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Tier-2 & 3 cities need to be identified and backed by a successful PPP model to foster growth in the outsourcing industry, says Binu A. Pazhoor, Chief Executive Officer, Cyberpark, Kerala.

Information Technology, more than an industry, is rather seen now as an enabler to the growth of the global economy. Over the last 20-30 years, as the overall quality of our life enhanced, we have witnessed information technology touching our lives in almost everything we do. We have witnessed the very important role that information technology now plays, in the field of healthcare, financial services, manufacturing, biotechnology, agriculture etc. This triggered the growth of investment in the field of information technology which further drove the demand for resources skilled in those areas. It was the result of this that we have witnessed the huge flows of skilled resources from India in the mid-80s migrating to US and other developed countries. The main focus of the industry at that time was to fulfil the demand. The shortage of skilled resources, the effort of maximising the profit and ROI drove the outsourcing industry to its peak during that time.

India and outsourcing
India has got the attention of the investors from around the world for high literacy rate, higher quality of education, and availability of large pool of skilled, English speaking resources. The Tier-1 cities like Bangalore, Hyderabad and Chennai played a major role in providing outsourcing services to the global market during the earlier days. Some of the advantages that the Tier-1 cities had were:

• Proper infrastructure to support the global business like roads, airports, ports etc.
  
• Large pool of skilled and English speaking resources.
  
• Social infrastructure like educational institutions, movie theatres, restaurants, pubs etc.
  
• Higher quality of living. Coupled with these advantages and the demand for outsourcing, the cities were able to attract a lot of information technology related start-ups and investments in a very short span. The initial trend of outsourcing of the more mechanical backend programming jobs gradually changed to outsourcing more client facing and jobs that requires more skill sets to these region. As with any growth, the cities have started facing some challenges:
  
• The increased cash at disposal with the professionals drove the cost of living high
  
• This in turn drove the cost of operations high
  
• This started driving the cost advantage of outsourcing down.
  

Alternate options
With the global recession and the increased push for driving cost down, the investors have been forced to look for alternate options where they can still deliver the same services at a lower cost.

Recognising the opportunities such as availability of skilled resources, lower cost of living, lower cost of operations, and acknowledging the challenges such as lacking the essential social and economic infrastructure, the Tier-2 & Tier-3 cities stood out as the most viable solution for the way forward to the outsourcing industry. Investors started looking at the option of spreading their operations by limiting the most critical operations in Tier-1 cities, and moving the backend operations and data centres to Tier-2 & Tier-3 cities. This has proven to be a very effective solution to meet the client expectations by keeping the overall cost of operations down.

The IT investment in Tier-2 & Tier-3 cities were constrained by a number of factors such as:

• Lacking infrastructure facilities likes road, air and rail connectivity.
  
• Lacking social infrastructure facilities like good schools, hospitals, shopping places, restaurants, pubs etc.
  

Data connectivity, uninterrupted power and water supply, waste management etc. It has proven to be very challenging for a private investor to set up all the infrastructure facilities essential for an IT industry, before he could set up his operations in a Tier- 2/Tier-3 city.

With the large pool of skilled resources and urban development promoted by local business entities like spices, textiles and sea foods, and the high literacy rate, Kerala had an even mix of Tier-2 & Tier-3 cities ready to serve the needs of the IT industry. Government of Kerala has recognised the crucial role it has to play to promote the Tier-2 & Tier-3 cities to serve the global IT market, thus maintaining the No.1 rank of India in the outsourcing of IT and other knowledge-based industry.

With this vision the government has introduced the following models to promote the IT industry:

• Hub-and-Spoke model IT parks: With the hub situated in a Tier-2/semi-urban city, the spokes were developed in Tier- 3/rural villages across the state. The government has initiated major IT infrastructure projects by acquiring land with state and central government funding for setting up IT parks and townships, developing roads, bridges, airports, setting up electrical substations for uninterrupted power supply, drinking water, waste management etc., which are essential for any IT-related investments.
  

The government IT parks in Trivandrum (Technopark), Kochi (Infopark) and the one being developed in Kozhikode (Cyberpark) are following this model.

The various options like completely built-up space with uninterrupted power supply, water, data connectivity and internal roads, to raw land to set up a separate campus by their own has set the stage for IT investment of any levels to succeed. The unique advantage of Kerala with its green and serene nature coupled with the high literacy rate and the government-backed IT parks has invited a number of companies from all over the world over the last 20 years.

Further, the hub-and-spoke model enabled the state to spread the growth in a very balanced and organic nature, by having the Technopark promote the developments in the southern part of the region, Infopark promoting the central part, while Cyberpark promoting development in the northern part of the state. To learn more about these parks, please visit www.KeralaIT. org

• Technolodges:

This project was designed with a vision of taking IT to rural areas. A study conducted recently revealed that about 55 per cent of staff employed in IT in Kerala hail from rural areas. The concept of Technolodges envisages creating rural infrastructure for IT companies to operate from rural areas. Government buildings and those belonging to local bodies lying unutilised were identified and the infrastructure was improved to enable them to locate and operate IT/ITES companies.

• Technocities:

The project was designed with a vision of island like development by setting up a township environment under a PPP model, thus creating a self-sufficient environment for IT/ITES industry. The parks will be set up with residential and commercial projects, schools, hospitals of international standards, restaurants, pubs etc., thus building an environment for nurturing more IT innovation, while not compromising in the quality of living maintaining the work life balance. The 400 acres of land under Technopark and the 100 acres of land under Cyberpark in Kasaragod are being developed in this model.

Conclusion
IT industry is set for further growth in the coming years. With the global recession and the pressure for driving the costs down, the market has been in a correcting phase. In order to continue providing the most innovate IT solutions from the country, it is essential to build a recipe that would enable the investor to compete in the global market, by being able to provide the most cost effective solutions at the highest quality, while still maintaining the quality of living of the citizens and providing a work life balance. The role of Tier-2 & Tier- 3 cities have to be identified and should be backed up by the successful PPP model to foster growth in the coming years.

(Cyberpark is a Government of Kerala organisation planned on the lines of Technopark at Thiruvananthapuram and Infopark in Kochi to build, operate and manage IT parks for the promotion and development of investment in IT and ITES industries in Malabar region of Kerala.)

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