tier 2 cities location analysis

Location Analysis: Emerging cities of India January 2012

Zinnov LLC CONFIDENTIAL

January 2012

This report is solely for the use of Zinnov and Zinnov Clients. No part of it may be circulated, quoted, or reproduced for distribution without prior written permission

Zinnov LLC

The location study covers 12 locations in India for assessment based on an exhaustive list of suitability and cost parameters

2

Tier – 1 Tier - 2

1. Bangalore 1. Chandigarh 2. NCR 2. Coimbatore 3. Chennai 3. Ahmedabad 4. Hyderabad 4. Vadodara 5. Pune 5. Jaipur 6. Nagpur 7. Trivandrum

- Infrastructure

- Human Resource

- Support Ecosystem

- Quality of Life

- Business Continuity Risk

- Cost

- The study tries to analyze major locations in India on a comprehensive list of parameters

- The objective of the study is to help MNCs identify the optimal locations in India to setup their R&D centers

Loca

tio

ns

Agenda

3

TRENDS

RANKINGS

CITY PROFILING

Agenda

4

TRENDS

RANKINGS

CITY PROFILING

Prior to 2005, majority of MNC R&D centers were concentrated in tier-1 Indian cities

5

NCR

Bangalore Chennai

Pune Hyderabad

Jaipur

Coimbatore Trivandrum

Ahmedabad

Nagpur

Chandigarh

Vadodara

Till about mid 2000s, MNCs were looking at tier-1 cities in India primarily due to high talent availability, investment friendly policies and high quality of life

Tier-1 cities constituted almost

100% of R&D talent pool in India.

Gradually, growth of tier-1 locations exposed issues like poor urban infrastructure, rapidly increasing operating costs, higher cost of living, high attrition, etc.

1990 2004

Source: Zinnov Analysis Note: Map not to the scale

Post 2005, MNCc started looking at tier-2 Indian cities as future R&D hubs

6

NCR

Bangalore Chennai

Pune Hyderabad

Jaipur

Coimbatore Trivandrum

Ahmedabad

Nagpur

Chandigarh

Vadodara

MNCs started expanding to tier-2 cities due to advantages like higher catchment area, lower attrition, cost arbitrage, etc.

Tier-2 cities, which were initially

looked upon for IT/BPO services, now are serious contenders for setting up R&D centers due to the distinctive advantages they provide.

Companies also started looking at tier-2 locations for creating a hub-&-spoke model especially in automotive sector.

But tier-2 are still in nascent stage in terms of establishment as IT hubs and constitute around 2% of MNC R&D talent pool in India.

2005 2012 ……………

Source: Zinnov Analysis Note: Map not to the scale

More than 50% of the MNC R&D talent pool is concentrated in Bangalore Region; tier-2 cities are effective sources of fresh talent pool

7

Bangalore Region

Chennai Region

Mumbai Region

NCR

Other Locations

Hyderabad Region

19.2

31.1 23.0

16.5%

9.8%

6.5%

12.5%

2.0%

M Mean Value :Headcount per MNC R&D Center

102.5

52.7%

Total MNC R&D Talent in India in 2011 ~ 204,196

3.7

24.0

Source: Zinnov Analysis

MNC R&D Talent pool in India is growing at the rate of nearly 9 percent every year and is expected to reach ~250,000 by 2015.

Fresh Talent Pool distribution by location Bangalore

NCR

Chennai

Hyderabad

Pune

Coimbatore

Jaipur

Nagpur

Trivandrum

Others*

13%

12%

17%

13%

9%

8%

7%

6% 4%

10%

35%

Academia Ecosystem

Expansion to tier-2 cities

Talent Pool Manufacturing

Ecosystem Proactive state IT

organizations Start-up

Ecosystem Vertical Focus

Cost

Bangalore still dominates overall and software MNC R&D ecosystem in India; other locations like Pune and Hyderabad are catching up

8

MNC R&D centers distribution in India by locations

NCR Chennai Others Pune

Mumbai Hyderabad Bangalore


Software MNC R&D centers distribution in India by locations



13%

43%

6%

13%

4%

11% 11%

40%

11%

12%

6%

15%

4%

11%

Discussion

96% of MNC R&D centers in India are still concentrated in tier-1 cities, tier-2 cities constitute just around 4%

Pune, backed by strong service provider and academia ecosystem, has emerged as a preferred choice of MNCs in software vertical

Academia Ecosystem






Cost

While Bangalore is the clear leader in semiconductor vertical, automotive vertical is much more scattered

9

Semiconductor MNC R&D centers distribution in India by locations




Automotive MNC R&D centers distribution in India by locations



54%

13%

11%

9% 3%

10%

24%

24%

22%

11%

9%

9%

1%

1%

Discussion

All 4 tier-1 cities (Hyderabad, Chennai, Pune and NCR) are gaining good traction among MNCs in Semiconductor vertical

Chennai and Pune are the two largest automotive hub of India, accounting for just less than half of automotive MNC R&D centers

Academia Ecosystem






Cost

MNCs are looking to expand to tier-2 locations to setup their secondary centers due to the unique advantages provided by tier-2 locations

10

Key Drivers


Company Tier 2 location FTE

Bosch Coimbatore ~800

Quark Chandigarh ~300

Allscripts Baroda ~250

Cignex Ahmedabad ~150

Radiance Ahmedabad <50

Examples of MNCs in tier-2 cities

Academia Ecosystem






Cost


11 Source: Zinnov Analysis

Academia Ecosystem






Cost

Saturated Talent Market

(Narrowed talent net, Attrition,

Relocation etc.)

Business Continuity Risk (People, Geo political, Cost

escalation etc.)

Infrastructure saturation

Contribution to more than 5% of the talent in

the city

Cost Benefits of Tier 2 Cities

Pressure to grow an

acquired site

Most companies beyond 2,500+ headcount in one city. Companies in some domains become the hunting ground for large companies

Most companies with more than 1000

headcount in one city/one building


12 Source: Zinnov Analysis

Academia Ecosystem






Cost

One Two Three Four

575

93

22 6

No. of companies

No of Locations

Number of companies with multiple locations

• 84% of the US based MNCs have only one location for R&D center in India

• Close to 13% of US based MNCs have R&D centers at two locations in India

• Around 14% of Europe based MNCs have R&D centers at two locations in India

Discussion

• Amazon • Dell • Nvidia • FreeScale • AT&T • BMW • Nokia • Mentor Graph • Invensys

Companies with 3 locations

• AMD • Adobe • Broadcom • Atrenta • Avaya • Applied Materials • D-Link • Halliburtun.

Companies with 2 locations

Of the ~2100 product companies started in India in last 2 decades, 55% are based in Bangalore and NCR regions, but off late tier-2 cities have started gaining traction

13

Bangalore Chennai

Hyderabad

Pune

Kolkata

486

326

142

625

238

51

244

NCR

Mumbai

Pune

Bangalore

Hyderabad

Product start-ups split across regions

Region Cities

Bangalore Bangalore, Mysore, Belgaum, Gulbarga, Hubli

Hyderabad Hyderabad, Secundrabad, Vishakhapatnam, Vijayawada

Pune Pune

Chennai Chennai, Calicut, Trivandrum, Madurai, Coimbatore, Cochin, Vellore

Mumbai Mumbai, Goa, Ahmedabad, Vadodara, etc.

NCR Delhi, Gurgaon, Noida, Chandigarh, Mohali

Kolkata Kolkata, Patna, Bhubaneswar

Though the number of start-ups originating from tier-2 cities is minimal, many start-ups originating out of tier-1 cities are expanding to the nearest tier-2 cities to lower the cost of operations. In the last 5 years, tier-2 cities have witnessed more than 40 such start-ups.

Note: The cities marked in bold are emerging Tier-II cities for product startups Source: Zinnov Analysis

Kolkata

Academia Ecosystem






Cost

With new IITs and NITs coming up in tier-2 and tier-3 cities, these locations are poised for a major growth in academia infrastructure

14

8 of the 9 new IITs have been set up in tier-2 or tier-3 cities and 9 new NITs are coming up in tier-3 cities, giving a major boost to education infrastructure in these locations.

‘Indian Institute of Software Engineering’ is coming up in Pune in association with Carnegie Mellon University, USA.

NCR and Pune are the best locations in the country in terms of technology university ecosystem. Pune is known as the “Oxford of the East” due to presence of historically strong university ecosystem.

3 out of every 10 colleges^ in India are present in tier-2 cities, with Coimbatore and Jaipur being the leaders

Source: Zinnov Analysis Note: * Others include Ahmedabad, Chandigarh and Vadodara, ^ Analysis is only for the 12 cities taken into consideration

0

5

10

15

20

25

EstablishedIITs

UpcomingIITs

EstablishedNITs

UpcomingNITs

Tier-2/Tier-3Locations

Tier-1Locations

Engineering Colleges distribution by location Bangalore

NCR

Chennai

Hyderabad

Pune

Coimbatore

Jaipur

Nagpur

Trivandrum

Others*

19%

15% 15%

13%

8%

8%

7% 6%

4% 3%

Academia Ecosystem






Cost

Fast growing manufacturing hubs like Ahmedabad have good potential to attract MNCs in to set up their R&D centers in the long run

15

Pune(Western Ghats)

Chennai

NCR Ahmedabad

Pantnagar

Emerging Automotive Manufacturing Hubs

Established Automotive Manufacturing Hubs

Kolkata

Some of the big automotive companies which have their manufacturing plant in Ahmedabad are Tata Motors, General Motors, Ford Motors and Peugeot.

Chennai, often referred to as the "Detroit of India“, is still the largest auto hub in India, accounting for 60% of the country's automotive exports.

Ahmedabad Advantages

Speedy execution and transparency in

dealing

Strategically located in central India

Availability of greenfield land and

well developed ports

Investor friendly policies and ease of

doing business


Academia Ecosystem






Cost

Many state IT associations in the country are making proactive efforts to establish their states as major IT hubs

16

IT & ITES Industry association of AP

Gujarat Electronics & Software Industries

Association

Software Exporters’ Association of Pune

ITSAP representing the software industry in Andhra Pradesh; started in 1991 with 15 people and has more than 300 registered members till 2011.

ITSAP has played a vital role in recommending and lobbying for incentives policy and branding AP as an IT destination.


GESIA was started in 1995 to promote Electronics Industry in Gujarat; now it has 280+ registered members.

GESIA played a key role in development of Gujarat as a major IT hub by recommending incentives and branding initiatives (Vibrant Gujarat is the most successful branding campaign in India).

SEAP was started in 1998 and now has more than 100 registered members which includes all the major IT/ITES companies operating out of Pune.

SEAP acts as an umbrella under which various technical and marketing issues can be discussed and learning opportunity provided within the member companies through SIGs.

Academia Ecosystem






Cost

Tier-2 cities provide a huge cost advantage over tier-1 cities but costs in these cities have shown an exponential surge in last couple of years

17

66

58 55 53 50 48

47

40 39 38 38 34

Commercial Real Estate prices in tier-2 cities are Tier-2 are 15-20% lower than the tier-1 cities on an average. Rentals in Chandigarh and Trivandrum are on the higher side, partially due to presence of just one technology park these cities

In the last couple of years, tier-2 cities have witnessed a major surge in Commercial Estate costs and Cost of Living due to infrastructure development and increased traction. Commercial Real Estate Prices have risen sharply in Nagpur after the offset of Multi-modal International Cargo Hub and Airport (MIHAN), which is the biggest economical development project in India in terms of investments.

Average Commercial Real Estate Rentals/sq.ft

37.9 36.6 35.1 34.2 33.7 33.1

32.6 32.4 32.1 29.8

Cost of Living Index

Source: www.magicbricks.com, www.numbeo.com, Zinnov Analysis

Academia Ecosystem






Cost

http://www.magicbricks.com/

http://www.numbeo.com/

Agenda

18

TRENDS

RANKINGS

CITY PROFILING

R&D Suitability Index across different locations

19

0

0.5

1

1.5

2

2.5

3

3.5

4

0.5 0.6 0.7 0.8 0.9 1

Su

itab

ilit

y*

Differential Cost*

There is a sizable gap between tier-1 and tier-2 locations in terms of both Suitability and Cost. Bangalore continues to top the suitability index followed by Hyderabad and Pune; NCR tops in Cost parameter

Tier-2 cities are more clustered compared to tier-1 cities in suitability ratings but are quite scattered in cost ratings, with Chandigarh being the costliest

Bangalore

NCR

Pune

Hyderabad

Chennai

Chandigarh

Trivandrum

Ahmedabad

Jaipur

Nagpur

Coimbatore

Vadodara

Source: Zinnov Analysis *Note: Suitability is the weighted average of ratings on various sub-parameters; Differential Cost includes rentals cost and people cost

Vertical wise city ranking

20

1 BANGALORE

2 PUNE

3 HYDERABAD

4 NCR

5 CHENNAI

6 TRIVANDRUM

Source: Zinnov Analysis Note: Embedded R&D includes R&D in Telecom, Semiconductors, Storage, Networking and Computer Hardware; Core Engineering R&D includes R&D in Automotive, Energy, Industrial and Aerospace

1 BANGALORE

2 NCR

3 HYDERABAD

4 PUNE

5 CHENNAI

1 PUNE

2 BANGALORE

3 CHENNAI

4 NCR

5 HYDERABAD

Software Product Development

Embedded R&D* Core Engineering

R&D*

Bangalore continues to be the leading R&D hub of India but Pune is the leader in Core Engineering vertical due to strong manufacturing ecosystem and presence of indigenous companies & MNCs

Cities like Coimbatore and Ahmedabad are coming up in core engineering vertical

6 COIMBATORE, AHMEDABAD

BANGALORE 1

CHENNAI 2

NCR 3

HYDERABAD 4

PUNE 5

JAIPUR 6

TRIVANDRUM 7

AHMADABAD 8

COIMBATORE 9

NAGPUR 10

VADODARA 11

CHANDIGARH 12

City wise Infrastructure Ranking

Excellent IT infrastructure but Poor Transportation infrastructure

Source: Zinnov Analysis Note: Rankings based on weighted average of sub-paramerts ratings

21

Good rating on all parameters

Excellent IT infrastructure but Poor Civic infrastructure

Good Transportation infrastructure but Poor Civic infrastructure

Good IT infrastructure but poor international connectivity

Good Hotel infrastructure but Poor IT infrastructure

Average Transportation infrastructure but Poor international connectivity

Excellent Civic infrastructure but Poor international connectivity

Average Physical and Civic infrastructure but no international airport

Average transportation infrastructure but Poor Hotel infrastructure

Good Physical infrastructure but no international airport

Average transportation infrastructure but no international airport

Infrastructure - Sub Parameters Rating

22

Cities Transportation within

city IT Infrastructure Hotel Infrastructure

Physical and civic infrastructure

International Connectivity

Tier-1

Bangalore

Chennai

NCR

Hyderabad

Pune

Tier-2

Ahmedabad

Chandigarh

Coimbatore

Jaipur

Nagpur

Vadodara

Trivandrum

- Poor - Fair – Good – Very Good - Excellent


Tier-2 cities have shown major improvement in Infrastructure and are poised for a major revamp in coming years

23

Overall tier-1 and tier-2 cities have comparable Physical and Civic infrastructure ; tier-2 cities have advantages of lower population and size, which is easy to govern.

Ahmedabad was ranked best city in India in terms of civic infrastructure by survey done by Times of India-IMRB

All tier-2 cities suffer from poor to zero international connectivity especially to USA and Europe countries.

International connectivity of Pune is expected to improve with the new airport

New international airports are coming up in Chandigarh (2012) and Coimbatore (2013)

Ahmedabad BRTS is the most successful BRTS project in India; it also won the most Sustainable Transport Award in the world (2010)

Vadodara City Bus Service implemented through PPP model has been one of the most successful projects among peers.

Metro Rail projects are undertaken in many tier-2 cities like Jaipur, Nagpur, Chandigarh


NCR has the best Hotel infrastructure among Indian cities; tier-2 cities lack considerably in presence of quality hotels

15 new hotels consisting of 3,502 rooms are expected to become operational in Pune by 2013

City wise Human Resource Ranking

24

BANGALORE 1

Excellent talent pool and in-country movement of talent PUNE 2

Excellent in-country movement of talent and good installed talent pool

NCR 4

Excellent fresh talent pool but average installed talent pool.

HYDERABAD 3

Excellent fresh talent pool and in-country movement of talent

COIMBATORE 6

Good Fresh Talent pool but poor In country movement of Talent JAIPUR 7

Good Fresh Talent pool but expatriate movement of talent

AHMEDABAD 9

Good in-country movement of talent, but poor talent pool

CHENNAI 5

Excellent fresh talent pool and good expatriate movement

NAGPUR 8

Average in-country movement of talent, but poor talent pool

TRIVANDRUM Good Fresh Talent pool but poor In country movement of Talent CHANDIGARH

Average talent pool and poor expatriate movement VADODARA

Average in-country movement of talent, but poor talent pool

10

11

12


Human Resource Availability - Sub Parameters Rating

25

Cities Installed Talent Pool Fresh Talent Pool In country movement Expatriate movement

Tier-1

Bangalore

Chennai

NCR

Hyderabad

Pune

Tier-2

Ahmedabad

Chandigarh

Coimbatore

Jaipur

Nagpur

Vadodara

Trivandrum



City wise Quality of Life Ranking

26

1 BANGALORE Excellent climate and a number of languages spoken

2 PUNE Excellent climate and medical facilities

3 HYDERABAD Low pollution levels but less number of weekend outing locations

4 NCR Excellent medical facilities but high pollution levels

5 COIMBATORE Excellent climate but low cultural diversity

6 TRIVANDRUM Excellent climate but low cultural diversity 7 CHANDIGARH

Large number of weekend outing locations but poor medical facilities

8 JAIPUR Large number of weekend outing

locations but poor climate

9 CHENNAI Large number of languages spoken

but low cultural diversity

10 AHMEDABAD Good medical facilities but poor

climate

11 VADODARA Excellent cultural diversity but poor

medical facilities

12 NAGPUR Very low pollution levels but less number of

weekend outing locations


Quality of Life - Sub Parameters Rating

27

Cities Climate Languages Spoken Pollution levels Weekend outing

options Medical facilities Cultural diversity

Tier-1

Bangalore

Chennai

NCR

Hyderabad

Pune

Tier-2

Ahmedabad

Chandigarh

Coimbatore

Jaipur

Nagpur

Vadodara

Trivandrum



Tier-2 cities provide advantages like good hospital infrastructure, low pollution levels and weekend outing options which can be a major plus for them

28

- Jaipur, Nagpur, Vadodara and Ahmedabad have drawback of very extreme climatic conditions compared to other locations

- NCR is the most polluted location and Chennai is the least polluted location among all cities - On an average, tier-2 cities pollution levels are 20% lower than tier-1 cities

Pollution Levels

Climatic Conditions

- Nagpur and Chennai figure low in weekend outing options compared to other cities - Cities like Pune, Bangalore, Chandigarh provide many options for weekend outings due to their geographic advantage - Lonavala, a hill station on Pune-Mumbai expressway, is fast emerging as a preferred choice for second homes for many people working in Pune or Mumbai

Weekend outing options Medical Facilities

- Coimbatore is a major center for medical tourism; there are nearly 750 hospitals in and around Coimbatore with a capacity of 5000 beds - 12 new multi-specialty hospitals are expected to come up in Hyderabad in the next 5 years

Cultural Diversity

- Cities like Chennai, Ahmedabad are not perceived to be open to other cultures and religions which can prove to be a major roadblock in attracting talent

1

2

3

4

5

5

Quality of

Life


City wise Support Ecosystem Ranking

29

Excellent MNC R&D and Start-Up ecosystem

Overall good Innovation ecosystem Excellent academia ecosystem but poor Start-Up ecosystem

Excellent Research and start-up ecosystem

Good academia ecosystem but overall poor innovation ecosystem

Good academia ecosystem but overall poor innovation ecosystem

Overall poor Innovation Ecosystem

Excellent academia eco-system but poor Start-Up eco-system

Good academia eco-system but poor Start-up

ecosystem




Overall poor Innovation ecosystem

Support Ecosystem - Sub Parameters Rating

30

Cities Academia Ecosystem Research Labs MNC R&D Ecosystem Start-up Ecosystem

Tier-1

Bangalore

Chennai

NCR

Hyderabad

Pune

Tier-2

Ahmedabad

Chandigarh

Coimbatore

Jaipur

Nagpur

Vadodara

Trivandrum



City wise Business Continuity Risk Ranking

31

12 BANGALORE

8 VADODARA

10 AHMADABAD

6 JAIPUR

4 NAGPUR

2 COIMBATORE

11 HYDERABAD

7 NCR

9 PUNE

5 TRIVANDRUM

3 CHANDIGARH

1 CHENNAI


Overall below average business continuity risk.

Politically stable but has experienced terrorist/communal attacks.

Less political risks but risk of terrorist/ communal attacks.

Low crime rate but has experienced natural calamities.

Low crime rate and less prone to natural calamity.

Low crime rate but above average political risks.

High crime rate but less prone to natural calamities.

Politically stable but high crime rate.

Low political risks but has experienced terror/ communal attacks.

Less prone to natural calamities but high crime rate.

Low political risks and average crime rate.

Low political risks and low crime rate.

Business Continuity Risk - Sub Parameters Rating

32

Cities Crime Rate Natural Calamities Terrorist Attacks/ Communal Riots

Political Risks

Tier-1

Bangalore

Chennai

NCR

Hyderabad

Pune

Tier-2

Ahmedabad

Chandigarh

Coimbatore

Jaipur

Nagpur

Vadodara

Trivandrum



Degree of business continuity risk is distributed across all locations and each location has its own pros and cons

33

Crime

Rate

Natural

Calamities

Terrorist Attacks/

Communal Riots

Political

Risks

According to National Crime Rate Bureau, Jaipur registered maximum number of crimes under IPC in 2010, followed by Bangalore.

Chennai registered minimum number of registered crimes under IPC, just next were Coimbatore and Chandigarh.

Overall all the cities possess very low risk of any natural calamities. Only exceptions are Chennai and Trivandrum, which have history of

natural disasters like Tsunami

Tier-2 cities are less prone to terrorist attacks compared to tier-1 cities Ahmedabad and Vadodara and the 2 cities which have the history of

communal riots.

Overall all the cities possess very low political risks and have stable political structure in place

Hyderabad has some political risks pertaining to creation of new state Telangana.

Source: National Crime Rates Bureau reports, Zinnov Analysis

Agenda

34

TRENDS

RANKINGS

CITY PROFILING

Bangalore – Silicon Valley of India

35

Key Drivers

Bangalore has a well developed eco-system of skilled resources and managerial talent; it employs 35% of India’s talent pool

Thriving start-up ecosystem with more than 60% of the product start-ups in India originating out of Bangalore

Infrastructure in terms of steady supply of real estate, in the form of SEZs is improving. New power generation and Metro Rail projects have been major boost to city infrastructure

Pros and Cons

PROS Good Academia and IT Infrastructure, Large

Human Resource, Favorable Climate, CONS High Operations Cost, High Attrition

Illustrative list of companies present

Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively

TALENT COST ECOSYSTEM

Fresh Talent Pool 40,000

STPI Exports (Rs)

MNC R&D Talent Pool

1,08,220

Quick Facts

Software Exports growth

23% (2009-10)

58,850 Crores (2010)

Hyderabad - The Cyberabad of India

36

Key Drivers

Compared to other metros, the cost of living and lease rentals are lower in Hyderabad by around 10-20%.

Andhra Pradesh is one of the largest supplier engineering students in the country, majority of them being from Hyderabad and adjoining areas

Strategically located – equidistant from Bangalore, Pune and Chennai

Pros and Cons

PROS Good Academia and IT Infrastructure, Ease of

doing business, Good physical infrastructure CONS Relatively higher business continuity risk, poor

city perception





STPI Exports (Rs)

MNC R&D Talent Pool

25,520

Quick Facts


24.5% (2009-10)

27,000 Crores (2010)

Chennai – Detroit of South India

37

Key Drivers

Chennai has a large human resource pool at all levels. The presence of an industrial base (automotive and engineering sectors) has lead to strong skill sets in these sectors.

Infrastructure availability is quite good especially reliable power, supply of office space, national and international connectivity.

Cost of living and real estate costs are 10-12% lower than Bangalore, the nearest IT hub which is a big plus

Pros and Cons

PROS Good Academia and IT Infrastructure, Good

physical infrastructure, Lower pollution levels CONS Poor city perception, Low cultural diversity





STPI Exports (Rs)

MNC R&D Talent Pool

13,270

Quick Facts


14% (2009-10)

22,400 Crores (2010)

NCR – 2nd largest metropolitan city of India

38


STPI Exports (Rs) 21,700 Crores (2010)

Key Drivers

Delhi has well developed infrastructure including steady supply of office space and 52 SEZs (spanning 900 hectares) in the NCR region. National and international connectivity from Delhi is also among the best in India

Very strong academia infrastructure due to the presence of more than 100 engineering colleges and research institutes

Places like Noida, Faridabad provide significant cost advantages compared to other metros

Pros and Cons

PROS Excellent IT and transportation infrastructure,

Excellent international connectivity. CONS Relatively average start-up ecosystem, High

pollution levels, history of terrorist attacks

MNC R&D Talent Pool

20,000

Quick Facts



Almost 0%



Pune – Oxford of East

39

Key Drivers

Proximity to “the financial capital of India” has helped Pune to emerge as center of IT services and support arm of some of the major global banks

Pune boasts of very strong manufacturing ecosystem

Pune is home to some of the oldest education institutes and prominent research institutes in India

Thriving Physical infrastructure with projects like new airport, metro rail and 18 new SEZs

Pros and Cons

PROS Good Academia and IT Infrastructure, Favorable

climatic conditions, Strong service provider ecosystem

CONS Poor international connectivity





STPI Exports (Rs)

MNC R&D Talent Pool

24,000

Quick Facts


40% expected (2011-12)

29,000 Crores, (2010)

Coimbatore – Manchester of South India

40


STPI Exports (Rs) 570 Crores (2010)

Key Drivers

More than 40,000 SMBs primarily in textiles, automobiles and other engineering component industries

Commercial Real Estate costs are around 20-55% lower than tier-1 cities

Coimbatore being one of the educational hubs of South India ,has abundance of graduate talent available

Strategically located –equidistant from both Bangalore and Chennai

Pros and Cons

PROS Good Academia Infrastructure, Favorable

Climate, Low Business Continuity Risk CONS Absence of international airport, Average

transport infrastructure

Quick Facts



90% (2009-10)



Nagpur – The Orange city

41

Fresh Talent Pool


Key Drivers

Rapidly growing infrastructure due to the Multi-modal International Cargo Hub & Airport

Educational hub of central India with more than 40 engineering and medical colleges and good availability of fresh talent

Major engineering hub with presence of companies like Mahindra & Mahindra, NECO Ltd, Bajaj Auto, etc.

Commercial real estate costs are around 40% lower than the tier 1 cities on an average

Pros and Cons

PROS Very Low pollution levels, Favorable state

government laws, strategically located in central India

CONS Extreme Climate, Average medical facilities ,

poor international connectivity

Quick Facts



10% (CAGR in last 3 years)

20,000



Chandigarh – The Pensioner's Paradise

42



Key Drivers

Chandigarh ranks 1st in India in terms of Human Development Index and quality of life, thereby .attracting a large number of professionals from other locations

The city has a 10-50% cost advantage in comparison to tier 1 cities in terms of Commercial Real Estate Costs

Availability of Good fresh talent pool and strong university ecosystem due to universities like Panjab University is a big advantage

Pros and Cons

PROS High quality of life, Moderate climatic

conditions, low crime rates CONS Relatively small fresh talent pool, poor

international connectivity, average power infrastructure

Quick Facts



20% (2009-10)



Trivandrum - The highest literacy rate

43

Fresh Talent Pool


Key Drivers

Abundant available business space (around 20 million sq. ft. ) with natural beauty of the city is ideal for MNCs to set up their delivery centers

Strong Research Ecosystem due to presence of research institutes and academic institutes like CDAC, Indian Institute of Science, Education and Research, Indian Institute of Information Technology and Management, etc.

Onset of huge companies like Oracle for development of next gen products is a big plus

Pros and Cons

PROS Highest literacy rate in the country, Excellent

climatic conditions CONS Poor international connectivity with EU and

USA, relatively small fresh talent pool

Quick Facts



5% (2009-10)

12,000



Ahmedabad – Detroit of East

44

Fresh Talent Pool


Key Drivers

Ahmedabad is one of the fastest growing cities in India in terms of infrastructure and attracting investments

Commercial Real Estate cost is 20-40% less than that of tier-1 cities

Huge and fast growing auto manufacturing base with onset of companies like Tata, Ford and Peugeot

Pros and Cons

PROS Investor friendly policies, Very good

infrastructure, High quality of life CONS Extreme Climate, Relatively small fresh talent

pool, history of communal riots and floods

Quick Facts



72% (2009-10)

10,000



Jaipur – The Pink city

45

Fresh Talent Pool


Key Drivers

Flourishing infrastructure with the construction of Mahindra World City(India's largest integrated IT SEZ) and World Trade Park

Good service provider ecosystem due to presence of all major Indian service providers

Cost advantage of 20-40% in Commercial Real Estate costs compared to tier-1 locations

Due to the city’s proximity to NCR, Jaipur can be grown as supporting location to create a hub-&-spoke model

Pros and Cons

PROS Excellent hotel infrastructure, Many weekend

outing options, Low Crime Rate CONS Poor power infrastructure, Extreme weather,

Relatively high pollution levels

Quick Facts



50% (2009-10)

22,000



Vadodara – The Knowledge City

46

Fresh Talent Pool


Key Drivers

Vadodara offers a cost advantage of over 25% with respect to compensation levels and around 20-40% with respect to cost of living in tier-1 cities

Presence of companies like ABB, L&T, Alstom, Siemens and Bombardier have given a major boost to Vadodara’s industrial ecosystem

Thriving civic infrastructure (Vadodara City Bus Service implemented through PPP model has been one of the most successful projects among peers)

Pros and Cons

PROS Good Industrial Ecosystem, Investor friendly

policies, growing civic infrastructure CONS No international airport, High pollution, Has

witnessed floods, earthquakes and communal violence.

Quick Facts



70% (2009-10)

8,000



Glossary

47

Term Definition

R&D Includes product software development, product testing and futuristic research Doesn’t include IT services, IT Enabled services, BPO/IT Support, etc.

Tier-1 cities Cities which have established themselves as R&D destinations and contribute significantly towards R&D ecosystem in India

Tier-2 cities Cities whose contribution towards Indian R&D ecosystem is very small and are emerging as future R&D hubs

Suitability Measures how suitable is the location for setting up a MNC R&D center. It is calculated using a weighted average of ratings of various sub-parameters like support ecosystem, human resource, etc.

Differential Cost Measures the differential cost of locations relative to most expensive location (NCR in this case). Cost is approximated using a weighted average of Rentals cost and People cost

Software Product Development

Includes R&D in verticals such as Software products/Internet

Embedded R&D Includes R&D done in Telecom, Semiconductors, Storage, Networking and Computer Hardware verticals

Core Engineering R&D

Includes R&D done in Core Engineering R&D includes R&D in Automotive, Energy, Industrial and Aerospace verticals

Fresh Talent Pool Approximated based on number of engineering colleges in the location

Zinnov LLC

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48 Zinnov LLC ( Confidential)

mailto:[email protected]

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tier 2 cities location analysis

Documents

bangalore region tier

growth of tier

total mnc rd talent

emerging cities of india

rd centers locations

indian cities

locations hyderabad

fresh talent pool distribution