Kerala is developing as an alternative IT hub to its better established neighbours

He is just 28 years old but Sijo Kuruvilla George has already started a company, built it up, made his million and is now helping other kids walk down the same path. Mr. George is CEO of Startup Village in Kochi’s Kinfra Hi-Tech Park, a company that “incubates” college kids with terrific ideas but without the resources to build on them.

Startup Village is a public-private partnership between the Department of Science and Technology and MobMe, a company founded by Mr. George and his college-mate, Sanjay Vijayakumar when they were still studying. Its agenda is to create an ecosystem that will help start-ups develop breakthrough technologies. As Mr. George says: “From ideas to IPO.”

In many ways, Startup Village symbolises the silent transformation that is on right now in Kerala’s industry scene. The State was never known for its manufacturing strength, rather it was more famous for its labour unions and industrial strikes. Given the high literacy levels in the State, finding unskilled labour is difficult. People are also highly aware about the environment and have in the past opposed industries that either pollute or exploit their natural resources. On top of all this, land is scarce in Kerala and acquisition of land for setting up industries is a sensitive issue.

Chief Minister Oommen Chandy admitted as much in an interview to The Hindu (Op-Ed, September 7). “We know that we are far behind in the manufacturing sector and we know the limitations also…. we don’t have much wasteland. So we cannot think of inviting the major polluting industries.”

From services to IT

Therefore, successive governments have preferred to focus on the services sector, predominantly tourism, relatively non-polluting, and which needs little unskilled labour. The natural beauty that the State is endowed with has been exploited very well for tourism.

In the last few years though the focus has shifted several gears to the information technology industry where a quiet revolution is on to build up the State as an attractive alternative to its better established neighbours — Karnataka, Tamil Nadu and Andhra Pradesh.

Kerala works with a simple model for this: set up IT parks across the State and lease out the space to companies either in the form of land — in which case it is a 90-year lease — or built space that is fully furnished renewable every three years. The model is by itself not anything new; the Chinese perfected it in their quest for manufacturing dominance. The difference though is that Kerala is scarce on land and has to tailor its policy accordingly. That it has been prudent until now is evident when you visit the Technopark in Thiruvananthapuram and meet its CEO K.G. Girish Babu. It was the first such park to be set up in the early 1990s and was an idea ahead of its time.

Kerala follows a hub-and-spoke model with three hubs in the capital, Kochi and Kozhikode. Each hub has satellites within a 50-60 kilometre radius where again space will be allocated for IT and BPO companies. Kochi, for instance, has satellite centres in Cherthala and Koratty.

The Technopark itself is the single largest IT park in the country spread over 748 acres of greenery and boasting 7.1 million square feet of built up space. “We have taken care to design our buildings with minimal impact on environment,” says Mr. Babu with justifiable pride and pointing to the green expanse around him. There are a little over 37,000 people working in the park with companies such as TCS, Oracle, Cap Gemini, UST Global and Infosys. But when all four phases are completed in the next three years there will be 2,00,000 people working out of the campus.

The Infopark in Kochi is a carbon copy, though smaller with 3.5 million sq.ft of built-up space. Arun Rajeevan from its marketing department says that 155 companies function out of the park employing 17,000 people. Software exports from Infopark last year totalled Rs.1,100 crore, less than half that of Technopark’s Rs.2,800 crore. A second phase of 160 acres is now under development but direct employment will double to 35,000 people by the time Phase I ends in 2015, he says.

Three advantages

Admittedly, the numbers appear small when compared to Karnataka or Tamil Nadu. For instance, Chennai alone has about 2,50,000 IT employees and Bangalore a few times that number. Yet, there is an unmistakable trend of companies gravitating towards Kerala, says Technopark’s Mr. Babu. And this movement is driven by three main advantages that Kerala enjoys.

First, uninterrupted grid power at prices as low as Rs.4-5 a unit. Mr. Babu points out that Kochi’s Infopark has seven different power sources and it has never had to take recourse to captive generation. In comparison, both Tamil Nadu and Karnataka have long hours of power cuts.

Second, low cost of operations. Infopark, for instance, leases out built space for between Rs.35-45 a square foot depending on whether it is an empty shell or fully furnished. Technopark at Thiruvananthapuram is cheaper at Rs.25 a square foot on average. The cost of living in Thiruvananthapuram or Kochi is relatively lower than in Bangalore or Chennai which is a big plus for staff.

Third, the low attrition rate of just four per cent coupled with the large catchment area for engineers — Kerala has 164 engineering colleges — means that finding and retaining qualified people is not an issue.

Mr. Babu says that the new generation of IT workers don’t carry the baggage of the past; they are children of locals who migrated to other parts of the country or abroad and have thus imbibed the culture of hard work.

The biggest advantage of all though is the simple procedures for companies to start operations. “I’m empowered to grant all sanctions and clearances in Technopark,” he says.

Riding on these pluses, Kerala believes that its time has come in the IT industry. Just as well, because generating employment for its people is one of the biggest challenges that the State is now facing.

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