If the initial phase after the State formation in June 2014 was devoted to building on Hyderabad’s image as an emerging hub for the IT industry, attracting more new-age firms to set up shop also to allay fears, the next few years for the Telangana government was all about evolving strategies to accommodate a runaway growth.
Realising early on the benefits of IT firms going to Tier-II cities and the challenges of letting growth concentrate in Hyderabad, especially its western fringes, the government adopted a two-pronged strategy. While one involved creating plug-and-play infrastructure in smaller towns, the other was about incentivising the IT industry to spread wings to north and east Hyderabad. Parallelly, the government successfully persuaded a few well-known IT firms such as Cyient and Tech Mahindra to open facilities in Warangal, the second largest city of Telangana.
Notwithstanding the potential, the process of taking IT firms into the heartland of Telangana and closer to where presumably talent resides has been anything but easy given Hyderabad continues to remain a preferred destination.
Within Hyderabad, approximately 70-75% of IT/ITES firms have made the western corridor their location of choice over the past two decades. “This is true for both homegrown (Telangana and Andhra Pradesh) IT/ITES firms and the global MNCs... enabling the development of a robust ecosystem which has further ability to grow and multiply,” says Samson Arthur, senior branch director-Hyderabad of real estate consultancy Knight Frank (India).
Availability of land and supporting infrastructure have been drivers of the growth in the western pockets that include Madhapur, Kondapur and HiTech City. On the flip side, the challenges of such a growth are increase of concrete development, growth undispersed, pressure on infrastructure and civic amenities amongst others, he adds. The IT industry in Telangana, as per the latest annual report of IT department, employed a little over 7.78 lakh people in 2021-22 as against 3.23 lakh in 2013-14. A chunk of the headcount is in the firms’ facilities in Hyderabad, according to industry sources.
With 70-75% of IT firms making western corridor the location of choice over the past two decades, challenges of such a growth are increase of concrete development, growth undispersed, pressure on infrastructure and civic amenities: Samson Arthur, senior branch director, Knight Frank-Hyderabad.
Sharp increase
In terms of IT exports, from Rs. 57,258 crore at the time of Telangana formation, they touched Rs. 1,83,569 crore in 2021-22, a fiscal that also saw nearly 1.50 lakh new jobs added by the sector in the State.
Thus when Industries and IT Minister K.T.Rama Rao recently tweeted of how the 3D mantra of digitise, decarbonise and decentralise is being put into action by expanding the IT/ITES sector to district headquarters, it was welcomed by many. He said IT hubs in Warangal, Khammam, and Karimnagar are functioning successfully and the IT towers in Nizamabad and Mahbubnagar are almost ready, while the Siddipet IT hub is shaping up well and construction of Nalgonda IT Hub would be wrapped up in four to six months.
Efforts are being initiated as per Chief Minister K.Chandrasekhar Rao’s vision to expand the IT sector to all corners of the State. Warangal is a testament to the constructive steps taken as it turned into the second largest IT hub in the State where reputed companies have set up their offices, Mr.Rama Rao said.
3D mantra of digitise, decarbonise and decentralise is being put into action by expanding the IT/ITES sector to district headquarters: IT Minister K.T.Rama Rao
‘Decongest cities’
Industry leader and founder chairman of Cyient B.V.R. Mohan Reddy says, with 65% population of India living in tier-II, tier-III locations and rural areas, the technology industry has a responsibility to create employment in these places and not bring all the talent to the cities.
“Else, it will lead to overcrowded and unmanageable cities in the country. At Cyient, we thought it is important to create enough opportunities in tier-II locations such as Warangal, Kakinada and Mysuru and decongest the cities. There is plenty of talent available in towns such as Warangal. Notwithstanding the fact that about 70% of engineering institutions are in Hyderabad and Rangareddy districts, 30% of engineering colleges are in towns such as Adilabad, Karimnagar, Khammam, and Warangal. We deemed it fit to move the jobs to where the talent is rather than uproot them from their hometowns,” he explains.
We deemed it fit to move the jobs to where the talent is rather than uproot them from their hometowns: Cyient founding chairman B.V.R. Mohan Reddy
Moreover, the cost of operations in these towns is lower compared to that in urban locations. The real estate is cheaper, there are benefits of being in a special economic zone (SEZ) and the transportation costs are much lower, he says. Cyient’s facility in Warangal is spread over five acres with 58,000 sq.ft. built-up area and accommodates 550 seats.
Attrition levels
Mr.Reddy, who is a former chairman of the IT industry body Nasscom, says, “Our experience of working in Warangal has been very positive. The management feels upbeat... it is the right place to grow some of the skills in the lower end of the skill matrix, which do not require subject matter expertise.”
The challenge is that the “fresh talent we hire at these locations wish to move to the cities after gaining 2-3 years of experience. They believe city life is much richer and presents more professional opportunities. This is leading to higher levels of attrition. We had to create avenues to make sure they stay back,” he says.
Telangana government is looking at structured hubs for development in a distributed fashion: HYSEA president Manisha Saboo
Welcoming Telangana government’s approach of structured hubs for development in a distributed fashion, Hyderabad Software Enterprises Association (HYSEA) president Manisha Saboo says there are employees who aspire to eventually work in Hyderabad, and in the process, make IT firms in tier II cities training grounds. Then, there are also “people who are very passionate about the city they grew up in”.
Long wait
It is not just about better career prospects and earning more, as Kompally IT Entrepreneurs Association (KITEA) president Oruganti Venkateswarlu cites the long hours spent daily commuting from Kompally, in north Hyderabad, to the IT firm he worked in Madhapur for about 15 years. Little wonder, he sounds impatient when pointing to how the government plans for an IT tower in Kandlakoya (north Hyderabad) resulting from the demands of the association, remains in tendering stage even 10 months after the Minister laid the foundation.
“We are a group of more than 125 companies, typically small and medium sized, who want to set up operations in the proposed Gateway Park in Kandlakoya. Additionally, there are some companies in west Hyderabad who want to move here as their operation cost is high now. Also they have to pay higher salaries and run the risk of being a training ground and losing employees if they remain in proximity to large companies,” he says.
Mr.Venkateswarlu, however, is undeterred with the less than desired response from leading builders to the tendering process initiated by Telangana State Industrial Infrastructure Corporation (TSIIC) for the project involving development of around 22 lakh sq.ft. of IT office, commercial and residential space on about 10 acres. The government is receptive to certain changes suggested by KITEA, including development in phases with the first phase to be taken up by TSIIC.
The proposed facility in Kandlakoya, abutting the Outer Ring Road, is a part of the Growth in Dispersion (GRID) policy of the government to take IT beyond west Hyderabad. A list of 11 industrial parks within the ORR is to be converted into IT Parks, in addition to the development of an IT Tower in the northern part of the city in Kompally and in the northwestern part of Kollur/Osmannagar.
Multiple benefits
Dispersing IT growth, be it within or beyond Hyderabad, is bound to offer multiple benefits. Former Tech Mahindra executive Vijay Rangineni, who as CEO-IT Investments is in charge of government’s programme on taking IT to tier II and III locations, says the attrition level for the companies, compared to their Hyderabad operations, is relatively less and thus, the efforts going into retaining employees are less. From an employee perspective, especially starting level associates, they get to stay with their family and spend less time on travel.
Local businesses are also biggest beneficiary of the government’s effort in popularising tier II and III towns as IT destinations, he says
“Any growth is good for Telangana, will create more jobs and from a real estate perspective, any development is good as more jobs means more demand for housing and other asset classes such as malls, multiplexes, commercial and retail spaces,” explains NAREDCO TREDA president Sunil Chandra Reddy.
Open to suggestions
Driving the confidence of the government is the sentimental value attached by IT entrepreneurs of Telugu origin abroad. IT and Industries Secretary Jayesh Ranjan recalls how a group of such entrepreneurs met the Minister when he led a delegation to the U.S. and expressed desire to set up offices in their hometowns as part of giving back to society. The suggestions they made were to consider setting up IT office space in such locations as they have limited resources to construct their own campuses, upskill students to ensure a ready pipeline of talent, and provide market access for their products. The government worked on all three suggestions, he said, adding that from the earlier five, it has now been decided to set up IT towers in nine locations, including in small places like Adilabad.
“Some IT entrepreneurs have expressed desire to set up their facilities in Suryapet, Wanaparthy and Ramagundam. From our side we will push ahead as long as there is demand for 500 seats either in government or PPP model,” Mr.Rangineni asserts, adding, “In the next five years, our goal is to create 50,000 jobs in tier II locations.”
At present, Warangal, besides being home to Cyient’s facility, hosts the offices of Tech Mahindraand other companies. From around 2,000 people employed by the firms, Warangal will be home to more people working in the tech sector when Genpact office is opened early next year and other firms expand their operations.
In Karimnagar, there are 18 IT companies employing 550 associates and in Khammam, 19 firms with 430 associates. Nizamabad will be getting a 50,000 sq.ft. facility with 500-plus seats in a few months; Mahbubnagar a 60,0000 sq.ft. IT tower with 600-plus seats; Siddipet 1.21 lakh sq.ft. with 1,200 seats (700 seats in phase I under development). In Nalgonda, the upcoming tower under construction will have 1,000-plus seats.
On his advice to IT firms evaluating tier II towns, Mr. Mohan Reddy says “tier-II towns are a good option as they gain from cost advantage and have access to the talent pool. However, remote management is a roadblock, but so long as companies have bandwidth in terms of leadership, they should definitely look at tier-II towns”.
The government, on its part, needs to create work towards quality education, soft infrastructure and improve connectivity to make other tier II cities in Telangana lucrative for business, he says.
