The IT thrust

A big pool of information technology professionals attracts the best of software companies to set up operations in the city.

IRONICALLY, Chennai's stature as a leading Information Technology hub is based on its traditional strengths. The standard stereotype of an "attractive" software city has been onethat supposedly offers golf courses, bowling alleys and glitzy malls for the software professionals, enabling them to relax after a hard day's work. Not so, say many serious analysts of the software industry. One senior software engineer, who spoke recently to Frontline on the sidelines of Connect 2000, the annual high-end IT event in Chennai, said: "It is not such features alone that attract companies and professionals. Companies will go where the professionals are available. Chennai has them, and so we come here. It is as simple as that."

About 40,000 IT professionals work from Chennai. Tamil Nadu has become a leading destination for software companies. While most of the companies now operate from Chennai, the State government said in a recent IT Policy statement that it will make special efforts to bring software companies to Tier-II towns also. However, Chennai is likely to remain the fulcrum of the software industry in the State.

In 2001-02, software exports from Tamil Nadu accounted for $1.1 billion (about Rs.5,223 crores), increasing by 68 per cent from $677 million (Rs.3,116 crores) in the previous year (see data table). The overwhelming portion of these exports was from Chennai. In fact, the growth happened even as software companies in general went through a very bad patch. The recessionary conditions in India could have hardly been expected to help generate the demand for these services; export revenue from offshore projects amounted to more than Rs.3,300 crores, while revenue from on-site work accounted for Rs.1,717 crores.

Tata Consultancy Services is the leading software exporter from the State. Other leading exporting companies are HCL Technologies, Pentasoft, Infosys, Wipro, Cognizant, Covansys, SSI, Polaris, Orbitech and Satyam. There are smaller companies that operate in niche markets overseas.

Application software, consulting activity and system software account for a high proportion of exports from the State. Nearly 90 per cent of all exports originated from these segments. The new buzzwords are IT-enabled services and Business Process Outsourcing (BPO). Although IT-enabled services account for only 6.5 per cent of all exports from the State, this segment is expected to be a major revenue earner in the years ahead.

Unveiling Tamil Nadu's new IT Policy at the inaugural of Connect 2002 recently, Chief Minister Jayalalithaa announced several concessions for software companies operating in the State. IT companies can "self-certify" their adherence to labour legislation, ridding them of the need to file otherwise statutorily required information before government departments. In order to extend the reach of the IT revolution to smaller cities and towns in the State, Jayalalithaa proposed the creation of a special purpose vehicle (SPV) to promote IT initiatives and investments in the second-tier cities. Power at concessional rates were promised to IT units.

At Connect 2002, the Chief Minister said that the State aimed to become "the choice destination for IT investments'' and the "BPO capital of the world''. Incidentally, this is the State's second IT Policy statement in five years, although some critics have pointed out that the policy constitutes more a statement of intent than a path to specific goals. The government has promised that it will ensure that sufficient bandwidth and power is made available to IT companies at alternative locations throughout Tamil Nadu.

According to the government, the rationale for promoting Chennai and Tamil Nadu as an IT-enabled services destination is the realisation that "India is on the way to becoming the world's back office". It reckons that the operation of the putting out system on a global scale, as a result of the globalisation process, "is forcing organisations everywhere to focus on their core business competencies' and outsource the `non-core business processes'. Drawing on the Nasscom-McKinsey Report 2002, the government has concluded that such services will soon account for about four million jobs and that the IT and IT-enabled services industry will account for over 7 per cent of India's gross domestic product (GDP) and 30 per cent of its foreign exchange inflows. The government, in its draft IT-enabled services policy statement, reckons that the new mantra is: "served from Tamil Nadu".

Chennai's traditional strengths are laying the basis for enhancing its capability as a leading centre for providing IT-enabled services on a global scale. For instance, its stature as a leading financial centre, and the availability of an abundant pool of professional accounting skills in the city, have resulted in major institutions such as the World Bank, ABN-Amro Bank, Standard Chartered and Citibank opting to locate a substantial part of their back office operations in Chennai.

Realising the need to upgrade the language skills of IT professionals, companies are focussing on training them in languages other than English. Several companies are training their employees in German and other European languages. Chennai-based IT companies are focussing on European markets to provide IT-enabled services.

Among the major infrastructure providers for IT companies in the city is the State-owned Electronics Corporation of Tamil Nadu Limited (ELCOT), which was incorporated in 1977. ELCOT has promoted several joint ventures covering a wide range of projects such as electronic equipment and components, infrastructure, consumer electronics, communication and software development. ELCOT has achieved a considerable level of growth and is now the nodal agency for the Tamil Nadu government in implementing its IT policy and programmes.

The presence in the State of more than 240 engineering colleges and the high level of computer literacy among the available workforce are among the main reasons for IT companies choosing Chennai as a preferred destination. The State was among the first in the country to launch a computer education programme in government-run schools. This programme, meant for students from classes 9 to 12, ensures that computer education is provided to them during school hours. It also aims to provide people living in the neighbourhood computer-related skills, training after school hours and on holidays. It is being implemented in 1,200 higher secondary schools. The computer education industry, which remained largely unregulated during the height of the IT boom, is more organised now, after the partial collapse in the sector a couple of years ago.

Infrastructure for the IT industry has been upgraded on a continuous basis in the city. The world's biggest submarine optical fibre cable project the i2i network a joint venture between Bharti Enterprises and Singapore Telecom connecting Chennai and Singapore is to become operational soon. The telecom backbone in the State is being strengthened by the rapid accretion of optical fibre cable lines. TIDEL Park, the icon of the IT industry in the city, which was fully occupied by IT companies within a matter of four months, has encouraged the government to expand the project and go in for TIDEL Park II. Meanwhile, Xansa, a British company, has started work on establishing a software facility in the Siruseri IT Park on the outskirts of the city.