Why IT industry should expand its physical base
The move, complementary to the IT investment region scheme cleared by the Cabinet a few weeks ago, does not come as a surprise to companies which are expanding beyond the metros to service their onshore and off-shore clients.
Nasscom, the industry body for IT companies, has been in talks with the centre for developing new IT regions in the country. It has short-listed 50 locations in the country — other than the top seven cities —for companies to set up shop.
“With the surge in real estate prices, IT and ITes companies are finding it tough to set up operations in traditional locations including Bangalore, Chennai, Mumbai, Hyderabad, Kolkata, Gurgaon and Noida . We expect small cities to anchor the next growth wave in the IT industry,” says Ganesh Natarajan, chairman of Nasscom.
Nasscom has, perhaps, taken a cue from China which has developed small growth regions such as Wuxi and Dalian for industrial development. It reckons that Tier II cities will have the potential to account for at least 40% of the total projected ITBPO jobs by 2018 provided there is a balanced growth.
Currently, the top seven cities account for over 85% of IT sector employment “The proposed move will help spread development across the country and ease out pressure from big cities, where infrastructure is crumbling. By encouraging locations outside metros, the government could make way for reverse migration,” he said.
Srinivas Vadlamani, CFO, Satyam Computer Services, said the company has already initiated steps to move out of large cities. “We are planning to move into places like Vizag, Nagpur, Gandhinagar and Madurai and are setting up our own SEZs. This can lower our cost of operations, cut travel time and traffic congestion which our associates face in the Tier I cities,” he said.
He says the government should offer incentives such as salary subsidy, free office space and liberal tax breaks spread over 10-15 years to make this move successful. Some of the Asian governments like China and Malaysia already offer such incentives.
