Unveiling the journey of IT-BPM service delivery in Tier II/III cities – a transformational impact akin to the established locations

India has already achieved a global leadership position in the IT-BPM sector backed by its distinguished capabilities across different areas. In the recent past, however, the growth has been concentrated only to a few leading cities which have already realized significant benefits.

More recently, to strive for balanced regional development and an equitable share of benefits across the country, the potential in emerging cities is gaining prominence. As I was thinking more and more deep, myriad thoughts came into my mind regarding the unique selling points of Tier II/III locations which is not just limited to the cost competitiveness as compared to the big cities but also certain desirable factors like social & living environment, untapped talent pool, better quality of life etc.

It is not uncommon to say that the existing seven locations (leading It-BPM destinations) will continue to see significant growth in the near future, however, the major thrust now is to spread this development further to a new set of untapped locations through proactive planning and meticulous execution.

In the year 2008, NASSCOM made an attempt to identify 50 promising and desirable tier II/III business locations for the IT-BPM industry in India. While, it is evident that a significant traction is already happening since the last 2-3 years, we believe it’s now our endeavour to showcase their journey, understand their movement and growth in IT-BPM service delivery till date and build on a future roadmap for them so as to create a transformational impact akin to the established locations.

With this underlying objective, this year NASSCOM and Cushman & Wakefield have partnered together for a research study to identify the most desirable 20 tier II/III business locations, along with key business trends and its impact on the ecosystem – opportunities and challenges that are expected to emerge.

The hypothesis of the study involve 5 broad parameters:

  • Perceived advantages of Abundant Talent – knowledge pool availability & quality of professionals, thus expanding the base
  • Cost pressures are less – Low hiring and operational costs
  • Government support & positive environment­ – State government pursuing IT- BPM investments and providing necessary environment
  • Accelerated growth in the Infrastructure and improved connectivity over the last few years
  • Better social and living environment – A unique growth enabler
  • Conduciveness of business environment in tier 2/3 cities – enabling the growth of IT- BPM Industry

To be very honest, I was extremely overwhelmed when I felt the transition actually happening to these Tier II/III cities, during my visit to first 5 cities – Chandigarh, Trivandrum, Kochi, Ahmedabad and Vadodara.

It was an immense pleasure to interact with various stakeholders e.g., Industry heads (both Members & Non-members), Start-up communities, IT Government Secretariat, State Planning Board, STPI/SEZ heads as well as Academia heads.

I rolled the interaction I had across various points, over and over in my mind and realized that it was an insightful journey and helped immensely in gaining the perspective of different parties enabling the development of IT- BPM Industry in these cities.

The key highlights from the first 5 cities with respect to the broader parameters are as follows:

BUSINESS ENVIRONMENT:

  • The government in these regions is quite supportive for the development of IT/-BPM sector and has been involved in providing necessary infrastructure in the form of IT Parks as well as SEZs
  • Setting up of operations for any new company seems to be quite easy due to the single window clearance available as well as other extended benefits
  • Also, positive factors like high levels of transparency and lower level of corruption, enhancing the attractiveness of these cities more recently

TALENT AVAILABILITY:

  • Talent pool available in Tier II/III cities is reasonably good in technical skills, however, requires some level of training in terms of soft skills along with marketing & business development skills
  • Fresh technical graduates as well as non-technical graduates are easily available
  • High outturn of qualified talent and presence of good colleges indicate that Tier II/III cities can also support a sizeable IT-BPM existence
  • Overall attrition rates across the cities estimated to be below industry average.

POLICY & GOVERNMENT ENABLERS

  • Focus on start-ups looks prominent with some existing measures like plug & play facility for incubators along with prospective plans in the near future
  • Support to small & medium scale entrepreneurs by offering tax benefits/ export initiatives
  • Export revenues has achieved a growth of above 20% over the last couple of years; the outlook remains positive in each city

OPERATIONAL HIGHLIGHTS

  • The cost of operations is very less as compared to many other cities
  • Electricity, water and other basic utilities are much cheaper and the supply is also fairly adequate with frequency of power cuts being very low
  • Infrastructure and other enabling environment is providing impetus for operational efficiency to IT-BPM companies

The Indian outsourcing industry has to retain its global position going forward, by maintaining the competitive thrust at a lower cost, which eventually means that these potential destinations should also address the growing needs of the Industry and enhance their attractiveness to the next level.

Henceforth, it becomes a prerogative of each industry stakeholder to play a proactive role in creating the ecosystem to drive longer term growth of the sector.

 

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