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L.N. Revathy

Smaller cities and towns are slowly making their presence felt even as big IT players look to expand. If the players have the inclination, these cities and towns have the talent and the space, it appears.

A YEAR ago, when the Wipro Chairman, Azim Premji, visited Coimbatore, he made it clear that his company would not look at destinations that lagged behind in flight connectivity. A year later, rumours are rife that Wipro is looking to establish a development centre in Coimbatore, , though things continue to remain the same, but for some changes in flight schedule.

Wipro is not alone. A number of others are also looking at Coimbatore for setting up development centres. After the hottest IT game, companies have started looking at the second-rung cities and towns such as Madurai, Tiruchirapalli and Coimbatore in Tamil Nadu, Vishakapatnam in Andhra Pradesh, Hubli, Mysore and Mangalore in Karnataka, Thiruvananthapuram and Kochi in Kerala and the Union Territory of Goa as they see immense potential in such places.

"A big pool of talent is available, infrastructure investment is relatively low and there is enormous room for growth in these cities," says Pradeep Nevatia of Vetri Software.

In search of space

The space available in the Tier I cities has been estimated at one million sq.ft. But considering the tech job potential in second-rung cities, industry insiders anticipate the overall demand to touch a high of 150 million sq. feet as the peripheral areas of some of the top ranked places are being developed for the purpose.

The 3-million sq.ft Krisson Knowledge City project in Bangalore is expected to be completed by end 2003 and at the Cyber Pearl project at Hyderabad, an estimated 2.5 lakh sq.ft is expected to be created, besides the techpark at Kochi (an ongoing project), where 2 million .sq.ft space has been provided for, says Raghavendra Prasad, Executive Director, PSG STEP.

"In the upcoming parks in South India, the likely space requirement by 2006 has been put at 10 million sq.ft. but the prospective space that is expected to be made available is only 5.75 million sq.ft," says Prasad.

Though the real estate rates have more or less stabilised in central business pockets, the prices are moving up in peripheral areas. In Hyderabad alone, the rates are 20 per cent higher for the value-added infrastructure in the periphery, whereas they are cheaper in the peripheral areas of Chennai.

Industry sources are anticipating huge land space to come up for sale in the Coimbatore region, from the sale of land belonging to the textile mills and the NTC mills in particular.

In Bangalore, the rental rates both for the peripheral area and central business destinations in the heart of the city are at Rs 50/- per sq.ft, while they are marginally cheaper in the extension areas and suburbs.

Propmart predicts that by end 2004 the total real estate demand for BPO operations will exceed the available supply in the metros. Approximately 30 of this additional demand will be met by the non-metro cities of Pune, Coimbatore, Cochin and Chandigarh.

Talent shortfall

Meanwhile, on the manpower front, recent studies by Nasscom on the IT manpower situation project a potential shortfall of 2.35 lakh by 2008, while the ITES sector is expected to generate over 1.1 million jobs by the year 2008.

The demand for IT professionals outweighs supply except in the case of the larger cities.

Besides this, the industry's attrition rate, which was within limits until recently, has started to rise in the last two quarters, with the big players too facing serious retention problems. Even renowned players have, therefore, started looking for new locations where the talent pool would not be a problem and attrition rates minimal.

The ITES sector is more active in these cities. This combine, industry sources perceive, will require at least one lakh techies over the next 12 months.

Until now, renowned players and start-ups were choosing Bangalore, Pune, Chennai, Mumbai or Hyderabad, as these were considered the temple of IT revolution. However, most of them are looking at expanding their horizon — at alternative destinations now.

Why alternative destinations? Industry insiders explain that the traditional cities are getting more expensive and IT players' margins are under pressure. Their priority, therefore, is for low-cost options with good (bandwidth) connectivity.

While companies are at it, the respective State Governments also seem to be wooing prospective investors by identifying land to set up IT parks in such places.

Branding Coimbatore

Take the Tamil Nadu Government. The State is keen to promote an IT Park in Coimbatore on the lines of Chennai's Tidal Park. The land has been identified and immediate demand has been projected. The pity is, the talks have been going on for months now, and no one is sure if the park will see the light of day.

With over 27 engineering colleges and about 20,000 students graduating every year, the talent pool is really large. But most of them migrate to other destinations for career prospects.

Is there a way to retain the talents here? The CII has time and again tried to woo renowned players to set up shop here, for the members firmly believe that these players' presence alone would trigger all-round growth.

"We are really taken aback by the state-of-the-art units that exist here. We are aware that the foundries here cater to the requirements of world-class automobile companies. But it is sad to note that the city has not been marketed properly. Branding is essential, be it in product or service" says Pradeep.

Looking back, it is interesting to note that Coimbatore was coined as the Manchester of South India, although it was not so in the true sense. A textile hub — yes, a cotton city — perhaps. But where is it heading now?

The CII regional chapter has been glorifying the city as `an ideal IT destination'. Its voice has not gone unheard. After missing the bus, the city is finally waking up.

"The CAD/CAM software, designing systems, embedded solutions are aplenty. Most of the start-ups look at these niche options and the domain knowledge is aplenty" confirms Paramasivam of eBrahma Technologies. He concedes that the entry-level salary is quite low, but the opportunity to learn is immense. "The staff retention problem persists in smaller towns as the opportunities are limited. But for some of us who have interests here and are forced to hang around, the rest migrate in search of lucrative offers to bigger cities such as Bangalore or Chennai. These destinations are within reach, to catch up with the family during the weekends," he says.

Asia's largest medical transcription company KGISL is based out of Coimbatore. The company has since forayed into BPO services as well and has been doing a remarkable job by offering e-Enabling solutions to the local body. It is learnt that the model is being replicated in other district headquarters in the State.

Small players such as Sapience Software are for ever on the hunt for incorporating IT in varied applications as in fish harvesting, in identifying endangered plant species, rain water harvesting models, security surveillance etc.

With thousands of SMEs and a strong textile-engineering base, Coimbatore offers scope for leveraging the skills and exploiting the IT potential. Besides Coimbatore, Tiruchy and Madurai are also emerging as potential IT hubs.

The world could be a small village in the knowledge era. Yet IT companies stress the need for being close to their clients. "It is not enough to operate in remote. Physical presence makes all the difference" says Pradeep.

Despite having a huge set-up in Chennai, Vetri Software is keen to foray into second-rung cities, albeit in a small way, by establishing Business Associates. "We are now looking at broadening our base in the South, before setting foot in the northern and eastern parts of the country," Pradeep says.

Kerala calling

Elsewhere, in the State of Kerala, companies such as 24*7, Tata Consultancy Services, Consultancy firms such as Ernst & Young and McKinsey and Infosys Technologies have all set up shop in the sprawling technopark developed at Thiruvananthapuram and Kochi. IT executives have no reservations in pointing out that the State is renowned for its legacy of labour unionism. But the State Government has been conducting road shows aggressively in the US and other destinations to attract software companies to the State.

But the biggest hitch appears to be in funding the venture.

Bankers still voice doubts about funding an IT venture as they consider it a high-risk proposition.

Industry insiders suggest that the alumni of the various colleges, settled abroad, could float some funds for starting some venture in their home ground, as banks are ready to extend assistance to the hospitality sector, for promoting theme parks, and the like.

It is not a new thought, for this is already happening in the IT industry.

The hype is there. The land prices have started to look up. But one has to wait and see if the big players eventually start operating out of these cities or use it as a training ground. There is, however, no looking back..

lnr@thehindu.co.in

Imaging: R. Ravikannan

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