-4X cheaper than the US
Customer Focus Leadership 100 per cent coverage
of outsourcing engagements
Maturity 16,000+ firms, 25+ years
of experience
Ecosystem Leadership ~43 Tier II/III cities
20
India-UniquelyPositionedasaStrategicCountryWithOver50DeliveryLocations
During the last decade, the industry has undergone numerous changes due to external and domestic conditions involving economic, political and social factors including the emergence of many new international delivery locations to serve the needs of this growing industry. Indiaistheonlycountry intheworldthatoffers50deliverylocations,ofwhich43areTierIIandIIIcities,whichserveaspotentialscalableoptionsforthetechnologyindustry,andalsoofferbusinesscontinuityoptionswithinthesamecountry.
One of the key changes that have impacted the industry and its functioning in India is the industrys gradual shift to Tier II cities due to the availability of infrastructure, sincere regulatory reforms and political support from the government, in addition to their cost advantage over Tier I cities. Many organisations are focusing on emerging cities to widen their operational base and improve their product and/or service offerings, whilst also boosting their revenues and profit margins. This could also be one of the key methods in staving off the increasing competition from other countries to Indias outsourcing industry leadership.
Emergence of Tier II and III locations as delivery hubs owing to conducive business environment, relatively lower people costs and attrition rates, lower real estate costs and improvement in infrastructure have led to the emergence of hub and spoke model within the country. Hubs being the established Leader locations like Bengaluru, Mumbai, Hyderabad, Delhi-NCR, etc. and network of other emerging locations considered as spokes.Inadditiontothecostadvantages,deliverylocationsacrossthecountryofferscalability,businesscontinuityandstability,economiesofscale,riskmitigationforclientsandaccesstoalargeraswellaswell-qualifiedtalentbase.In addition, these cities provide stronger cross industry ecosystem along with emergence of community start-ups.
21
Leaders
BengaluruChennaiDelhi-NCRHyderabadKolkataMumbaiPune
Followers
AurangabadBhopalGoaGwaliorHubliKanpurMysoreNashikPuducherrySalemSuratVijayawada
Aspirants
AllahabadDehradunDurgapurGangtokGuwahatiLudhianaPatnaRaipurRanchiShimlaSiliguriSrinagarVaranasi
Challengers
AhmedabadBhubaneswarChandigarhCoimbatoreIndoreJaipurKochiLucknowMaduraiMangaloreNagpurTiruchirappalliThiruvananthapuramVadodaraVisakhapatnam
NASSCOM- ATKearneyReportcategorizationofdeliverylocationsinIndia
High
Challengers Leaders
Loca
tion
Att
ract
iven
ess
Cost Attractiveness HighLow
FollowersAspirants
23
The success of the largely unregulated and self-growing IT-BPM industry in the top six Indian cities could potentially be replicated in many other Indian cities too. Whilst these smaller cities were categorised as Challengers, Followers and Aspirants five years ago, it has become important to see if there has been a substantial change in their value proposition as IT-BPM destinations. Almost all state governments have followed policies that are conducive to the growth of the industry within the emerging cities and we have seen that some of them may be on the threshold of making the quantum leap into a higher segment and hence, need to be recognised so that interested organisations can act accordingly.
The current report titled EmergingDeliveryLocationsinIndia: TheRisingTide examines the changes that have taken place in select 10 emerging cities to help decision-makers in their medium to long-term growth strategies. Additionally, the study enumerates the advantages and challenges these cities are facing and seeks to find solutions which can make these locations even more conducive to the IT-BPM industry. With increased participation from all the key industry stakeholders state governments, industry bodies, academic institutions and public authorities, there is a strong likelihood that India can continue to grow its share within the global IT-BPM industry.
24
EmergingBusinessTrendswithintheIndustrythathaveImpactedtheLocationExpansionStrategyintheLastCoupleofYears.
As industry is focusing more on transformational impact innovation, differentiation and hyper-specialisation are the key catalysts
Non-linearity A new imperative
Non-linear growth in revenues i.e. higher revenues with lower employee base
Employee addition per USD billion of revenues has gone down by 1.6X in the last ve years, leading to improved top as well as bottom line
High focus on operational eciencies with growing advent of technology, leading to a shift in realisation per employee. The focus is now on to do more with less
Revenue per employee up by ~1.2X
High value, low volume
New business segments
Source: NASSCOM
SMAC has identied new revenue opportunities which enable productisation of services
Total addressable opportunity of USD 1 trillion from SMAC by 2020
2013 116
100
1.2x
2009
Revenues per employee
2013 62
100
1.6x
5-10%
2009
Employee addition per USD billion of revenues added
Revenues from SMAC (% share)
25
Employee engagement
Employee engagement is a key dimension to improve productivity of businesses. Industry is maturing and new themes are emerging for better employee engagement
Work from home, part time labour, subcontracting, eective and reliable transport infrastructure are some of the benets oered by the organisations to increase eciency and control attrition leading to increased loyalty, ensure continuity as well as maintain attractiveness
Following the Customer Global Network Indian rms have presence in over 78 countries and have established over 600 oshore development centres
Indian IT-BPM industry has been growing in size, scale, maturity and domain expertise serving global customers across industry segments, and addressing the changing customer needs. The industry has been catalysing business transformation for global clients through global delivery chain with ability to provide anytime, anywhere service
t "TUIFGPDVTTIJGUTUPDMJFOUQSPYJNJUZCFUUFSBDDFTTUPTLJMMTand markets, managing risk and serving clients globally; global service delivery networks and their management have only gained more importance
t 'VUVSFTDBMFPVUTJEFPG*OEJBMJLFMZUPCFESJWFOCZNBSLFUaccess and serving specic client needs
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Global delivery models
':
':
Number of countries in which industry has Global
Delivery Centres (GDCs)
Talent mobility
78
':
':
4PVSDF/"44$0.26
TalentScenarioinIndia
The growth of IT-BPM industry is largely dependent on a number of parameters, the most important being the talent pool with requisite skill sets to cater to the rapidly growing needs of the industry. Ample talent with desired diversity and rich domain skills in niche segments is driving non-linear revenue growth for the industry. Tosustaingrowthlevelsinfuture,theIT-BPMindustryneedsconsiderabletalentbase,augmentingthedemandfortalenttofurtherlevels
Leadership in talent
t )JHIFTUFNQMPZBCMFUBMFOUQPPMJOUIFworld - India produced 7,50,000-8,00,000 technical graduates and 4-4.5 million non-technical graduates in FY2014, out of which 6,00,000-7,00,000 are employable
India enjoys a leadership position in terms of talent availability as against its closest competitors
t The diversity of the IT-BPM workforce in India is a strong point wherein other graduates and specialists bring in added advantage, domain competencies and make the sector more sustainable
Human capital leadership: Worlds most diverse talent pool
Diversity of workforce
t The six leading IT-BPM locations: Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune witness more demand than supply for talent
However, other cities oer talent supply in excess, thus pointing towards a need for organisations to reconsider their location strategyin India
Over 50 per cent of the IT-BPM workforce come from emerging locations
Uniformlyhigh talent
output
Talent Background(in %)
48-50%
Source: NASSCOM
Tier I cities
50-52%
Tier II/III cities
Engg GradsGrads (excl. Engg.)Post-GradsFinancial SpecialistsOther SpecialistsOther Grads
Employable pool
Leader
Indi
aPh
ilippi
nes
Peop
le (m
illio
ns)
Chin
aBr
azil
Educational qualications ofIT-BPM workforce
4%3%
5%
13%
45%
32%
27
Convergence of services/
solutions SMAC
Next phase of growth projects
to platforms
Value proposition - beyond cost to
delivering business outcomes
TheNextEvolution
IndianIT-BPMexportsareexpectedtocrossUSD175billionwhilethedomesticmarketcangrowtoUSD50billionby2020. Going forward, the thrust to go digital will drive the future growth for the industry.
IT spending is driven by increased R&D around technologies focused on automation, human-machine interface, green technologies, etc. Thus, it is clear that the value proposition of the industry will be further attuned to the changing requirements of the world.
Industry prerogatives:
a) Help clients go digital
b) Understand and acquire new customers for clients,
c) Grow their business will be on the top of the agenda in the next evolution. Transformational outsourcing (value, technology and innovation) will drive future growth for the IT-BPM industry.
NextEvolutionofTechnologyIndustry
Thenextdecadewillwitnessanincreasinglysoftwarepoweredworld,withtechnologybecomingevenmorecognizant,sentientandubiquitousaninextricablepartofnotonlyourenvironmentbutourselves
28
ImpactonTierILocations
TransformationoftheLeadersofIT-BPMlocations
Over the last couple of years, transformation in delivery models has altered location strategy of IT-BPM organisations. A large number of firms have steadily increased their footprints in the peripheries of existing Leader cities. For example, Whitefield and Outer Ring Road (ORR) in Bengaluru; Gurgaon and NOIDA-Greater NOIDA in Delhi-NCR; Andheri-Kurla Road and Thane-Belapur Road in Mumbai; Hinjewadi and Kharadi in Pune; Madhapur and Gachibowli in Hyderabad and Perungudi-Taramani in Chennai. Some of the primary driving forces for this transformation are discussed below.
Tier I locations expanding their boundaries
Availability of large-sized, quality spaces at attractive rentals coupled with necessary social and physical infrastructureDPOOFDUJOHUPUIFSFTJEFOUJBMIVCTXIFSFNPTUPGUIFJSUBMFOUQPPMSFTJEFTIBTBJEFEUIFNPWFNFOUBOEFYQBOTJPOPGNBOZ*5#1.PSHBOJTBUJPOTXJUIJOUIFTVCVSCBOBOEQFSJQIFSBMCPVOEBSJFTPGUIFUPQTJYA-FBEFSDJUJFT
5IFPVUFSCPVOEBSJFTPGUIFTFDJUJFTCPBTUPGmuch lesser rentals in comparison to the core areasBOEDPOTJEFSJOHUIFTDPQFPGBNQMFTVQQMZJOTVMBUFUIFPSHBOJTBUJPOGSPNTUFFQSFOUBMSJTFTJONFEJVNUPMPOHUFSN
Investments of nearly ` 143 billion have owedJOUPWBSJPVT4&;TDPNNFSDJBMSFBMFTUBUFBOE*51BSLTBDSPTTUIFTFMFBEJOHDJUJFTUPDBUFSUPUIFIJHIEFNBOEGPSPDFTQBDFTCZUIF*5#1.TFDUPS
IT SEZ stock (in millionsquare feet)*
9
NTG
NTG
IT stock (in millionsquare feet)*
NTG
9
NTG
5BMFOUSFRVJSFNFOUTBSFNFUCZMPDBMTCVUMBSHFMZCZUIFJOCPVOENJHSBUJPOUPUIFTFFTUBCMJTIFE*5#1.IVCT
#FOHBMVSVIPTUTa number of private colleges and prominent national institutes.%FMIJ/$3IBTMBSHFOVNCFSPGHPWFSONFOUBTXFMMBTNBOZEFFNFEBOEQSJWBUFVOJWFSTJUJFT
Premier universities and colleges of multifarious streamsMPDBUFEJOUIFTFDJUJFTBUUSBDUUPQOPUDITUVEFOUTUPUIFTFMPDBUJPOT
Growing talent pool
$VNVMBUJWFTUPDLPGSFBEZCVJMEJOHT
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No. of engineering colleges
29
Impactonemerginglocations
TransformationoftheChallengers
Given the multiple benefits that the IT-BPM industry offers to the economy and the cascading impact that it has had on the growth and development of the top six Leader cities, almost all other emerging cities have also tried to push the growth story further. However, unlike Leader locations, the emerging cities are carving their niches and trying to create visibility based on the inherent capabilities existing within these cities.For example, Ahmedabad has emerged as a choice for software product and support services along with support from other ancillary industries; Jaipur is establishing itself as an emerging financial services hub due to its inherent talent skills.
Inthelastfewyears,wehaveobservedthatmanyemerginglocationsarefollowingthefootprintsofLeaderlocations.
Challenger cities are recognised by the stage of development of IT-BPM industry and growth in talent base along with improvement in infrastructure aided by favourable and focused government policies.
Business ecosystem
t 5IFFNFSHJOHDJUJFTBDDPVOUGPSQFSDFOUPGUPUBMPQFSBUJPOBM*54&;TJOUIFDPVOUSZ
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4PVSDF$VTINBO8BLFFME3FTFBSDI
Talent
t .BOZFNFSHJOHDJUJFTIBWFQSFTFODFPGSFOPXOFEFOHJOFFSJOHBOENBOBHFNFOUDPMMFHFTTVDIBT**5TBOE**.T
t "SPVOEQFSDFOUPGUIFDVSSFOUXPSLGPSDFJTGSPNOPO5JFS*MPDBUJPOT
t "SPVOEQFSDFOUPGUIFUPUBMJOGSBTUSVDUVSFTQFOEJO*OEJBJTJO5JFS*****MPDBUJPOT
t *ODSFBTFEDPOOFDUJWJUZXJUIJO*OEJBBOEHMPCBMMZQMBOOFENFUSPSBJM#35TUPOBNFBGFX
Infrastructure
30
Further,fromtheinitiallistof15citiesthatwereidentifiedintheChallengercategoryinthe2008NASSCOM-ATKearneyreport,10cities(includingKolkata)haveshownmeasurableandnoteworthygrowthintheirvaluepropositionfortheIT-BPMindustryandhavebeenconsideredforevaluationinthisreport.
All the 10 cities assessed have shown improvement across multiple parameters such as IT-BPM ecosystem, availability of talent pool and infrastructure over the period of the last five years which has led them to undertake the journey of higher growth in the future.
Along with Kolkata, cities like Ahmedabad, Kochi and Jaipur have emerged as viable alternatives to Leader cities in India. The rest have shown growth in the last five years but they still need to develop at a faster pace to build up the necessary momentum and be considered worthy options to Leader locations.
31
Cushman & Wakefield Research and NASSCOM conducted a survey of prominent IT-BPM players of varying sizes (revenues and/or employee strength) to understand their location selection criteria
Areas where the Challenger locations need to improve include a) Talent availability at mid to senior levels b) Infrastructure c) Business support from local authorities
Benefits/advantages offered by Challenger location are:
a) Lower operating costs, up to 25 per cent as compared to the leading cities; these cost savings actually make servicing new customer segments viable
b) Happier, more satisfied employees (since 50 per cent of employees originally are from the Challenger locations)
c) The flexibility of having business continuity/disaster recovery centres in the same country
While talent pool is the most important criteria for location selection by offshore focused IT-BPM companies, domestic market focused firms give equal importance to both cost and talent
Summary
32
Location Selection A Complex Case
The Challenger locations have shown gradual improvement over the years to offer a set of distinct advantages to the IT-BPM organisations. Cushman & Wakefield Research and NASSCOM conducted a survey of prominent IT-BPM players of varying sizes (revenues and/or employee strength) to capture their location selection rationale. The results of the survey, which includes key advantages, challenges and location attractiveness parameters, are covered in this section.
AdvantagesOfferedbyaChallengerLocationasanIT-BPMDeliveryCentre
The following advantages add to the appeal of these locations as alternate delivery centers for expansion or new set-up by IT-BPM companies:
Increased breadth and depth in oerings
Focus Area Advantages Oered By Challenger Locations
t $PTUTBWJOHTJOUIFA$IBMMFOHFSMPDBUJPOTPQFOVQXIPMFnew services areas for delivery, in addition to new target clientst AChallenger locations enhance process diversification and specialisation
0QFSBUJPOBMeciency
t Overall savingsPFSFEJOUFSNTPGTBMBSZDPTUTMPXFSPWFSIFBETBOEMPXFSJOJUJBMDPTUTQPTJUJWFMZJNQBDUTCPUUPNMJOFTt Operating costs in the Challenger cities lower by ~10-25 per cent as compared to FTUBCMJTIFEMPDBUJPOT
"WBJMBCJMJUZPGEJWFSTFUBMFOU
t "WBJMBCJMJUZPGample talent makes the Challenger cities attractiveGPSGVSUIFSTDBMBCJMJUZt PGUIFOFX**5TDPNJOHVQJOA$IBMMFOHFSMPDBUJPOT
*EFBMGPSCVTJOFTTDPOUJOVJUZexpansion
t 5IFNVMUJQMFA$IBMMFOHFSMPDBUJPOTJO*OEJBPFSUIFunique advantage of business continuity and disaster recovery planningXJUIPVUMFBWJOHUIFDPVOUSZ
Uninhibited expansion
t Cost of land in Challenger cities is up to 20 per cent lower than the QFSJQIFSJFTPGFTUBCMJTIFEDJUJFTt "NQMFMBOEBUMPXTVCTJEJ[FEDPTUTJTJEFBMGPSMBSHFDBNQVTEFWFMPQNFOUTBOEEFWFMPQJOHMBSHFUSBJOJOHDFOUSFTBTXFMMBTGPSGVUVSFFYQBOTJPO
&OUSFQSFOFVSJBMspirit
t ~10 per cent of start-ups are from Challenger locations oJOOPWBUJWFTPMVUJPOTVOJRVFDBQBCJMJUJFTt 1SFTFODFPGCVEEJOHFOUSFQSFOFVSTMPDBMTFUVQTBOE4.&TDPOUSJCVUFUPUIFFOUJSFFDPTZTUFNHJWJOHUIFBCJMJUZUPCVJMEQBSUOFSTIJQTBOEIFODFBSFDPOTJEFSFEBEWBOUBHFPVT
33
MajorConcernsinOperatingOutofChallengerLocations
There has been an accelerated penetration of IT-BPM organisations to alternate delivery locations in the last couple of years, however, at the same time it has not been, all in all, a smooth ride. The collated results of our survey indicate certain areas that need to be tackled proactively in the light of altering industry dynamics. The next phase of growth could be very well-determined by the ability of domestic and international organisations in resolving the issues below, as highlighted by the respondents:
In some cities, educational curriculum is deemed insufficient and rms need to provide time consuming training
Manpower issues Eco-system
Local authorities are more keen on attracting large players rather than encouraging the growth of local entrepreneurship and start-ups
Limited career growth path can lead to employee dissatisfaction
Talent availability, especially forsenior to mid-level workforce
Dedicated focus for the sector is limited in many cities as well as implementation of IT policies; delayed approvals for business
Last mile connectivity is inconsistent, increases cost of transportation for employees
Poor infrastructure Perceptions about quality of life
Some cities lack adequate social infrastructure to fulfil the aspirations of the upwardly mobile employees
Irregular power supply and increasing infrastructure costs aecting business operations
Working spouses and children of transferees are skeptical of shifting to a Challenger location due to limited employment and education options
34
DetailedSurveyFindings
Although at a broader level, the factors considered for location strategy were almost similar for both international as well as domestic firms, the importance of these factors differed between the two. In the following section, the findings of the survey have been analysed and presented separately. As per the survey results, different parameters are sub-divided into two factors:
Motivating factors - the ones which increase the satisfaction and on which the final decisions are based
Other factors - also called hygiene factors are considered to be the basic requirements, as they do not motivate firms to finalize the location but if absent, disqualifies the location even for initial consideration
The roles of the different parameters are explained in the subsequent section
RankofParametersforDeterminingLocationAttractiveness
FordomesticIT-BPMorganisations: The biggest reason for choosing a Challenger location was the fact that the founder/s or senior management belonged to that particular city and therefore they felt more convenient to commence operations in a familiar environment where they had better access to different support structures. However, for choosing a location without this inherent conflicting bias, there were other factors which came to the fore.
35
Rank
Locationparameters
Domesticfirms
Multinationalfirms
Comments
Talent pool 1 1
Availability of requisite talent at different levels across various functions and skill-sets was the most important criteria
Cost competitiveness
1 2
Cost advantages in terms of operating and fixed expenditures consisting of lower people costs, real estate costs, maintenance, etc.
Infrastructure 3 2
Supportive physical infrastructure through good road, rail and air connectivity, IT bandwidth and constant electricity supply is perceived to be a pre-condition
Business environment
4 2
A conducive business environment with concentration of interrelated businesses, suppliers and associated institutions gives added competitive advantage
Government policies
5 3
Government support for entry and expansion of IT-BPM firms through the right policies
Real estate 6 4
Adequacy of office space and land governs the cost dynamics of setting up office.SEZs with tax exemptions provide cost advantage to firms targeting exports
Motivating factors Hygiene factors
Source: Cushman & Wakefield Research36
PerformanceofChallengerCitiesonEachParameterinCityLevelSurveys
Based on the survey findings, the performance of the select Challenger cities is presented hereafter:
I. TalentPool
TheindustryhassignificantlyincreasedtheemployeeheadcountinChallengerlocationsinthelastcoupleofyears.Forthe10ChallengerIT-BPMlocationscoveredinourstudy,theemployeeheadcounthasalmostdoubledsince2008.IT-BPM occupiers, both domestic and international, consider presence of ample talent pool a crucial decisive factor in zeroing on to ideal locations. Whilst respondents in all the 10 cities feel that the talent pool available in their cities is adequate; Bhubaneswar, Coimbatore and Kolkata have rated the available talent pool as relatively higher. While talent available in all cities is technically proficient, they lack soft skills that could make them suitable for higher positions and client interaction.
ImportanceoftalentpoolforlocationstrategyasperIT-BPMorganisationssurveyedinthesecities
Ahme
daba
d
Source: Cushman & Wakefield Research
Bhub
anes
war
Chan
digarh
Coim
bato
re
Indor
e
Jaipu
rKo
chi
Kolka
ta
Thiru
vana
ntha
puram
Visak
hapa
tnam
0
1
2
3
4
5
37
II.CostCompetitiveness
Cost competitiveness is a derivative product of the entire ecosystem within the city consisting of all the hygiene factors like business environment, talent pool and infrastructure. Depending on the hygiene factors and other intrinsic factors that are specific to a particular business model followed by the firms, cost advantages differ from one firm to the other. However, it is the relativecostadvantagesandthesynergiesderivedthatarefinallyconsideredwhilezeroingontothelocationforsettingupanIT-BPMdeliverycentre.
Cost advantages in Bhubaneswar, Coimbatore, Thiruvananthapuram and Kochi are derived from lower people costs. Low commuting time in Thiruvananthapuram and Kochi has obliterated the need for providing the employees with transportation facilities as against few Leader cities by many firms. Further, acquisition of land and construction costs for developing campuses and facilities usually require substantial amount of fixed capital investments, but in most of the cities land has been allotted by the state government at subsidized prices.
Thiruvananthapuram and Coimbatore also enjoy lower rental values for built commercial offices, which also guided firms in finalising their location decisions, especially in the case of start-ups, Small and Medium Enterprises (SMEs) and homegrown firms which are extremely sensitive to costs.
ImportanceofcostcompetitivenessforlocationstrategyasperIT-BPMorganisationssurveyedinthesecities
Ahme
daba
d
Source: Cushman & Wakefield Research
Bhub
anes
war
Chan
digarh
Coim
bato
re
Indor
e
Jaipu
rKo
chi
Kolka
ta
Thiru
vana
ntha
puram
Visak
hapa
tnam
0
1
2
3
4
5
38
III.PhysicalInfrastructureTheBackboneofanEffectiveEcosysteminIT-BPMLocations
Components Details StandoutCities
Connectivity
Connectivity to the leading cities through domestic flights and trains is imperative
Part of hygiene factors for setting up IT-BPM operations
Presence of an international airport with connectivity to international destinations is an added convenience, especially for international organisations
Ahmedabad, Kochi, Thiruvananthapuram and Kolkata
Transportation
Electricity
Internet Connectivity
Intercity transportation network should be well developed; means of public transportation like public buses, metro rails, flyovers, etc. are major factors that firms look for before setting up their campuses or acquiring leasing space
Well-developed expressways and bus routes makes it easier for employees to travel for work and other engagements
Last mile connectivity from city to outer locations where many firms have their offices is a major driving force to attract employees
Stable power supply is a key requirement of firms and lower tariff is also important as the power requirements are huge for IT-BPM companies. Start-ups and SMEs are especially sensitive to this and so, good power infrastructure becomes a motivating factor
Presence of high speed internet connection is imperative for the industry, so the presence of high bandwidth under sea cables make Kochi a preferred location
Relatively lower commuting time in cities like Jaipur, Indore and Ahmedabad
Low power outages in Indore, Kochi, Kolkata and Ahmedabad led to firms ranking them higher
Healthcare
Education
A good healthcare infrastructure comprising public and private hospitals, healing centers and nursing homes provides better quality of life to employees
Education facilities are an important factor for non-local employees to relocate with their families to a Challenger city. Almost all the Challenger cities did well on this parameter in terms of schooling and technical higher education. However, underdevelopment of soft/social skills was also highlighted in many locations
Kochi, Ahmedabad, Jaipur, Kolkata and Chandigarh
Jaipur, Kochi and Kolkata relatively better in soft skills
39
Components Details StandoutCities
Retail and hospitality
Adequate social infrastructure like entertainment, tourist attractions, shopping centres, etc. to fulfil the needs and aspirations of the employees
Sufficient hotels to cater to business travellers is also a basic requirement for firms to help serve their clients and employees from other locations; adequate facilities for Meetings, Incentives, Conferences and Exhibitions (MICE)
Kochi offers modern social infrastructure
Kolkata, Kochi, Chandigarh, Jaipur, Indore, Thiruvananthapuram and Ahmedabad
Others
Good law and order situation
Clean and green environment and low pollution ensures better quality of life. Presence of sports, cultural and recreational facilities also contribute to well-rounded societies in Kochi and Chandigarh
Low crime rate in Kochi and Thiruvananthapuram make them preferable for habitation
Importanceofinfrastructure(socialandphysical)forlocationstrategyasperIT-BPMorganisationssurveyedinthesecities
Ahme
daba
d
Source: Cushman & Wakefield Research
Bhub
anes
war
Chan
digarh
Coim
bato
re
Indor
e
Jaipu
rKo
chi
Kolka
ta
Thiru
vana
ntha
puram
Visak
hapa
tnam
0
1
2
3
4
5
IV.BusinessEnvironment
Entrepreneurial talent and presence of SMEs along with the established players act as catalysts for a conducive business environment, which consists of all the external aspects with which any business connects such as clients, suppliers and competition. The presence of several incubation centres backed by the support from government, educational institutes and angel funds has led to a spurt in start-ups activity in several cities and has increased the success rate too. Also, the competition stimulates innovation and leads to the growth of newer verticals and business processes.
40
Since presence of interconnected businesses lead to higher productivity of firms present in a cluster Kochi, Thiruvananthapuram and Ahmedabad are preferred by firms. Inapositivebusinessenvironment,competitiveadvantageisreapedbybothdomesticandinternationalfirmsaswitnessedinthesethreecities. However, the business environment can have a negative impact as well, for example, the presence of large number of unfocused competitors signals numerous opportunities but at the same time, leads to higher attrition and talent costs, as in the case of Kolkata. While well-developed business environment in Ahmedabad, Kochi and Thiruvananthapuram have been instrumental for IT-BPM organisations; in Visakhapatnam the rudimentary business environment has acted as an impediment.
ImportanceofbusinessenvironmentforlocationstrategyasperIT-BPMorganisationssurveyedinthesecities
Ahme
daba
d
Bhub
anes
war
Source: Cushman & Wakefield Research
Chan
digarh
Coim
bato
re
Indor
e
Jaipu
rKo
chi
Kolka
ta
Thiru
vana
ntha
puram
Visak
hapa
tnam
0
1
2
3
4
5
V.GovernmentPolicies
Government support for the easy set-up of IT-BPM facilities is an important consideration for the industry to take a root in any new location. Provisions
41
for tax-breaks, incentives and subsidies for the IT-BPM industry have been provided by the central government, so that firms can continue to operate mainly out of the already established Leader locations. InordertopromoteselectChallengerlocationsasIT-BPMhubs,specialfocusfromthestategovernmentisrequired. Provision of quality government office space for firms at subsidised rentals has proved to be quite advantageous to firms in Indore, Kochi, Thiruvananthapuram and Visakhapatnam by lowering their operating expenses. While provision of land at cheaper rates was provided in most cities, Kochi and Thiruvananthapuram have benefited from favourable construction norms1.
Apart from investment subsidies and concessional power tariffs, price preference in government contracts is also granted to firms in Kochi and Thiruvananthapuram based on certain parameters. Thus, firms find government policies quite important as these policies can substantially increase their operational savings. The competitive advantage of locations needs to be such, that IT-BPM firms can derive higher synergy.
The implementation of single window clearance system in select Challenger cities and the short duration (1-2 months) to start operations with minimal paperwork are some of the positive factors that led to these cities being considered attractive by potential and existing occupiers. The Governments in Ahmedabad, Kochi and Thiruvananthapuram have also provided venture capital funding in the initial stages to homegrown firms, contributing well, in making these locations as preferred choices.
ImportanceofgovernmentpoliciesandincentivesforlocationstrategyasperIT-BPMorganisationssurveyedinthesecities
Ahme
daba
d
Source: Cushman & Wakefield Research
Bhub
anes
war
Chan
digarh
Coim
bato
reInd
ore
Jaipu
rKo
chi
Kolka
ta
Thiru
vana
ntha
puram
Visak
hapa
tnam
0
1
2
3
4
5
1Relaxation in Floor Space Index (FSI), single window clearances, etc.
42
VI.RealEstate
Availabilityoflandparcelsatcomparativelycheaperpricesismuchsoughtforbythefirms. Attractive land parcels were offered by the state governments in Jaipur and Kochi that helped existing firms to create more jobs within these cities and develop their local economies and ensure overall growth. Further, availability of good quality office space at competitive rentals developed by private developers in Coimbatore, Kochi and Thiruvananthapuram has been quite vital in keeping the real estate expenditure comparatively low, till date. However, high rentals in Kolkata and lack of adequate IT parks and SEZ space in Ahmedabad and Bhubaneswar at affordable rents have proved to be deterrents for these cities. In Visakhapatnam, lack of adequate office space in close proximity to the city resulted in a low rating by the firms.
ImportanceofrealestateforlocationstrategyasperIT-BPMorganisationssurveyedinthesecities
Ahme
daba
d
Source: Cushman & Wakefield Research
Bhub
anes
war
Chan
digarh
Coim
bato
re
Indor
eJa
ipur
Koch
i
Kolka
ta
Thiru
vana
ntha
puram
Visak
hapa
tnam
0
1
2
3
4
5
43
SummaryThe performance of select Challenger cities over last five years was evaluated across various parameters such as businessperformance,talent,infrastructure,livingenvironmentandcostdifferentialandbenchmarkedagainsttheLeaderlocations
Businessenvironment: While Leader locations continue to grow, certain Challenger locations such as Coimbatore and Visakhapatnam have matched them and in certain parameters exceeded the performance of Leader locations
Talent: Student enrollment is significantly higher in Challenger locations as compared to Leader locations
Higherretention: Challenger locations have attrition rates that are half the level of Leaders implying higher employee retention in addition to lower hiring costs
Infrastructurecosts: Average office rentals in Challenger cities is 60 per cent lower than Leader cities
Costcompetitiveness: Challenger cities offer cost advantage in the range of 10-25 per cent over Leader locations
44
Challenger Locations: Now Even More Viable Destinations
Delhi-NCR
Chandigarh
IT BPM locations
Jaipur
AhmedabadIndore
MumbaiPune
Hyderabad
Bengaluru
Chennai
Thiruvananthapuram
KochiCoimbatore
Visakhapatnam
Bhubaneswar
Kolkata
Leader
Challenger
In order to ascertain whether the Challenger locations (identified in the 2008 AT Kearney - NASSCOM report) have improved their standing as IT-BPM destinations, Cushman & Wakefield Research and NASSCOM conducted exhaustive field surveys of the 10 cities. Besides evaluating state and local governments policies aimed at the IT-BPM industry, other enablers such as availability and quality of talent pool, support from local industry bodies, support infrastructure like local transport, healthcare and real estate, etc. were also analysed.
45
BusinessEnvironment:ProvidingaSoundEcosystemthatEnablesGrowth
Though all the ten cities have depicted positive trends in the overall business environment in the last five years, some of them have performed outstandingly well.
A number of SMEs have seen a significant rise over the years. A large number of entrepreneurs have set up IT-BPM firms taking advantage of their familiarity with business environment and talent pool. Over the years, the scope of services offered by IT-BPM organisations has diversified to newer processes such as Search Engine Optimization (SEO) activities, medical transcriptions, embedded systems, knowledge services, products development, SMAC offerings, etc.
Average Growth in Revenues
Source: Cushman & Wakefield Research and NASSCOM
Growth in employee headcount
Coimbatore, Visakhapatnam
and Ahmedabad have witnessed
more than 2.5X growth in
employee headcount
Visakhapatnam 4.0X
Tier I Benchmark
1.8X
Kochi 2.7X
Chandigarh 2.5X
While the overall industry has witnessed growth in revenues by 1.8X in the last 5 years, Chandigarh, Kochi and Visakhapatnam have surpassed the industry average growth with support from growing businesses in varied verticals.
While more firms set-up their operations in the Leader locations, some of the Challenger locations did well on that front too. The largest increase in number of IT-BPM registered units in the last five years was noticed in Coimbatore followed by Visakhapatnam and Kolkata. This increase was corroborated by an increase in employee headcount as well as revenues for these locations. The rise in employee headcount indicates the growing scale of operations of IT-BPM organisations present in all cities, further aided by the presence of a strong base of other industries
46
like manufacturing, automobiles, etc. Also, investments to promote research and innovation with provision for incubation space in cities like Ahmedabad and Coimbatore has supported the rise in headcount.
1.4X 1.4X1.8X 2.1X 2.1X2.0X
1.3X2.0X
2.4X
30.0X
Gro
wth
(in
mul
tiple
s)
3.3X
2.8X3.3X
2.1X1.6X 1.5X
1.2X 1.2X 1.0X1.4X 1.4X 1.4X
Tier I BenchmarkCoimbatoreKolkata
AhmedabadIndoreThiruvananthapuram
BhubaneswarJaipurVisakhapatnam
ChandigarhKochi
Business Performance since 2008
IT-BPM exports revenues (USD billion)
Employee headcount in IT-BPM organisations
No. of IT-BPM units registered
Source: STPI/SEZ, Cushman & Wakefield Research and NASSCOM
Gro
wth
(in
mul
tiple
s)
1.8X 1.8X 1.7X 1.8X 1.6X 1.6X1.0X1.1X
2.5X 2.7X
4.0XG
row
th (i
n m
ultip
les)
47
Talent:MostImportantDeterminantforSettingUpBusinesses
Availability of good quality talent was ranked as one of the key determinants while choosing a delivery location for majority of the respondents.
The demand for talent in the IT-BPM industry comprises students from science, engineering and management disciplines. With active participation from both the government and private sector, existing colleges have increased their student intake and many more new institutions have opened up in the last five years.
The number of students enrolling for technical courses has increased in the range of 20-80 per cent across the Challenger cities, clearly surpassing the Leader location benchmark of 23 per cent growth over the last five years. Prestigious institutes such as National Institute of Technology (NIT), Indian School of Business (ISB), etc. have expanded in these cities. Most of these cities are hubs of higher education in their respective regions and boast the presence of many colleges and universities.
Number of students enrolled
Attrition rate
Attrition rate in Visakhapatnam and Coimbatore remains within the range of
4-5% as against Tier 1 Benchmark of
22-25%
Source: Cushman & Wakefield Research and NASSCOM
Attrition rate in Visakhapatnam and Coimbatore remains within the range of
4-5 per cent as against Tier I
benchmark of22-25 per cent
Kolkata1.8X
Visakhapatnam1.6X
Jaipur1.7X
Tier IBenchmark
1.2X
48
Besides hiring new talent, it has become imperative for firms to manage and retain their existing talent in the present competitive scenario. Although the local talent pool may suffice the requirement for entry/beginner level jobs, lateral hiring plays an important role in hiring for mid and senior levels. Most of the Challenger cities have recorded attrition levels below 10 per cent, which is very healthy compared to the Leader locations witnessing attrition as high as 22-25 per cent. Hiring local talent is one of the reasons attributed to the low attrition rate in the Challenger cities.
1.7X
1.2X 1.1X1.4X
1.5X1.3X 1.3X 1.3X
1.5X1.6X
1.8X
Number of enrollments(growth since 2008)
Gro
wth
(in
mul
tiple
s)
5%8% 9% 9% 9% 9%
5% 5%
22-25%
13% 11%
In p
erce
ntag
e
Tier I BenchmarkCoimbatoreKolkata
Source: Cushman & Wakefield Research and NASSCOM
AhmedabadIndoreThiruvananthapuram
BhubaneswarJaipurVisakhapatnam
ChandigarhKochi
Attrition Rate
49
Infrastructure:SupportingGrowthbyProvidingAccessibilityandComfort
1.RealEstate
Real estate is one of the most important support infrastructure required for the development of any industry including, the IT-BPM industry and is a key indicator of the competitive advantage for any city.
Availability of quality office space for setting up and expanding operations, and the availability of housing options for employees at competitive rentals and capital values affect the decision-making process while choosing any location.
The Challenger cities have pulled out all stops in providing quality office space for attracting the IT-BPM industry. Many of the respective state governments have also notified Special Economic Zones (SEZs) and Software Technology Parks of India (STPI) providing tax exemptions among other benefits for setting up of IT-BPM companies. Private developers too, have joined the fray with integrated office space developments with plug and play facilities. Whilst Leading cities have just over doubled their stock of Grade A IT space in the last five years, few of the Challenger cities have increased their Grade A stock of IT space by more than 10 times.
One of the added advantages of operating from the Challenger cities is the reduced real estate cost compared to the Leader locations. Private developers are very pro-active in provisioning of quality housing options in close proximity to all IT hubs in each of the Challenger cities. Cashing-in on the demand generated for housing by the IT-BPM industry and the ripple effect, the developers have initiated projects to cater to demand from across the levels of employees. With the rise in number of residential developments, the number of under-construction residential units have more than doubled in most of the Challenger cities over the last five years.
50
12.5X
2.2X 2.2X1.9X 1.6X 1.6X 1.5X1.0X
4.5X
11.1X 11.4X
Gro
wth
(in
mul
tiple
s)
2.4X 2.1X 2.1X1.8X
0.9X1.4X
Gro
wth
(in
mul
tiple
s)
13.3X
2.4X2.4X
3.6X
2.4X
Tier I BenchmarkCoimbatoreKolkata
AhmedabadIndoreThiruvananthapuram
BhubaneswarJaipurVisakhapatnam
ChandigarhKochi
Source: Cushman & Wakefield Research
0
20
40
60
80
100
`/sf
/mon
th
82.7
IT Stock: Grade A (growth since 2008)
No. of under-construction residential units
Average rental values for Grade A oce spaces
28.034.0
52.545.0
28.0 32.035.0 35.0 35.0
45.0
51
Average rental value forGrade A oce space
(`/sf/month)
Source: Cushman & Wakefield Research
'Challenger' citieshave average rental
values for Grade A spacein the range of `
28-35/sf/month i.e.,55-65 per cent lower than
Tier I cities which cost ` 80-85/sf/month
Visakhapatnam 11.4X
Tier I Benchmark
2.2X
Growth in stock of Grade A IT space
Ahmedabad 11.1X
Coimbatore 12.5X
Trivandrum 2.4X
Tier I Benchmark
2.4X
Bhubaneswar 13.3X
Growth in no. of under-construction
residential units
Indore 3.6X
2.LivingEnvironment
The living environment is a direct reflection of the availability and quality of healthcare services, entertainment facilities, pollution levels and many other aspects of social infrastructure. Hi-tech industries such as the IT-BPM industry requires superior living environment to attract and retain well educated talent. Conversely, development of the IT-BPM industry adds to the growing demand for such facilities and services in the city.
The Challenger cities have witnessed tremendous growth in mall spaces in the last five years, with three of the cities more than tripling the mall inventory which is higher than the leader cities growth benchmark. These malls have most of the prominent domestic and international brands present, to cater to the tastes and needs of the global IT-BPM workforce.
Jaipur3.7X
Source: Cushman & Wakefield Research
Tier I Benchmark:
2.3X
Growth in mall inventory
Kochi90X
Kolkata3.4X
52
2.3X
3.7X
90X
3.4X
1.0X
Support infrastructure(growth since 2008)
Tier I BenchmarkCoimbatoreKolkata
Source: Cushman & Wakeeld Research
AhmedabadIndoreTrivandrum
BhubaneswarJaipurVisakhapatnam
ChandigarhKochi
Gro
wth
(in
mul
tiple
s)G
row
th (i
n m
ultip
les)
Mall inventory (msf )
No. of hotel keys
2.0X2.4X 2.3X
1.2X1.4X
1.9X
1.4X 1.2X1.0X
1.5X1.7X
1.3X
Gro
wth
(in
mul
tiple
s)1.7X
1.4X
1.0X 1.0X
2.2X
1.3X 1.3X
1.7X1.5X
1.2X
1.1X 1.1X 1.1X 1.1X 1.2X
No. of Hospital Beds
53
The global nature of the IT-BPM industry necessitates the presence of first-class hospitality services in the city. All the Challenger cities have recorded a significant growth in the number of hotel keys in the last five years. While the Leader locations benchmark is set at 1.5 times, five of the Challenger cities have witnessed higher growth in the last five years. Prominent hotel chains have either already established their presence in the Challenger cities or are in the process of doing so.
Many private sector hospital chains have expanded across various cities, improving the quality and diversity of healthcare services being provided within these cities. Some of the Challenger cities have recorded an increase in the number of hospital beds, in the range of 10-50 per cent in the last five years.
Growth in hotel keys
Source: Cushman & Wakefield Research
Growth in hospital beds
Tier I Benchmark1.4X
Kolkata1.3X
Bhubaneswar1.5X
Jaipur1.7X
Ahmedabad2.0X
Tier I Benchmark 1.5X
Kochi2.3X
Chandigarh2.4X
54
3 Connectivity
Good connectivity within the city and to nearby locations via road, railways and air along with large investments to upgrade existing physical infrastructure provides support as well as aids the emergence of new business locations. This is further fuelled by real estate development along these transportation nodes that provide requisite infrastructure.
To keep the competitive advantage at home, Challenger cities are constantly upgrading their existing infrastructure and taking initiatives for developing new infrastructure. Besides undertaking planning/construction of ring roads, many of the Challenger cities have also progressed towards Bus Rapid Transit System (BRTS) or Mass Rapid Transit System (MRTS), which would significantly improve intra-city connectivity. Expanding the current capacity of domestic/international terminals, also featured in most of the cities.
No. of flights
1.3X 1.3X 1.4X 1.3X1.9X
1.3X 1.4X2.0X
1.2X
3.8X
Air connectivity
Gro
wth
(in
mul
tiple
s)
1.2X 1.1X
2.6X
0.7X
1.3X1.0X 1.0X 1.0X
1.1X0.8X
No. of passengers
Tier I BenchmarkCoimbatoreKolkata
AhmedabadIndoreThiruvananthapuram
BhubaneswarJaipurVisakhapatnam
ChandigarhKochi
Gro
wth
(in
mul
tiple
s)
Source: Cushman & Wakefield Research
1.9X
1.1X
55
The presence of IT-BPM organisations across geographies makes good connectivity an imperative feature. The airport infrastructure in India is going through a much needed revamp since the last few years. All the Challenger cities have witnessed an increase in the total number of passengers travelling by air over the last five years.
Infact, most of these cities beat the Leader locations, benchmark growth of 33 per cent in number of passengers over the last five years. The number of flights in most of the the Challenger cities have also grown significantly.
Growth in no. of ights
Indore1.4X
Kolkata1.2X
Growth in no. of passengers
Bhubaneswar2.0X
Tier I Benchmark 1.3X
Indore2.0X
Chandigarh3.8X
Source: Cushman & Wakeeld Research
Chandigarh2.6X
Tier I Benchmark1.2X
56
CostDifferential:AClearAdvantage
Overall Cost Dierentialw.r.t Tier I cities
Kochi ~25%
Coimbatore 20-22%
Thiruvananthapuram 20-25%
Overall Cost Dierentialw.r.t Tier I cities
Cost differential is one of the most important aspects that make these cities attractive for setting up operations compared to the established Leader locations. These cities exhibited lower people cost as well as other costs which include real estate cost, travelling and transportation cost, etc.
AhmedabadIndoreThiruvananthapuram
BhubaneswarJaipurVisakhapatnam
ChandigarhKochi
CoimbatoreKolkata
15-20% 15-20% 15-18%
20-22%
15-20%
5-10%
20-25% Approx. 20%
Approx. 20%
Approx. 25%
In p
erce
ntag
e
Cost dierential w.r.t Tier-I benchmark
Source: Cushman & Wakefield Research and NASSCOM
To further understand how each city has evolved since 2008, more detailed findings on each parameter as well as other interesting findings are provided in the city profiles.
57
AHMEDABADStrong stance of homegrown firms; favourable business ecosystem provides immense potential for future growth
Building Blocks
Cost Dierential*
Advantage Ahmedabad: The state government support, established infrastructure and cost advantages
Quality infrastructure
Strong manufacturing
industry
Overall cost dierential: 15-20%People cost lower by 10 -15%Other cost^ lower by ~30%
People Cost Other Cost
15-20%
Tier I cities Ahmedabad
Tier I cites represent Bengaluru, Mumbai and Delhi-NCR*Based on surveys**Based on STPI registered unitsConversion Rate: 1 USD = `40.2 (2007-08); 1 USD = `54.2 (2012-13)^Other cost includes real estate, electricity charges, travel, maintenance and other utilities
Lower costs
Active state involvement
Industry t IPNFHSPXO*5#1.SNTMJNJUFE*OEJBOGPSFJHONVMUJOBUJPOBMTXJUIMBSHFDBQUJWF operationst 3FOPXOFESNTQSFTFOU5BUB$PNNVOJDBUJPOT5$4,FOEMF*HBUF$ZCBHF.PUJG*OEJBFUD
Talent t "UUSJUJPOSBUFTIJHIMJUFSBDZSBUFPGXFMMBCPWFOBUJPOBMBWFSBHFPG
t *5BOETPGUXBSFEFWFMPQNFOUBSFDPOTJEFSFEBTQSFGFSSFEDBSFFSDIPJDFTCZFOHJOFFSJOHTUVEFOUT
Export revenues**
t 451*FYQPSUTHSFXCZ9JOUIFMBTUWFZFBST
Nature of operations
t *5BOETPGUXBSFBQQMJDBUJPOEFWFMPQNFOUFOHJOFFSJOHJOEVTUSJBMEFTJHOTPMVUJPOTand product development)
t #1.NFEJDBMUSBOTDSJQUJPODVTUPNFSSFMBUJPOTIJQNBOBHFNFOUBDDPVOUJOH)3process outsourcing, etc.)
Economyt (4%1HSPXUISBUFIJHIMFWFMTPGUSBEJOHBDUJWJUZXJUINBKPSQPSUTBU.VOESB,BOEMBBOE)B[JSB
t 1SPNJOFOUJOEVTUSJFTBQBSUGSPNBHSJDVMUVSFJODMVEFUFYUJMFTNBOVGBDUVSJOHDIFNJDBMTQIBSNBDFVUJDBMT
(PWFSONFOUincentives
t &YFNQUJPOGSPNQPXFSDVUTBOEFMFDUSJDJUZEVUZGPSZFBST(*%$UPGBDJMJUBUFMBOEBDRVJTJUJPOsingle window mechanism for various approvals
t 4UBNQEVUZFYFNQUJPOOBODJBMBTTJTUBODFTJNQMJFEMBCPVSMBXTDBTFUPDBTFFYFNQUJPOGSPN[POJOHSFHVMBUJPOTBWBJMBCMFGPSSNTTFUUJOHVQ*5PQFSBUJPOT
Educational ecosystem
t "QQSPYJNBUFMZFOHJOFFSJOHTFBUTJODSFBTFEUPOFBSMZ9JOUIFMBTUWFZFBSTt 1SFTFODFPGQSPNJOFOUFEVDBUJPOJOTUJUVUJPOTMJLF**."**5(BOEIJOBHBS/*'5/*%$&15FUD
Real estatet *OGPDJUZBU(BOEIJOBHBSEFWFMPQFEVOEFSUIF111NPEFMQSPWJEFTTQBDFGPS*5SNTBUaordable rentals
t (SBEF"PDFTUPDLJODSFBTFECZUJNFTJOUIFMBTUWFZFBSTt )FBMUIZVOEFSDPOTUSVDUJPOQJQFMJOFPGNTGQSPKFDUTMJLF(*'5DJUZFYQFDUFEUPQSPWJEFJNQFUVTGPSHSPXUI
t .JOJNVNUSBWFMDPTU_MPXFSDPNQBSFEUP5JFS*DJUJFTt &YQBOTJPOPGDJUZMJNJUTUP(BOEIJOBHBSEVFUPRVBMJUZJOGSBTUSVDUVSFFYDFMMFOUBJSDPOOFDUJWJUZUP
other locations within and outside the country t $POUSBDUTGPSSTUQIBTFPGUIF%FMIJ.VNCBJSBJMXBZGSFJHIUDPSSJEPSOFBS"INFEBCBEBXBSEFEt $POTUSVDUJPOPGUIFNFUSPSBJMQSPKFDUFYQFDUFEUPCFHJOTPPO
Infrastructure
Indu
stry
Pro
le
Busi
ness
Env
iron
men
tEmployment** t )FBEDPVOUHSPXUIJOUIFMBTUWFZFBST_9
58
t QFSDFOUJODSFBTFJOFOHJOFFSJOHDPMMFHFT
t *NQSPWFNFOUJO&OHMJTIQSPDJFODZEFTJSFE
t "NQMFBWBJMBCJMJUZPGRVBMJUZPDFTQBDFGPS*5SNTUPTFUVQFYQBOEPQFSBUJPOT
t /VNCFSPGIPUFMLFZTIBWFHSPXOCZ9PWFSUIFMBTUWFZFBST_FYJTUJOHLFZTXJUIBQQSPYJOQSPHSFTT
t /VNCFSPGIPTQJUBMCFETJODSFBTFECZ9PWFSUIFMBTUWFZFBST
t .BMMTQBDFIBTJODSFBTFEUPOFBSMZ9JOUIFMBTUWFZFBST
t $PNQFUJUJWFPDFSFOUBMTQFSDFOUMPXFSUIBO5JFS*DJUJFT
1.5X growth over the last ve years
Stock Grade A Oce Space (msf)
Average Grade A Rentals (`/sf/month)
"*$5&BQQSPWFE
/PUF 4UPDLEPFTOUJODMVEF#VJME5P4VJU#54BOEDBNQVTEFWFMPQNFOUT "WFSBHFSFOUTPG5JFS*DJUFTDPNQSJTFLFZ*5MPDBUJPOTPG#FOHBMVSV.VNCBJBOE/$3TVDIBT0VUFS3JOH3PBE8IJUFFME.BMBE(PSFHBPO(VSHBPOBOE/0*%"
#Information for nancial years
t "WFSBHFIPVTJOHSFOUBMTQFSDFOUMPXFSUIBO5JFS*DJUJFT* Includes high-rise apartments in standalone buildings and complexes by prominent developers
t /VNCFSPGJHIUTJODSFBTFECZ9t /VNCFSPGQBTTFOHFSTJODSFBTFECZ9
t 3PCVTUQPXFSTVQQMZXJUIOPQMBOOFEQPXFSDVUTUISPVHIPVUUIFZFBSt "NPOHUIFGFXQPXFSTVSQMVTTUBUFTJOUIFDPVOUSZ
t #354PQFSBUJPOBMt 'JSTUQIBTFPGNFUSPFYQFDUFECZ
2008
2008oFOHJOFFSJOHTUVEFOUT
2013oFOHJOFFSJOHTUVEFOUT
2013
18
28
2008 2013
32
34
Talent base growing at a fast pace; scope for further increase
Phenomenal growth in oce stock; low rentals Improving social infrastructure; high qutalityof life
Advanced infrastructure compared to other prominent emerging cities
0.53
5.90
2008 2013
9JODSFBTF
9SJTF
_JODSFBTF
Engineering Colleges*
*Residential units under-construction
Student Enrolments
Total Number of Flights#
The government needs release an updated IT policy to further attract large IT-BPM firms to capitalise citys strong business infrastructure
59
INDOREActive government support and a well-laid out IT policy makes the city an attractive IT-BPM destination
Advantage Indore: Presence of large talent pool; government incentives on skill gap training likely to further enhance resource quality
Skilled talent pool
Activeindustrial
base
Overall cost dierential: approx. 20%People cost lower by approx. 20%Other cost^ lower by ~40%
Tier I cities Indore
Tier I cites represent Bengaluru, Mumbai and Delhi-NCR*Based on surveys **Based on STPI registered units (BPMs in Indore with signicant domestic revenues)^Other cost includes real estate, electricity charges, travel, maintenance and other utilities
Goodsupport
infrastructure
Government Support
Economyt (4%1HSPXUISBUFQSPNJOFOUJOEVTUSJFTJODMVEFFMFDUSJDBMFMFDUSPOJDQSPEVDUTauto and auto components, iT-BPM, food processing, manufacturing, textiles, etc.
t "DUJWFJOEVTUSJBMCBTFGVSUIFSBEETUPUIFBUUSBDUJWFOFTTXJUIDPNQBOJFTMJLF)JOEVTUBO.PUPSTBridgestone, Larsen & Toubro, etc.
Government incentives
t Single window clearance and facilitation mechanism; one-time reimbursement of up to 50 per cent of the cost incurred on skill gap training
t Availability of land at 25 per cent of the collector guideline rate subject to project cost .This land should FNQMPZNJOJNVNQSPGFTTJPOBMTQFSBDSFQFSDFOUFNQMPZFETIPVMECFSFTJEFOUTPG.BEIZB1SBEFTI
Educational ecosystem
t /FBSMZFOSPMMNFOUTJOFOHJOFFSJOHDPVSTFTJO; sucient availability of both technical and non-technical talent
t Signicant presence of academic and technical education institutes to provide skilled and educated talent pool for white collared jobs; only city to have both IIT and IIM
Real estatet 'JSTU*54&;JOUIFDJUZHPWFSONFOUPXOFE$SZTUBM*51BSLCFDBNFPQFSBUJPOBMJOPFSJOHquality IT spaces at aordable rentals
t 458 hectares of planned real estate development along super corridor, likely to provide a signicant boost to both IT industry and real estate growth
t .JOJNVNUSBWFMDPTU_MPXFSDPNQBSFEUP5JFS*DJUJFTt 8FMMDPOOFDUFECZBJSSPBEBOESBJMUPBMMUIFNBKPSDJUJFTJO*OEJB#354PQFSBUJPOBMPOLNQJMPU
stretch of AB Road between Rajiv Gandhi Square and Niranjanpurt 1SPQPTBMUPEFWFMPQUIFDPVOUSZTSTUMJHIU.FUSP3BJMt .FUFS(BVHFDPOWFSTJPOPG*OEPSF6KKBJOTFDUJPOVOEFSQSPHSFTTU
Infrastructure
Employment** t )FBEDPVOUHSPXUIJOUIFMBTUWFZFBST_9t *OEVTUSZJTFYQBOEJOHUIFTDBMFPGPQFSBUJPOTFWJEFOUCZNPSFUIBOUXPUJNFTHSPXUIJO
total employees
Industryt *5#1.SNTSFNBJOTTJNJMBSJOUIFMBTUWFZFBSTNJYPG*5NBKPSTNJETJ[FESNTBOE
entrepreneurial start-upst .BKPSSNTQSFTFOUJODMVEF*#.$4$9FSPY'JSTUTPVSDF.QIBTJT5FMFQFSGPSNBODFFUD
Talentt "UUSJUJPOSBUF-JUFSBDZSBUFXFMMBCPWFOBUJPOBMBWFSBHFPG
t Limited availability of mid to senior level executives locally
Export revenues**
t In the last ve years, total export revenues in ` DVSSFODZIBWFHSPXOCZ9t Indore oers signicant potential for domestic BPM operations as demonstrated by successful
examples of BPM rms in the region
Nature of operations
t IT and software: QSPEVDUEFWFMPQNFOUXFCEFWFMPQNFOUJOUFSGBDFEFTJHOBOEapplications development, maintenance and testing, content management systems, etc.)
t BPM: UFDIOJDBMTVQQPSUUFMFNBSLFUJOHEBUBNBOBHFNFOUFNBJMTVQQPSUWPJDFservices, etc.)
People Cost Other Cost
Building Blocks
Cost Dierential*
Approx. 20%
Indu
stry
Pro
le
Busi
ness
Env
iron
men
t
60
Improved connectivity and physical infrastructure along with commencement of operations of proposed IT-BPM majors will further provide impetus to the industry growth
t /VNCFSPGJHIUTJODSFBTFECZ9/VNCFSPGQBTTFOHFSTBMNPTUEPVCMFEt *OEVTUSZFOWJTBHFUIFOFFEGPSJOUFSOBUJPOBMDPOOFDUJWJUZ
t /PQMBOOFEQPXFSDVUTUISPVHIPVUUIFZFBS
t #354PQFSBUJPOBMPOQJMPUDPSSJEPSPGLNTPO"#3PBEt 1SPQPTFEMJHIUNFUSPSBJM
_JODSFBTF
t QFSDFOUJODSFBTFJOFOHJOFFSJOHDPMMFHFTJOMBTUWFZFBST
t 5FDIOJDBMMZTPVOEFOUSZMFWFMUBMFOUTPGUTLJMMUSBJOJOHSFRVJSFEUPMFBEDMJFOUJOUFSBDUJPOSPMFT
t -JNJUFE(SBEF"TUPDLXJUIIJHIQSFGFSFODFGPSCVJMUUPTVJUPDFTBOEDBNQVTFTEVFUPBPSEBCMFMBOEBOEDBQJUBMWBMVFT
t )PUFMLFZTJODSFBTFECZ9PWFSUIFMBTUWFZFBST
t /VNCFSPGIPTQJUBMCFETJODSFBTFECZ9PWFSUIFMBTUWFZFBST
t .BMMTQBDFTNPSFUIBOEPVCMFEJOUIFMBTUWFZFBSTGSPNNTGUPNTG
XJUIUISFFOFXNBMMTCFDPNJOHPQFSBUJPOBM
t .BKPSJUZPG(SBEF"TUPDLCFDBNFPQFSBUJPOBMQPTUBQQSPYMPXFSSFOUBMTBTDPNQBSFEUP5JFS*DJUJFT
9HSPXUIPWFSUIFMBTUWFZFBST
Stock Grade A IT Parks & SEZs (msf)
Average Grade A Rentals(`/sf/month)
"*$5&BQQSPWFE
/PUF 4UPDLEPFTOUJODMVEF#VJME5P4VJU#54BOEDBNQVTEFWFMPQNFOUT "WFSBHFSFOUTPG5JFS*DJUFTDPNQSJTFLFZ*5MPDBUJPOTPG#FOHBMVSV.VNCBJBOE/$3TVDIBT0VUFS3JOH3PBE8IJUFFME.BMBE(PSFHBPO(VSHBPOBOE/0*%"
#Information for nancial years
t .BKPSJUZPGSFTJEFOUJBMVOEFSDPOTUSVDUJPOBDUJWJUZQSFWBMFOUJOFBTUFSOQBSUTPGUIFDJUZ* Includes high-rise apartments in standalone buildings and complexes
Total Number of Flights#
2008
2008oFOHJOFFSJOHTUVEFOUT
2013oFOHJOFFSJOHTUVEFOUT
2013
Signicant growth in intake; Well qualied entry level talent
Signicant growth in Grade A stock; low rentals Entry of prominent names in healthcare, construction and hospitality
Well connected to cities across India; sound existing physical infrastructure with plans for further improvement
Engineering Colleges*
35
44
9SJTF
*Residential units under-construction
Student Enrolments
9SJTF
61
COIMBATOREAmple talent with strong focus on technical courses; government needs to position the city as an IT-BPM location in order to meet industry expectations
Overall cost dierential: 20-22% People cost lower by 15-18% Other cost^ lower by approx. 30%
Approx. 20-22%
Tier I cities
Tier I cites represent Bengaluru, Mumbai and Delhi-NCR*Based on surveys**Based on STPI registered unitsConversion Rate: 1 USD = ` 40.2 (2007-08); 1 USD = ` 54.2 (2012-13)^Other cost includes real estate, electricity charges, travel, maintenance and other utilities
Lower attrition levels
Proximity to prominent
IT hubs
Enterprising Community
Availability of technically
sound talent
Employment t Headcount growth in the last ve years: ~30 Xt IT-BPM employees over 15,000
Industry t Growth in number of IT-BPM rms in the last ve years: ~2.8Xt Renowned rms present: Dell, Cognizant, Robert Bosch, HCL Technologies
Talent t Attrition rates: sub 5%; high literacy rate of 89%, above national average of 74%t Stable workforce; 80-90% (local and 35-40% female)
Export revenues**
t In the last ve years, growth in total export revenues: ~1.8X t Notable concentration of BPM operations along with IT services and products
Nature of operations
t IT and software: 55-60% (software development, cloud computing, website development, SEO, IT infrastructure, etc.)
t BPM: 35-40% (IT stang, analytics, sales lead generation, customer support services, data mining, etc.)
Economyt (4%1HSPXUISBUFt 1SPNJOFOUJOEVTUSJFTJODMVEF5FYUJMF"VUPNPCJMF+FXFMSZFUD
Government incentives
t *OGPSNBUJPO$PNNVOJDBUJPO5FDIOPMPHZ*$51PMJDZXJUIQSPWJTJPOGPSSFMBYBUJPOJO'4*exemption in stamp duty and registration fee, provision of single window clearance, etc.
t 5BNJM/BEV4&;QPMJDZBJNFEBUQSPWJEJOHTJOHMFXJOEPXDMFBSBODFUPBMM4&;VOJUTFOTVSJOHadequate power and water supply, providing legislative support, etc.
Educational ecosystem
t 5FDIOJDBMUBMFOUQPPMJODSFBTFEUPOFBSMZ9NBKPSJUZPGUIFFOHJOFFSJOHDPMMFHFTBSFBMJBUFEUPAnna university
t 5BMFOUBWBJMBCJMJUZGPSOPOUFDIOJDBMSPMFTBTXFMM_DPVSUFTZPWFSBSUTBOETDJFODFDPMMFHFT
Real estatet $PNNFSDJBMTQBDFQSPWJEFECZ5JEFM1BSLHPWFSONFOUPXOFEBOE$)*-4&;accommodating over 15,000 employees
t 0DFTUPDLIBTHPOFVQCZ9UJNFTNTGDVSSFOUMZNBKPS*5SFBMFTUBUFestablishments came into existence in the last 3-4 years
t .JOJNVNUSBWFMDPTU_MPXFSDPNQBSFEUP5JFS*DJUJFTt 5ISFFNBJOOBUJPOBMIJHIXBZTQBTTJOHUISPVHIUIFDJUZBOEDPOOFDUJOHJUUPDJUJFTMJLF#FOHBMVSV
Kochi, Thiruvananthapuram, etc.t 1SPQPTFENPOPSBJMXJUIUXPDJSDVMBSSPVUFTDPOOFDUJOH/PSUIFSOBOE4PVUIFSOQBSUBOEEVBM
linear line connecting Eastern and Western part of the cityt 1SPQPTFE#VT3BQJE5SBOTJU4ZTUFNTUBSUJOHGSPN"WJOBTIJ3PBEBOEFOEJOHBU.FUUVQBMBZBN
Road streching over 18.6 kms
Infrastructure
Coimbatore
People Cost Other Cost
Advantage Coimbatore: Connectivity to prominent IT hubs like Chennai and Bengaluru adds to immense potential of the city; broad base availability of technical talent
Building Blocks
Cost Dierential*
Indu
stry
Pro
le
Busi
ness
Env
iron
men
t
62
Focus towards hard infrastructure, proposed BRTS and monorail to enhance connectivity within the city
2007-08 2012-13
t JODSFBTFJOFOHJOFFSJOHDPMMFHFT
t 5FDIOJDBMMZHPPEUBMFOUJNQSPWFNFOUJOTPGUTLJMMTEFTJSFE
t 4UPDLIBTJODSFBTFENVMUJGPMEJOWFZFBSTBWBJMBCJMJUZPGSFBEZUPNPWFJOTQBDFT
t /VNCFSPGIPUFMLFZTIBWFJODSFBTFECZ9PWFSUIFMBTUWFZFBSTVQDPNJOHLFZT
t "WFSBHFIPVTJOHSFOUBMTBSFQFSDFOUMPXFSUIBO5JFS*MPDBUJPOT* Includes high-rise apartments in standalone buildings and complexes
t /VNCFSPGIPTQJUBMCFETIBWFJODSFBTFEUP9PWFSUIFMBTUWFZFBST
t 8JUIOPNBMMJOUIFDJUZIBTTFFOBOJOVYPGBSPVOENTGPG(SBEF"NBMMTQBDFJOUIFMBTUWFZFBST
t $PNQFUJUJWFPDFSFOUBMTOFBSMZQFSDFOUMPXFSUIBO5JFS*MPDBUJPOT
1.5X growth over the last ve years
Average Grade A IT Park Rentals(`/sf/month)
Student Enrollments
oFOHJOFFSJOHTUVEFOUT
2008
#Information for nancial years
Total Air Passenger Trac#
t "JSQBTTFOHFSUSBDIBTJODSFBTFECZ9
t $SJUJDBMQPXFSTJUVBUJPOXJUIBWFSBHFQPXFSDVUCFUXFFOIPVSTQFSEBZ
t 1SPQPTFELNT#354t 1SPQPTFENPOPSBJMDPOOFDUJOHJNQPSUBOUBSFBT
2008
2013
42
62
oFOHJOFFSJOHTUVEFOUT
2013
High focus on technical courses, ample talent pool
Availability of quality ready to move in oce space
Power situation playing a dampener; proposed transport initiatives
0.2
2.0
2008 2013
26
28
Engineering Colleges*
/PUF 4UPDLEPFTOUJODMVEF#VJME5P4VJU#54BOEDBNQVTEFWFMPQNFOUT "WFSBHFSFOUTPG5JFS*DJUFTDPNQSJTFLFZ*5MPDBUJPOTPG#FOHBMVSV.VNCBJBOE/$3TVDIBT0VUFS3JOH3PBE8IJUFFME.BMBE(PSFHBPO(VSHBPOBOE/0*%"
9SJTF
"*$5&BQQSPWFE
Stock Grade A IT Parks & SEZs (msf)
2008 2013
9SJTF
*Residential units under-construction
Transitioning phase to mall culture, developing social infrastructure
~8%JODSFBTF
2008 2013
63
VISAKHAPATNAMGrowth in export revenues supported by small and medium enterprises in IT-BPM and software products; ideal for start-ups
Overall cost dierential: Approx. 20%People cost lower by 10-15%Other cost^ lower by 15-18%
Approx. 20%
Tier I cities
Tier I cites represent Bengaluru, Mumbai and Delhi-NCR*Based on surveys**Based on STPI registered unitsConversion Rate: 1 USD = ` 40.2 (2007-08); 1 USD = ` 54.2 (2012-13)^Other cost includes real estate, electricity charges, travel, maintenance and other utilities
Growth of industry in the last ve years
Proximity of distances
Dominanceof domestic
rms
Entry level costeciency
Employment** t Headcount in IT-BPM Industry has increased by 3.3X since 2008
Industryt More than 100 IT-BPM rms have emerged in the last ve yearst Mainly homegrown IT rmst Renowned rms present: HSBC, IBM, WIPRO, Tech Mahindra, Patra
Talent t Average attrition rate of 4-5%t Low literacy rate of 66.91%, below national average of 74%
Export revenues**
t In last ve years, growth in total export revenues: ~4X
Nature of operations
t IT and software products: 60-65%; BPM: 35-40%t IT-BPM activities include medical transcription, software development embedded and
enterprise, website development, mobile apps development, knowledge services, insurance back-end processes, CRM, etc.
Visakhapatnam