emerging delivery locations in india report

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

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%


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


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

t 3BQJEMZHSPXJOHJOUFSFTUTUPFYQMPSFOFBSTIPSFMPDBUJPOTJOPUIFSSFHJPOTMJLF-BUJO"NFSJDBTBOE&BTUFSO&VSPQF

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

4PVSDF$VTINBO8BLFFME3FTFBSDI

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

t 1SPNJTJOHWJBCMFTFSWJDFTQSPEVDUIVCTPFSJOHTDBMBCJMJUZ

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


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


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


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


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


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%


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





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




ChandigarhKochi


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)


'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


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)


Source: Cushman & Wakeeld Research

AhmedabadIndoreTrivandrum


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


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




ChandigarhKochi

Gro

wth

(in

mul

tiple

s)


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.



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


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


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


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


t IT and software: QSPEVDUEFWFMPQNFOUXFCEFWFMPQNFOUJOUFSGBDFEFTJHOBOEapplications development, maintenance and testing, content management systems, etc.)

t BPM: UFDIOJDBMTVQQPSUUFMFNBSLFUJOHEBUBNBOBHFNFOUFNBJMTVQQPSUWPJDFservices, etc.)


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



t .BKPSJUZPGSFTJEFOUJBMVOEFSDPOTUSVDUJPOBDUJWJUZQSFWBMFOUJOFBTUFSOQBSUTPGUIFDJUZ* Includes high-rise apartments in standalone buildings and complexes

Total Number of Flights#

2008



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


35

44

9SJTF


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


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.


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


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


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



9SJTF

"*$5&BQQSPWFE

Stock Grade A IT Parks & SEZs (msf)

2008 2013

9SJTF


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


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

emerging delivery locations in india report

Documents

bpm industry

bpm locations

emerging cities

leading cities

bpm destinations

challenger cities

kearney india

leading locations