V ISITING EXECS TO BANGALORE RARELY FAIL TO COME BACK HOME AND BLOG ABOUT THE COWS ON THE MAIN STREETS, THE HARROWING TRAFFIC AND THE PITIFUL BEGGARS. THEY INSIST IT’S CHARMING.
Not being able to find a hotel room in the city, they put down as a sign of booming business. Only a few admit to the loss of productivity that spending an hour and a half in the traffic can bring. Good or bad, companies continue to flock to Bangalore. For them it is the new Silicon Valley of the world.
Yet, for the service providers, both the multinationals and the Indian companies, in BangMore to whom these companies have outsourced work to, the charm seems to be waning. Struck by the reality of poor infrastructure, people shortages and rising costs, they are busy setting up delivery centers in other cities of the country.
Outside of Bangalore, most large providers of VU and BPO services already have centers in Mumbai, Chennai and the National Capital Regioii of Delhi (this includes Delhi, Gurgaon and Noida). Many have also moved to the smaller, yet fast growing cities of Pune and Hvderabad.
American corporates, too, are familiar with these cities, and don’t hesitate to their work being done out of there.
LURE OF THE SMALLER CITIES
But it is the lure of the smaller cities that is scripting a new story.
Cities such as Chandigarh, Jaipur, Kolkata, Kochi, Managalore and Mysore are being seen as a panacea for talent shortage the biggest ill that the industry is plagued with. While salaries are only marginally lower in these cities than in the larger Indian cities, it is staff loyalty and less attrition that attract companies to these cities. Because there is less competition in these cities, people are less likely to be tempted to change jobs.
“Attrition [in smaller cities] is lower by two percent to eight percent depending on the city as compared to Bangalore,” says Laxman Badiga, Corporate VP and CIO, Wipro Technologies. Apart from most large cities, Wipro has both IT and BPO centers in Kochi and Mysorc, and its center in Bhubaneswar s likely to he operational in six to eight months. It is also actively considering Coimbatore, Vizag , Mangalore , Jaipur, Chandigarh and Nagpur . (See map for location of all cities discussed in this article.)
Given that growth in offshore operations is directly proportional to scale, surely cost is an important factor, too, for companies to set up centers in smaller cities? Not entirely. Salary costs are almost the same across the country you don’t pay a developer in Bangalore substantially more than you do in Mysore. Infrastructure costs — power and telecom too are more or less the same across locations.
The difference in cost can he seen in the rental cost of real estate . But, since real-estate space is more readily available in such cities, companies are coming round having to pay large rentals by building their own centers. Incremental running costs, the industry concludes, is hence not much different from city to city.
But the picture is not perfect — while the bulk of the junior positions can easily be filled in such cities, middle and senior level people are difficult to find. Companies “fix” this problem by sending managers from their established centers on short relocation programs.
Hiring talent at the lowest level takes some time in a city until people get to know your brand,” says Amit Chaudhry, CEO and MD , Jnfosys BPO. “But the critical issue is that of mid management.” Jnfosys BPO set up a center in Jaipur, close to Delhi and away from its stronghold Bangak last year, and the company is getting in a lot of its middle-level managers from its other established centers. Many of these are Infosys employees who belong to Jaipur, and are happy to go back to their hometown.
CITIES IN SPOTLIGHT
What does this mean for you-----the customer of services who has sent work to India? Should you really care where your work is being done as long as the service levels are being met? Not really. But you should know about issues of talent, infrastructure and cost and talent— it is your work that stands to gain or suffer because of these reasons. Moreover, you will he spending time at these places to drive deliveries so it may be a good idea to know what you can do once the sun goes down (not much, we’re afraid).
Global Services examines some emerging Indian cities that hold promise as IT and BPO hotspots.
Better known for its royalty, palaces, forts, camels, elephants, forts, palaces, henna and bright colors, Jaipur is an extrenly popular tourist destination. This city in Northwest India received attention in terms of roads, hotels, telecom and power.
The Delhi-Jaipur expressway will get you to the city from Delhi in about three hours . But once you get there, navigation amongst the rickshaws, bicycles, scooters, cars and pedestrians will be ...... charming . The city has traditionally had hotels catering to foreign tourists--- — old palaces and forts con verted into luxury hotels. Now, it has several business hotels as well. But, hotel rates in the city are climbing steadily (in the range of $150 a night at a business hotel) and it is getting increasingly difficult to find rooms.
Yet, there is little dearth of educated people, and attrition is low. Taking advantage of this, companies have begun to set up operations in the city. One of the most recent centers to have opened in Jaipur is that of Infosys’ BPO arm. Opened in December 2006, the center has 450 people and services three customers. The company plans to move its operations in a special economic zone in the outskirts of the city and scale -p to 5,000—7,000 people.
The other big BPO provider in the city is Genpact, which has two centers there. The headcount between two centers is 1,800.
No company is doing significant IT work from Jaipur yet, athough Wipro is actively considering opening a facility there.
Made famous by the Patrick Swayze starrer City of Joy and Mother Teresa, the Albanian nun who won the Nobel Peace Prize for her work among the very destitutes of Kolkata, the city is known for its intellectual bent Kolkatans pride themselves on their knowledge, especially in the arts, literature and languages. Not a small city by any standard, Kolkata’s communist roots has traditionally kept investment in the city at bay.
Realizing that its been left behind in India’s growing position in international business, the state government is now doing its bit by offering generous incentives. The government is also offering low electricity tariff to industry, and a state that was known for its poor power supply until the I 980s is today one of the few power surplus states in the country.
Moreover, it has declared IT as an “essential industry” and has over the past few years attracted IT bigwigs like Wipro, Cognizant and I’I’C Infotech. Infisys and Satyam, too, are considering setting up shop there.
On the BPO side, Genpact and HSBC’s BPO center are taking full advantage of the strong English-speaking people of the city. Genpact’s BPO center employs around 525 people. Primary and secondary education in Kolkata, unlike many other Indian cities, lays a lot of emphasis on English language and literature, to the extent that people from the city are known to fill the ranks of jobs that require strong English langtuge skills sttch as copy editing and journalism.
Numbers seem to support the rationale of setting up BPO businesses in Kolkata. Attrition in the city is low — in BPO it is almost 15 % - 20 % lower compared to the industry average of 3000, according to Tholons, an outsourcing advisory firm. Salaries are about 28 % lower and the cost of setting up business is 20 % lower in than in other BPO hubs.
On the downside, communism still rears its head from time to time in the city. Recently, there has been controversy about the setting up of trade unions for BPO staff . Government support, too, seems to be erratic . Infosys, which announced opening a center there in March 2006, has still not been able to do so. Run-ins with the government have been cited as a reason.
While tourism continues is a big contribution to the city’s coffers, IT and BPO, too, are emerging on the city’s radar. Kochi is one of the few smaller cities of India where multinational companies have a presence. HP, ACS and Oracle have centers here. Amongst the Indian companies, Wipro has more than 600 people in the city. TCS, too, has a center there. A “Smart City” is being developed in Kochi with help from Dubai. This will hous e iT, BPO, biotech, telecom and media companies.
Kochi has relatively cheap real estate, good power supply, good schools and colleges (it has 25 colleges), and a privately run airport . It has lower overall operational costs than most other Indian cities, according to a recent study by L. Alshridge.
Thiruvananthapuram (We don’t expect you to be able to pronounce this one!) is another city of Kerala where companies are heading . McKinsey has had a shared-services center there for almost fivc years. Ernst & Young, Infosys and
FCS also have a presence there.
One of th e best-planned cities of India, this North Indian city has seen Dell and Quark operate there for many years. In a recent visit to Mohali (on the outskirts of Chandigarh, where Dell has set up a center), Michael Dell had said, “The quality of the Mohali workforce coupled with the state’s commitment to information technology growth will help us adhere to the highest levels of service.” The centcr at Mohali provides technical support and customer care to1 customers in the U.S.
The government is very supportive to IT investment, and road, power and telecom infrastructure in the city is very good. Residential rentals are lower than many cities, and hover in the range of $550—$650 per mo according to a Jones Lang LaSalle study.
On the downside, being close to Delhi, Chandi1 sees a lot of young people leaving the city and going to Delhi for better work opportunities. English language too, is a bit of a problem amongst people in the city.
Mangalore and Mysore
Mangalore is taking full advantage of being Bangalore’s neighbor and is working hard to accommodate work that Bangalore may no t be able to. Three IT parks are currently under construction in the city----one of them will even have a helipad.
The first IT compamy to set up shop in Mangalore was Jnfosys . Now, the other two major Indian IT companies TCS and Wipro ------also have centers there. First American Corporation and MphasiS, the BPO services company that was recently acquired b y EDS, are also present in Mangalore.
Mysore is the city that houses Infosys’ famous trading center — one that has been abundantly showcased in the media . It is probably quicker to get to Mysore from Mangalore on the new expressway than it is to travel within Banglore city!
Other cities in the region that are receiving government attention in terms of infrastructure are Hubli, Gulbarga, Belgaum and Bellarv.
Coimhatore is a fast emerging city in the South Indian state of Tarnil Nadu . Tamil Nadu, which a houses Chennai, is one of the country’s best-connected states, with an optic—-iber network of more than 14,000 kilometers. Wipro is expanding its
It is home to the Indian Institute Mangement (IIM), one of the world’s great leading business schools. It also has the largest industrial center in Western India. Companies like HP (it has set up Experience Zone there) have already discovered this place. Recent Hindu-Muslim riots in the city have, however, colored the city’s reputation.
May 2007. (Pgs. 18-23)
Volum e 02. Issue 16. globalservicesmedia.com
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