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'Silicon Valley faces risk of losing out to rivals'

Press Trust of India

Posted: Nov 13, 2005 at 1608 hrs IST

Coming under the scanner for its crumbling infrastructure, India’s Silicon Valley faces the risk of losing out to formidable rival cities like Chennai in attracting big ticket investments not just in information technology but in other sectors as well.

Bad infrastructure, exposed further by the record rains last month, poses a threat to Bangalore’s brand name as a preferred investment destination, which has taken a severe beating.

Bangalore’s plight is giving ideas to others, though all of them may not not admit it openly. Neighbouring Tamil Nadu and its capital Chennai, not a small player in it or, for that matter, in automobile sector, is already bracing up. Not to speak of another neighbour Hyderabad and far-away Delhi readying themselves for a share in the pie.

Undaunted, key officials of Karnataka government are putting up a brave face, reeling out recent investment figures and MNCs continuing to make a beeline either to set up shop or expand operations in the country’s technology hub. But the famed it industry is upset and angry.

Top IT companies in Bangalore do not vent their anger in public over the sorry state of affairs--the roads, lack of a proper storm water drainage system and the consequent traffic chaos.

Heavy rains--a record for over a century--flooded a number of it firms, including Wipro, in the suburbs of Bangalore.

One of Wipro’s eight facilities in the city, which houses 400 employees out of a total strength of 13,500 employees in Bangalore, was badly affected by the rains. It also hit one of the four delivery locations of HTMT, an IT’s BPO firm besides causing damage to HTMT house.

“The recent rains have proved that there has been no improvement in the infrastructure which has been affecting the brand name of the city in the recent past. One must admit that brand name is decisive. It determines the quantum of investment. It companies, whose first preference was always Bangalore will now seriously look to other cities like Chennai and Bangalore,” says Ananth R. Koppar, president of Bangalore Chamber of Industry and Commerce.

Stronger views were aired by the Bangalore Forum for Information Technology, BFIT convener C. N. Kumar who feels that the status of Bangalore as a preferred investment destination has taken a serious beating.

Karnataka IT secretary M. K. Shankaralinge Gowda and director of Bangalore’s Software Technology Parks of India B. V. Naidu, however, strike an optimistic note, saying the city would continue to thrive.

Gowda says the recent announcement of expansion plans of CISCO and IBM in Bangalore drives home the point to show that the city has not lost its charm.

As many as 98 new it and ITES companies have flocked to Bangalore in the last six months. All major cities are facing infrastructure problems and Bangalore is no exception, claims Naidu.

But the IT industry feels much needs to be done. Koppar says the city continues to be managed like a small town municipality. The dismal condition of roads, perpetual traffic jams and consequent delays have led to drop in productivity in levels in work place, he claims.

“Infrastructure was never a big concern eight to ten months ago. But new companies which are planning to set up their facilities are very much concerned about the infrastructure, roads and accessibility of airport. The present situation does not look like improving and will make companies look for other options causing heavy loss to Bangalore and the state,” he says.

In Chennai, they are watching the developments in Bangalore. The infrastructure woes there have proved to be a blessing in disguise for Chennai, which is now emerging as the next preferred destination for a number of manufacturing companies as well as IT firms.

German car maker BMW has already announced setting up of Rs 110 million manufacturing plant at Maraimalai Nagar while a host of others including Finnish telecom major Nokia, Flextronics and a host of others have also announced mega investments at Sri Perumbadur.

In addition, Korean auto major Hyundai and American giant Ford, which have their India plants near Chennai (in Rungattukottai and Maraimalai Nagar respectively), have also started expanding their facilities in a big way.

Hyundai India’s USD 550-600 million expansion would see its production capacity going up to four lakh cars per annum from the existing 2.5 lakh cars. Ford is infusing usd 75 million to its Chennai facility for expansion.

Significantly, IT majors like Infosys, Wipro, TCS have also began to shift their focus towards Chennai.

“With so much of negative publicity to Bangalore, why would anyone want to go to Bangalore,” said Keshav R. Murugesh, chief operating officer of Nasdaq-listed Syntel Inc, which is making Chennai its biggest global centre.

However, in the wake of infrastructure bottlenecks in Bangalore, the Tamil Nadu government is now focused on diverting it investments to second-tier cities such as Madurai, Coimbatore and Trichy.

In a bid to accommodate more and more industries, the state government has also initiated steps to improve the existing infrastructural facilities.

The government has allocated Rs 525.05 crore for the construction of four river bridges, six flyovers and widening of several roads in the city. It was in addition to the Rs 1,925 crore Tamil Nadu Urban Development Project-III, inaugurated by the Chief Minister Jayalalithaa last month.

Besides boasting of being in a strategic location with a combination of sea port and airport adjacently, the state has also advanced in technology. “We have a broadband connectivity of 13.5 tetra bite and a 20 million sqft of IT space is coming up here,” C. Chandramouli, State It Secretary, said.

According to B. Santhanam, chairman, CII, Tamil Nadu, the greatest strength of the state is its people. “Creative, analytical, mathematical and having a combination of these, with excellent knowledge of business English, our people is the greatest strength in the emerging knowledge economy,” he said.

Tamil Nadu churns out over 80,000 engineering graduates every year, including 25,000 in computer science and software engineering.

The state government has already started interacting with business delegations from abroad, with a view to attract more investments. For the last few months delegations from Germany, Australia, Japan etc have visited the state and evinced interest in setting up facilities here.

“Besides IT, there is space for other sectors like bio-tech, automobile to grow in TN,” says S. Raghavan, secretary, the Southern India Chamber of Commerce and Industry (SICCI).

With a view to stay tuned towards the changing scenario, the government has also started initiatives to train its employees on hr practices. “A task force has been set up and we will come out with a detailed framework within three weeks,” said Chandramouli.

In Hyderabad, there is mixed response on the collapse of infrastructure in Bangalore and its fallout for Andhra Pradesh.

According to M. Hemalatha, Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI), the infrastructure problems and political instability in the state helps Andhra Pradesh indirectly to attract the industry.

“There has not been a single negative report about the poor quality of infrastructure in the state. The state government is also industry-friendly. All these factors would naturally count,” she adds.

However, S. N. Murthy, chief operating officer of INTOTO India, says the infrastructure blues in Bangalore may not immediately result in any benefit to neighbouring states immediately.

“Industry in Bangalore has attained a certain maturity,” he said.

Government officials are for record denying any attempt to cash in or problems in Bangalore. “We are not competing with anybody. But we are promoting Andhra Pradesh in a big way,” Ratna Prabha, Secretary, Department of IT, government of Andhra Pradesh, said.

The Delhi government, which has not formulated any special policy for IT investment, has, however, set up a 40,000 sq ft it park for software companies to set up shop in the capital.

According to chief secretary S. Raghunathan, the aim is to see the national capital region develop as an IT hub. Together with NOIDA and Gurgaon, Delhi can develop into an It hot seat, he said.

Only recently a top software organisation has selected Delhi’s IT parks over other cities, including Bangalore, he said. However, he did not reveal the company’s name.

“We are not offering any special concessions to IT companies, but Delhi offers to these companies the best infrastructure such as roads and uninterrupted power supply,” he said.

Delhi also participated in the recently-held It show in Bangalore where it not only projected itself as a potential it hub but also showcased its E-governance initiative

However, the deterrence for companies to come to Delhi is the cost of land, which is one of the highest in the country.

Raghunathan also said that the focus of the Delhi government on extracting it investment is to make its residents ‘E-citizens’.

“Our aim is to make Delhi an E-governed city, by creating an on-line interface between the government and the people. They should be able to interact with the government and get their problems solved through the internet,” he said.

For its E-governance programme, the government has tied up with Infosys and for computer aided learning it has entered a collaboration with consultancy firm ‘Ernst and Young’ while Municipal Corporation of Delhi is taking help from Microsoft in providing community education in schools.

In Kolkata, G. D. Gautama, principal secretary, Information Technology Department of West Bengal government, said, “we do not market others weaknesses, but our strengths, for which the state is witnessing a huge growth in the IT sector”.

Gautama said that this strategy had helped the state in logging 70 per cent growth against 35 per cent nationally.

Kolkata, at present, has 235 IT and ITES companies employing 33,000 people.

Gautama said that a number of companies were setting up shop at the moment. These were Mahindra BT, ICICI One Source, ITC Infotech, Satyam, HSBC, and IXIA, while the existing ones were expanding.

Kolkata and Rajarhat would have 12 it parks within three years covering an area of 13.3 million square feet.

At present, eight to 10 proposals were lying with the state government. The state government was also improving physical infrastructure in the IT sector.

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