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Deccan Herald » DH Realty » Detailed Story
IT bandwagon gung-ho about towns
With large cities reaching a saturation point in terms of infrastructure, cost of living & availability of talent pool, smaller towns in the country are becoming popular among IT-ITES firms, for setting up facilities, a NASSCOM report finds. Here is the first part of the article. Part II will be published in next week’s issue.
India’s Tier II and Tier III cities and townships are now coming of age. They are emerging as the new investment destinations for the IT-ITES sector, with the industry giving a keen look at these locales that are now gradually taking the pressure off the already infrastructure-strapped, saturated metros.

The IT-ITES sector, which earlier confined itself to the big canvas of Delhi and adjoining areas such as Gurgaon/NCR, Mumbai - the financial capital of the country, Bangalore - the largest hub, the Silicon Valley of India, is now setting its sights on the Tier II cities and the smaller towns where real estate is cheaper, where infrastructure is on a growth curve and where manpower availability is not too much of a problem.

The earlier trend, which had seen companies form IT clusters in cities, is now giving way to an independent exploration of new, virgin territories, where these organisations don’t typically encounter challenges such as attrition and intense competition for space under the sun.

Take the instance of Infosys, which has recently announced a major move to Chennai. While Chennai does not really count as a Tier II city, it is only in the recent years that Tamil Nadu’s capital has received attention from the IT-ITES community. Even until a few years ago, it was only a handful of organisations led by TVS Electronics and HCL that had set up their facilities in Chennai. Now, especially in the past two years, there has been a build up of interest in Chennai, on account of the city’s large pool of skilled, English-speaking, scientific manpower, the existence of a large number of higher-education institutions across the State and areas surrounding the city and the relatively inexpensive real estate.

Companies such as Infosys and Wipro, among others are now serious participants in Chennai’s IT-ITES industry and are expanding their presence in the city (not to mention Tamil Nadu itself), by the minute.

Infosys, for instance, has decided to set up its biggest campus at Mahindra City in Chennai, with a total investment of Rs 1250 crore. The investment, to be made over the next three to four years, will also include a major hiring spell by the IT software and services major.

Infosys plans to hire around 25,000 people during the same period at this upcoming 125-acre campus. Infosys currently has around 3,500 employees in Chennai and is looking at adding another 5,000 to its rolls. By the end of December, 2006, Infosys would have invested around Rs 350 crore in the Chennai campus.

While the physical factors have been a major draw for leading IT-ITES companies to move to new and untouched terrains, positive intervention by the Governments of various States has also led to increased interest in these regions.

States such as Tamil Nadu, Andhra Pradesh, Kerala, Himachal Pradesh, Uttar Pradesh, Gujarat, Maharashtra and West Bengal are going all out to develop their Tier II and III cities and townships and ready them for IT-ITES players. Not only are they gearing up in terms of telecom, transportation, and human resources, they are also making sure their policies are investment-friendly and attract both global and Indian IT-ITES companies.

A number of Indian states, in fact are vying with each other to bring in the crucial millions from the MNCs and domestic IT-ITES organisations. The aim, as mentioned, is not only to strengthen the bigger cities but also encourage the proliferation of IT investment across Tier II and III destinations such as Secunderabad, Mysore, Jaipur, Ranchi, Coimbatore, Hosur, Trichur, Madurai, Visakhapatnam and Bhubaneshwar, to name a few. In most instances, the Chief Ministers of these states are themselves acting as IT-ITES ambassadors, strongly positioning their regions as IT-friendly and liberalised in terms of a regulatory framework. The Tamil Nadu Chief Minister Karunanidhi in fact, has been making a pitch with CEOs of the best of the best IT-ITES players in India. By creating a conducive investment climate, marked by positive IT-ITES policies, Tamil Nadu is hoping to draw the big guns of the IT business into the State.

Among the larger players, Wipro Infotech has also shown interest in Tamil Nadu. The company, which currently has around 6,000 people on its rolls, will also be making a substantial investment in the state, with a special focus on Tier II cities such as Coimbatore and Trichy.
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