outsourcing is shifting to smaller cities in india

8/8/2019 Outsourcing is Shifting to Smaller Cities in India

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Outsourcing is shifting to smaller

cities in India, China and Philippinesdue to rising costs in bigger cities.



Group Members

Name Roll No.

Juhi Chittoria 11 Siddhida Mistry 19

Tejaswi Babhal 20

Bhargavi Sanghvi 40

Shubhra Kapil 54

Amruta Salvi 56

Shubhra Sharma 59



Reasons of shift

Rising competition

Overload on existing infrastructure High attrition rates

Cost effectiveness

Less competition for good graduates



Key location selection factors

Real estate rent, support cost, corporate tax rates, laborcost, HR cost, cost to start a business, tax incentives.Financial attractiveness

Size of industry, presence of major IT&BPO companies, multi-lingual capability, key services, industry specific services andfocus

Service maturity

Size of workforce, university graduate output, attritionrate, scalability, sustainability, wage inflationHuman capital

Number of ISPs, personnel computers, number of IT

parks & SEZs, airline connectivity, road infrastructureInfrastructure Crime rate, financial risk, labor risk, infrastructure risk,

geo-political and social riskRisk

Government support and incentives, social environment, quality of life, bureaucracy cost and time to set up business and cost of livingBusiness environment



Maturity levels of China, India and Philippines

Tholons research 2009



How important is the location factor?



INDIA



Factors influencing the three generations of maturity in Indiancities.



CITY EVOLUTION MODEL



Comparison of different cities across generation



W here is everyone going?

1. Jaipur

2. Chennai

3. Cochin

4. Kolkata

5. Pune

6. Hyderabad

7. Other cities



Jaipur

The city with a population of 6.5 million people (estimated in 2007)

Jaipur has 410 colleges and15universities including 25 engineering colleges and 27

business-management institutes churn out thousands of graduates per annum. The per month rental charges in Jaipur is $1 to $3 per square feet.

Jaipur·s railway and airport are well connected with all major cities in India.

Inaugurated with the much-awaited IT Special Economic

Zone (SEZ), Mahindra World City, in August,2008

Numerous IT and BPO companies-Infosys, Wipro, Connexions, Spanco, Genpact,GECIS(now GE)



Chennai

Star city of South India

2nd largest exporter of software

75000 engineering graduates per year including more than 35000 IT specialists

India·s IT sector has grown at 28% annually, while Chennai growth has been 60%

Electronic Corp of Tamil Nadu(ELCOT)

Chennai's plus points include high connectivity, land availability, and a low attrition rate of 7-13%(compared to 50-100 % in cities like Bangalore, Mumbai, and Hyderabad).

Being one of the best connected states, with an optic fiber network of more than 14,000 kilometers, itdefinitely holds an enormous amount of attraction for investors.

Labor cost significantly cheaper as compared to any U.S. cities Wipro is expanding its Chennai and Coimbatore centers by 85 and 25 acres respectively.

Established centre of excellence

The Mahindra City township, is being planned on the outskirts of Chennai.



Cochin(Kochi)

Cochin has a population of 1.6 million

There are 25 colleges, which produce a large pool of talented English speaking individuals.

It has one of India's largest sea ports and has relatively cheap real estate, good power supply,good schools, and a privately run airport.

Wipro - India's second largest IT company



Pune

Pune has a large pool of skilled IT professionals, improved infrastructure, and lowattrition rates.

Pune has new infrastructural trends due to various township projects.

Eg. Magarpatta City

MsourcE, C-DAC, Persistent Systems, Zensar are the key players and they employ approx.

7,300 people.



Kolkata

Kolkata·s plus point includes power surplus state, infrastructure, intelectual talent and lowcost.

Currently the revenue generated by the West Bengal IT industry is miniscule, accounting for

2.2% of India's total

Offering generous incentives to investors like low electricity tariffs and declaring IT as anessential industry

The BPOs of the region concentrate mainly in Consultation and software. PwC, IBM, ITCInfoTech, TCS are some of the prominent players of the field employing around 7,300

people.



Hyderabad Hyderabad, one of the favorite visiting spots of international tourists, experiences the advantage of being a

twin city with Secunderabad.

The salary of an entry-level BPO executive in Hyderabad is $200 to $220 and of an entry-level ITOprofessional varies from $290 to $310.

Hyderabad, which is a known as established outsourcing location for ADM, testing and healthcareoutsourcing services, is developing new outsourcing capabilities such as product development, financialservices and contact center (English).

Being home to a population of 6.8 million, it needs constant infrastructural developments.

The government is also providing full support by coming up with business and operations friendlypolicies.

It includes power, tax, Stamp duty,property, real estate, and also mega incentives.



Other cities

A study shows that Indian IT companies are relocating to smaller cities as the rise in rupeeagainst the US dollar continues to eat away at their profits.

In addition, the Software Technology Park of India (STPI) scheme, which provides varioustax concessions for the IT and ITeS companies, expires in March 2009. This serves as areason for these firms to shift base. Many IT companies are relocating to Tier-II and Tier-III

There is a urge that the STPI scheme benefits be extended for another 10 years so that

technology exporters can avail of tax incentives which would enable them to meet theirexport targets and sustain the growth momentum. Shifting IT firms to smaller cities willcreate 200,000 jobs and will result in the development of these cities.



CHINA



Revenue breakdown by client geography

44%

34%

20%

2%

US/UK

JAPAN/KOREA

CHINA(LOCAL)

OTHERS

Source: Accenture & China council of international promotion study



Hangzhou

Another Chinese city vying for financial service contracts isHangzhou, the capital of East China·s Zhejiang province. It offers alower-cost alternative to nearby Shanghai. Some 43 percent of the

outsourcing work done in Hangzhou is for financial services. Oneexample is State Street Bank, which is served by outsourcing providerInsigma Technology Co. ´We want to be known as China·s outsourcingdestination,µ says Tong Guili, deputy mayor of the Municipal

Government of Hangzhou. ´We have a strong software sector and weguarantee a steady talent pool of graduates from our universities and

colleges. We also have a pleasant environment.µ Hangzhou gainedinitial technology fame for beinghome to China·s leading e-commercecompany, Alibaba.



Chengdu

Chengdu is the economic center of Southwestern China. The city is an important global IT outsourcingdestination. Several IT companies such as EDS, IBM, HP, Neusoft, Dextrys (formerly known asDarwinSoft),Augmentum, Wipro, Genpact have their presence in the city.

The city with a population of 7.8 million people has a large pool of highly skilled IT professionals. Alarge number of universities and research institutions in Chengdu churn out over 20,000 students peryear.

In addition, Chengdu·s labor cost is quite competitive, which is about two thirds the wages in coastalcities, and the employee turnover rate is below 10 percent, according to Invest Chengdu·s statistics. Onan average, a mechanical engineer earns about $4,488.65 per year, while a software engineer gets $9,299per annum.

Also, Chengdu is an important R&D center in China. The city houses several SEZs including ChengduHign-tech Industrial Development Zone and Chengdu Economic and Technological Development Zone.Chengdu Information Association and Chengdu New and High Technology Industry Area haveestablished an ´Implementation Plan for Speeding up the Development of Chengdu SoftwareOutsourcing.µ

Chengdu has a world-class infrastructure, and is well connected with the other metropolis such as Beijing

and Shanghai. Chengdu Shuangliu International Airport is the sixth largest airport in mainland China.The city has one of China·s densest highway networks with 10 expressways so far.



Dalian

Not to be outdone is Dalian Software Park in Northeast China, a major outsourcing zonewhere nearly 400 companies employ 25,000 people over three square kilometers.

The harbor city is known for its temperate climate and has numerous Japanese companies

due to its close proximity to Japan and Korea. It has also emerged as an outsourcing base for multinationals suchas GE Capital and SAP.

Dalian Software Park prides itself on offering a ´build, operate, transferµ operation forsmaller businesses whereby the park puts up the investment money, hires the staff and buildsup the facility and equipment. Then as the smaller company gains sufficient scale, it begins topay back the park, typically over a period of one or two years.



Cebu city As the country·s main port, it is home base to 80 percent of the domestic shipping

companies. It is the nucleus for commerce, trade and industry since pre-colonialtimes.

It has 15 registered, special economic zones and centers. Within these areas, major IT players such as Canon, Cisco, Epson, Hewlett-

Packard, IBM, Lexmark and Microsoft have established operative facilities.

At present, there are 100 outsourcing businesses in Cebu which provide a widevariety of services, including clerical and administrative

functions, publishing, medical transcription, website design, softwaredevelopment, customer service and much more.

Cebu is also positioned to penetrate the emerging market for knowledge- processoutsourcing with a growing population of professionals with graduate degrees infinance, corporate law, natural sciences and human studies.



Q uezon City Quezon City is the most populous city in the country with 2.3 million people; a third of its

residents under 15 years.

With the help of 65 colleges and universities, the city produces an enormous number of educated work force every year.

The city·s government is taking several innovative steps including the introduction of a 320-hour competency course for call-center agents for poor on Sept. 15th, 2008. Besides freemeal, transportation allowance will also be provided.

The city has lured close to 57,000 business establishments, with BPOs finding the city a cost-effective location. At present the city has over 60 BPOs and about 35 call centers. A BPO agentin the city earns more than $250 per month.

Even though the monthly rental charges in Quezon City is $2 to $4 per square feet, registeringproperty for any business purposes can take about 39 days in order to complete the propertyregistration procedures.

Quezon City has good infrastructure, and is well networked with the major highways, thoroughfares and mass transit systems of Metro Manila.



Mandaluyong City has a small population of 295,733 people.

The overall literacy rate in the City of Mandaluyong is pegged at 99 %.

There are three major universities ³ Don Bosco Technical College, The Jose Rizal

University, The Rizal Technological University ³ and 47 colleges in the city. Over40,000 students graduate every year from these educational institutions. Most of thecolleges offer short-term courses on computer and technical education.

BPO players such as eTelecare are also expanding in the city. Last year, eTelecarecompleted a facility in Mandaluyong City³ accommodating up to 3,000 employees.

In 2007, new businesses in the city grew 21 percent from the year before. Interestingly, it takes only 21 days to register a property in the City of Mandaluyong.

The per month rental charges in the city is between $2 and $4 per sq.ft.



Metro Laguna

Over 7,000 graduates a year within the Metro Laguna towns and cities

PEZA-accredited sites available on lease

The area also has good quality roads as well as excellent power and telecommunicationsinfrastructure.



Iloilo City

Iloilo City has the lowest average wage, rental, and power rates

City produces over 17,000 graduates a year but has smaller talent pools

IT-BPO facilities has not kept up with demand. Power supply is a concern



Other cities in philippines

Davao city

Bacolod city

Metro Pampanga

Bulacan east/west

Cagayan de oro city

Lipa City



Conclusion



Bibliography

www.tholons.com

50 global emerging cities 2009

Next wave cities 2010

www.google.com

outsourcing is shifting to smaller cities in india

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