The Hindu Business Line : With Chennai overcrowded, TN offering other cities to IT cos

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With Chennai overcrowded, TN offering other cities to IT cos

Govt will facilitate creation of physical, social infrastructure

M. Ramesh
K. Bharat Kumar

Chennai, July 27 ‘Puliyancholai at the foot of Kolli Hills – the lush green forests, gushing streams and cascading waterfalls, so spectacular’. Something from a tourism brochure? Wrong. This is from a Tamil Nadu government brochure asking IT companies to set up units in the State.

With Chennai running full, the Government is pulling out all stops to lure IT companies into other parts of the States. Chennai cannot take any more load. Already 60 million sq ft of additional IT space, or as much as 47 Tidel Park buildings, is proposed to be created in the city.

This is in addition to the large number of campuses coming up in and around the city. Siruseri alone would have 78 campuses, justifying the 6,000-apartment township coming up there.

Tier-2 cities in focus

The burgeoning IT population has, literally and figuratively, reached the city limits — and the State Government wants to push IT companies into the interiors. But in this effort, it has come up against a chicken-and-egg situation.

IT companies are willing to go to tier-II cities but the problem is lack of social infrastructure. But then, schools and hospitals will not come up unless there are people.

In a bid to break the jinx, the State Government has plans to offer, to both IT companies and the rest of the ecosystem, the one sweetener — land.

“We are telling the IT companies, ‘come first and you will get the land cheap,” says Dr C. Chandramouli, Secretary, IT, Government of Tamil Nadu. The idea is to get one big anchor customer, then the rest will follow. Likewise, for schools and hospitals.

IT parks are coming up at Madurai (indeed, two there), Tiruchi, Tirunelveli and Salem. (Coimbatore, like Chennai, is full.) In each, a township is thrown in.

Take Madurai, for example. About 240 acres of land that belonged to Madurai Kamaraj University has been taken up for an IT park. Fifty acres of that is earmarked for a township that is to be developed by a private developer, under the PPP-model.

In Tirunelveli, the story is bigger. Apart from the 2,500-acre Nanguneri SEZ, the State Industrial Promotion Corporation of Tamilnadu is planning a 500-acre IT park, again 50 acres of which is for a township.

The southern districts are a huge catchment area for talent, notes Dr Chandramouli. Just around the five cities, there are 136 engineering colleges and 555 colleges for humanities. Students from these colleges are today seeking jobs in Chennai. Give them jobs locally, and they will stick.

Lower attrition rates is a big lure.

Dr Chandramouli says the Government would facilitate creation of both physical and social infrastructure — but are the fish biting?

Honeywell Technology has set up shop in Madurai. Allsec Technologies is putting up a 200-seat BPO in Tiruchi. “I looked for convent schools, rather than engineering colleges,” says Mr Adi Saravanan, Founder and President, Allsec. In his BPO business, communication skills are of the essence and “communication abilities are formed in schools, not in colleges.”

‘IT preferred over BPOs’

Mr Phaneesh Murthy, CEO & Managing Director, iGATE Global Solutions, an integrated consulting, technology and operations company, feels that it does not make much sense for an IT company to go interior, seeking cost savings. For an IT company, infrastructure costs are anyway low. Manpower costs may be lower in Tier-II cities, but attrition cannot be avoided, because a good techie will relocate for a better salary. However, for a BPO it is the reverse. Infrastructure costs are high and a typical BPO employee will not relocate.

But the State Government would be interested more in IT companies than BPOs. After all, the State is climbing up the value chain in IT exports. Even as Tamil Nadu’s software exports grew 47 per cent to Rs 20,083 crore in 2006-07 over Rs 13,615 crore in the previous year, the share of products grew to 6 per cent from 3 per cent.

Dr Chandramouli feels that the trick is to get one anchor customer in each upcoming park and the others will follow — as was seen in the case of Coimbatore.

He points out that once you create good infrastructure, users will come, as Mahindra & Mahindra found out with their Mahindra World City in Chennai. It is just that one has to have patience.

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