Infrastructure: The rise of India's Tier II and Tier III cities

The Indian IT-ITES industry is deeply entrenched in all the key metros of India. The country's Tier I cities, including Mumbai, Delhi, Kolkata, Bangalore and Chennai have all emerged as significant hubs for both Indian and global IT-ITES companies. However, even as these cities are attracting IT-ITES investments and creating employments for thousands of citizens. Escalating real estate costs, paucity of skilled IT professionals and overstressed infrastructure such as power, roads and airports, are creating challenges for IT-ITES organizations that have set up operations in these cities.

Increasingly, it is being felt that other Indian satellite towns and Tier II and Tier III cities need to be developed for the IT-ITES sector, so that some of the pressure can be taken off the country's key silicon cities. A number of these smaller townships offer advantages in terms of cheaper real estate, access to relevantly skilled manpower and gradually improving telecom and physical infrastructure and are coming into their own in terms of drawing global and Indian IT majors.

A 2004 NASSCOM-KPMG Study on "Choosing a location for offshore operations in India," has revealed the following facts about some of India's emerging IT-ITES cities:

City: Kochi

Real estate and infrastructure: One of the lowest real estate rates among the IT-ITES clusters in the country. A number of housing projects planned such as the Eco Township, which include attached commercial and retail properties.
Literacy: Kochi ranks high in terms of literacy, which is higher than the national average.
Other advantages: Lower salary costs compared to other Tier I cities and low employee attrition rates (stated to be under five percent). The Government too has been very positive about IT, upgrading support infrastructure through projects in transport, water supply and other civic amenities. Through additional investments and forward looking policies, the Kerala Government is looking at harnessing Kochi's geo-strategic advantage and make it a hub of South Asia

City: Pune

Real estate and infrastructure: Facility rentals in Pune can be as low as INR 15-50/sq ft, though these are on the rise. It is estimated that current and announced projects could add around 10 million square feet of additional floor space in Pune over the next three years.
Literacy: There are more than 190 colleges in Pune, producing around 80,000 engineering graduates and another 120,000 graduates in arts, science and commerce. Pune has a number of specialized education institutes and a large base of scientists working on R&D under public agencies.
Other advantages: The overall cost of living in Pune is 37 percent lower as compared to Mumbai. Graduates in Pune are more stable employees. Existing companies in Pune have experience attrition of as low as 5-10 percent. Power supply in the city is cheaper than other Indian cities.

City: Nagpur

Real estate and infrastructure: Real estate rentals are cheap in Nagpur. The government is also in the process of developing the IT park in the city through the MIDC and facilities are available for as low as INR 13/sq ft/Mth, in addition to standard IT park benefits
Literacy: Nagpur university has a number of reputed colleges under it including the Visvesvaraya National Institute of Technology
Other advantages: Nagpur is focused on promoting IT with increased investments in infrastructure and a strong IT policy

City: Chandigarh

Real estate and infrastructure: Chandigarh retains the advantage of a small city in terms of travel times and availability of real estate and power. There is 200,000 sq ft of built up area available in the area with an additional five million sq ft in the pipeline. The city administration's Wired City plan has been implemented with the laying of about 110 km of optical fiber by private networks
Literacy: Literacy for the Chandigarh cluster is 82 percent as compared to 70 percent for Punjab.
Other advantages: The city has been ranked number one in terms of human development index.

City: Jaipur

Real estate and infrastructure: Jaipur retains the advantage of a small city, with lower travel time, real estate and power availability. It's proximity to Gurgaon is making companies consider it as an attractive second site to their Gurgaon operations. Plots in EPIP-Sitapura are available at INR 250-270 sq mtr, with the option of using ready facilities as an incubation center with no rent and minimal maintenances costs of INR 2.9 sp ft per month for the first year.
Literacy: Jaipur has an overall literacy rate of 71 percent, higher than the state average and produces more than 450 MBAs, 100 Cas and 5,500 engineering graduates each year in addition to a large proportion of the commerce and arts graduates that Rajasthan produces each year.
Other advantages: The average salary for the ITES-BPO industry is up to 30 percent lower than Gurgaon. The attrition rates (at five to 10 percent) are low, due to the lack of competition for skills.

Source : NASSCOM Newsline