Location Analysis: Emerging cities of India

Location Analysis: Emerging cities of India
April 2012

January 2012

Zinnov LLC
Zinnov LLC CONFIDENTIAL
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

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

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

Locations

- The study tries to analyze major - Infrastructure
locations in India on a - Human Resource
comprehensive list of parameters
- Support Ecosystem
- The objective of the study is to
- Quality of Life
help MNCs identify the optimal
locations in India to setup their - Business Continuity Risk
R&D centers - Cost

2

Agenda

TRENDS

RANKINGS

CITY
PROFILING

3

Agenda

TRENDS

RANKINGS

CITY
PROFILING

4

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

Chandigarh
 Till about mid 2000s, MNCs were
NCR looking at tier-1 cities in India
primarily due to high talent
Jaipur availability, investment friendly
policies and high quality of life
Ahmedabad  Tier-1 cities constituted almost
100% of R&D talent pool in India.
Vadodara Nagpur
 Gradually, growth of tier-1
Pune locations exposed issues like poor
Hyderabad urban infrastructure, rapidly
increasing operating costs, higher
cost of living, high attrition, etc.
Bangalore Chennai

Coimbatore
Trivandrum

1990 2004

Source: Zinnov Analysis 5
Note: Map not to the scale

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

Chandigarh  MNCs started expanding to tier-2
cities due to advantages like higher
NCR catchment area, lower attrition,
cost arbitrage, etc.
Jaipur
 Tier-2 cities, which were initially
looked upon for IT/BPO services,
Ahmedabad now are serious contenders for
setting up R&D centers due to the
Vadodara distinctive advantages they
Nagpur provide.
Pune
Hyderabad  Companies also started looking at
tier-2 locations for creating a hub-
&-spoke model especially in
automotive sector.
Bangalore Chennai
 But tier-2 are still in nascent stage
Coimbatore in terms of establishment as IT
Trivandrum hubs and constitute around 2% of
MNC R&D talent pool in India.
2005 2012 ……………

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
Vertical Expansion to Start-up Academia Manufacturing Proactive state IT
Talent Pool Cost
Focus tier-2 cities Ecosystem Ecosystem Ecosystem organizations

2.0% Fresh Talent Pool distribution
9.8% Bangalore
by location
3.7 NCR
19.2
Chennai
10% 13%
NCR 4%
6% Hyderabad
Other 17%
7% Pune
Locations
8% Coimbatore
13%
16.5% Mumbai Region 12.5% 9% Jaipur
12%
Hyderabad Region Nagpur
Bangalore 23.0
31.1 Trivandrum
Region
Others*

Chennai
6.5% 35%
52.7% Region
24.0
102.5
MNC R&D Talent pool in India is
growing at the rate of nearly 9
Total MNC R&D Talent in India in 2011 ~ 204,196 percent every year and is expected
to reach ~250,000 by 2015.
M Mean Value :Headcount per MNC R&D Center


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

MNC R&D centers distribution in India by Software MNC R&D centers distribution in
locations India by locations

11% 12%
11% 11%
40%
43% 4%
4%

13% 15%

6% 11%
13% 6%

NCR Chennai Others Pune NCR Chennai Others Pune
Mumbai Hyderabad Bangalore Mumbai Hyderabad Bangalore

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


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

Semiconductor MNC R&D centers Automotive MNC R&D centers distribution
distribution in India by locations in India by locations
10% 9%
9% 22%
3%
1% 24%
54% 11%
9%

1% 11%
13% 24%

NCR Chennai Others Pune NCR Chennai Others Pune
Mumbai Hyderabad Bangalore Mumbai Hyderabad Bangalore

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


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

Key
Drivers

Examples of MNCs in tier-2 cities
Company Tier 2 location FTE

Bosch Coimbatore ~800

Quark Chandigarh ~300

Allscripts Baroda ~250

Cignex Ahmedabad ~150

Radiance Ahmedabad <50


Talent Pool Cost

Saturated
Most companies with Business Talent Market Most companies beyond 2,500+
more than 1000 Continuity Risk (Narrowed headcount in one city.
headcount in one city/one (People, Geo talent net, Companies in some domains
building political, Cost Attrition, become the hunting ground for
escalation etc.) Relocation large companies
etc.)

Contribution to
Infrastructure more than 5%
saturation of the talent in
the city

Pressure to
Cost Benefits
grow an
of Tier 2 Cities
acquired site


Talent Pool Cost

Number of companies with multiple locations
575

Discussion

• 84% of the US based MNCs have only one location
No. of companies for R&D center in India
• Close to 13% of US based MNCs have R&D centers
at two locations in India
93
22 • Around 14% of Europe based MNCs have R&D
6
centers at two locations in India

No of Locations One Two Three Four

Companies with 2 locations Companies with 3 locations
• Amazon
• AMD • Dell
• Adobe • Nvidia
• Broadcom • FreeScale
• Atrenta • AT&T
• Avaya • BMW
• Applied Materials • Nokia
• D-Link • Mentor Graph
• Halliburtun. • Invensys


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
Talent Pool Cost

Though the number of start-ups originating from
Product start-ups split across regions
tier-2 cities is minimal, many start-ups originating
Kolkata out of tier-1 cities are expanding to the nearest tier-
NCR
2 cities to lower the cost of operations. In the
51
486 last 5 years, tier-2 cities have witnessed
more than 40 such start-ups.

Mumbai
Region Cities
326 Bangalore Bangalore, Mysore, Belgaum,
Gulbarga, Hubli
Hyderabad Hyderabad, Secundrabad,
Vishakhapatnam, Vijayawada
Pune Kolkata
Pune Pune
142 Pune
Chennai Chennai, Calicut, Trivandrum,
Hyderabad
238 Madurai, Coimbatore, Cochin,
Vellore
Bangalore Chennai Hyderabad Mumbai Mumbai, Goa, Ahmedabad,
625
244 Vadodara, etc.
Bangalore NCR Delhi, Gurgaon, Noida, Chandigarh,
Mohali
Kolkata Kolkata, Patna, Bhubaneswar

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

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
Talent Pool Cost

25
20 Tier-2  8 of the 9 new IITs have been set up in
/Tier-3
15 tier-2 or tier-3 cities and 9 new NITs are
Locations
coming up in tier-3 cities, giving a major
10
Tier-1 boost to education infrastructure in these
5 Locations locations.
0
Established Upcoming Established Upcoming  ‘Indian Institute of Software Engineering’
IITs IITs NITs NITs is coming up in Pune in association with
Carnegie Mellon University, USA.
Engineering Colleges distribution
by location Bangalore  NCR and Pune are the best locations in
NCR the country in terms of technology
6% 3% 4%
13%
university ecosystem. Pune is known as
Chennai
7% the “Oxford of the East” due to presence
Hyderabad of historically strong university
8% 19%
Pune ecosystem.
8%
Coimbatore
15%
15%  3 out of every 10 colleges^ in India are
Jaipur
present in tier-2 cities, with Coimbatore
Nagpur and Jaipur being the leaders
Trivandrum
Others*

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

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

Pantnagar Availability of
Ahmedabad Strategically located greenfield land and
NCR in central India well developed
ports

Speedy execution Investor friendly
and transparency in policies and ease of
Kolkata dealing doing business

Pune(Western Ghats)

Chennai
Ahmedabad
Advantages

Emerging Automotive Established Automotive
Manufacturing Hubs Manufacturing Hubs
 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.


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

IT & ITES Industry Gujarat Electronics & Software Exporters’
association of AP Software Industries Association of Pune
Association
 ITSAP representing the  GESIA was started in  SEAP was started in 1998
software industry in 1995 to promote and now has more than
Andhra Pradesh; started Electronics Industry in 100 registered members
in 1991 with 15 people Gujarat; now it has 280+ which includes all the
and has more than 300 registered members. major IT/ITES companies
registered members till  GESIA played a key role operating out of Pune.
2011. in development of  SEAP acts as an umbrella
 ITSAP has played a vital Gujarat as a major IT hub under which various
role in recommending by recommending technical and marketing
and lobbying for incentives and branding issues can be discussed
incentives policy and initiatives (Vibrant and learning opportunity
branding AP as an IT Gujarat is the most provided within the
destination. successful branding member companies
campaign in India). through SIGs.


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
Talent Pool Cost

Average Commercial Real Estate Rentals/sq.ft Cost of Living Index
66
37.9
36.6 35.1
58 55 34.2 33.7 33.1
53 32.6 32.4 32.1
50 48 29.8
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.

Source: www.magicbricks.com, www.numbeo.com, Zinnov Analysis 17

Agenda

TRENDS

RANKINGS

CITY
PROFILING

18

R&D Suitability Index across different locations

4
Bangalore
3.5
Pune
3
Hyderabad
2.5 NCR
Chennai
Suitability*

Ahmedabad
2
Coimbatore Trivandrum
1.5 Chandigarh
Vadodara Nagpur
1
Jaipur
0.5

0
0.5 0.6 0.7 0.8 0.9 1
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

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

Vertical wise city ranking

Software Product Core Engineering
Embedded R&D*
Development R&D*

1 BANGALORE 1 BANGALORE 1 PUNE

2 PUNE 2 NCR 2 BANGALORE

3 HYDERABAD 3 HYDERABAD 3 CHENNAI

4 NCR 4 PUNE 4 NCR

5 CHENNAI 5 CHENNAI 5 HYDERABAD
COIMBATORE,
6 TRIVANDRUM 6
AHMEDABAD

 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

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

City wise Infrastructure Ranking

1 BANGALORE  Excellent IT infrastructure but Poor Transportation infrastructure

 Good rating on all parameters
2 CHENNAI

3 NCR  Excellent IT infrastructure but Poor Civic infrastructure

4 HYDERABAD  Good Transportation infrastructure but Poor Civic infrastructure

5 PUNE  Good IT infrastructure but poor international connectivity

6 JAIPUR  Good Hotel infrastructure but Poor IT infrastructure

 Average Transportation infrastructure but Poor
7 TRIVANDRUM international connectivity

8 AHMADABAD  Excellent Civic infrastructure but Poor international connectivity

9 COIMBATORE  Average Physical and Civic infrastructure but no international airport

10 NAGPUR  Average transportation infrastructure but Poor Hotel infrastructure

11 VADODARA  Good Physical infrastructure but no international airport

12 CHANDIGARH  Average transportation infrastructure but no international airport

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

Infrastructure - Sub Parameters Rating

Transportation within Physical and civic International
Cities IT Infrastructure Hotel Infrastructure
city infrastructure 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

 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

1 BANGALORE
Excellent talent pool and in-
2 PUNE country movement of talent
Excellent in-country movement
3 HYDERABAD of talent and good installed
Excellent fresh talent pool and talent pool
in-country movement of talent
4 NCR
5 CHENNAI Excellent fresh talent pool but
average installed talent pool.
Excellent fresh talent pool and 6 COIMBATORE
good expatriate movement Good Fresh Talent pool but poor
In country movement of Talent 7 JAIPUR
Good Fresh Talent pool but
8 NAGPUR expatriate movement of talent
Average in-country movement
of talent, but poor talent pool 9 AHMEDABAD
10 TRIVANDRUM Good in-country movement of
Good Fresh Talent pool but poor talent, but poor talent pool
11 CHANDIGARH In country movement of Talent
Average talent pool and poor
expatriate movement 12 VADODARA
Average in-country movement
of talent, but poor talent pool


Human Resource Availability - Sub Parameters Rating

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

NAGPUR 12
Very low pollution levels but less number of 1 BANGALORE
weekend outing locations Excellent climate and a number of languages
spoken
VADODARA 11 2 PUNE
Excellent cultural diversity but poor Excellent climate and medical facilities
medical facilities

AHMEDABAD 10 3 HYDERABAD
Good medical facilities but poor Low pollution levels but less number of
climate weekend outing locations

CHENNAI 9 4 NCR
Excellent medical facilities but high pollution
Large number of languages spoken
levels
but low cultural diversity

5 COIMBATORE
JAIPUR 8 Excellent climate but low cultural diversity
Large number of weekend outing
locations but poor climate
6 TRIVANDRUM
CHANDIGARH 7 Excellent climate but low cultural diversity
Large number of weekend outing
locations but poor medical facilities


Quality of Life - Sub Parameters Rating

Weekend outing
Cities Climate Languages Spoken Pollution levels Medical facilities Cultural diversity
options

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

1 Climatic Conditions

- Jaipur, Nagpur, Vadodara and Ahmedabad
2 have drawback of very extreme climatic
Cultural Diversity Quality of conditions compared to other locations
- Cities like Chennai, Life
Ahmedabad are not
perceived to be open to 5 Pollution Levels
other cultures and 3
5 - NCR is the most polluted location and Chennai
religions which can prove
is the least polluted location among all cities
to be a major roadblock in
4 - On an average, tier-2 cities pollution levels are
attracting talent
20% lower than tier-1 cities

Weekend outing options
Medical Facilities
- Nagpur and Chennai figure low in weekend outing options
- Coimbatore is a major center for medical compared to other cities
tourism; there are nearly 750 hospitals in - Cities like Pune, Bangalore, Chandigarh provide many options
and around Coimbatore with a capacity of for weekend outings due to their geographic advantage
5000 beds - Lonavala, a hill station on Pune-Mumbai expressway, is fast
- 12 new multi-specialty hospitals are emerging as a preferred choice for second homes for many
expected to come up in Hyderabad in the people working in Pune or Mumbai
next 5 years


City wise Support Ecosystem Ranking

Excellent MNC R&D and Start-
Up ecosystem

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

Excellent academia eco-system but Excellent Research and start-up
poor Start-Up eco-system ecosystem

Good academia ecosystem but
Good academia eco- overall poor innovation ecosystem
system but poor Start-up Good academia ecosystem
ecosystem but overall poor innovation
ecosystem

Overall poor
Innovation Ecosystem Overall poor
Innovation
Overall poor Innovation Ecosystem
Ecosystem
Overall poor Innovation ecosystem


Support Ecosystem - Sub Parameters Rating

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

1 CHENNAI
Low crime rate
3 CHANDIGARH but above
Low crime rate average political
5 TRIVANDRUM and less prone risks.
to natural
7 NCR Low crime rate but calamity.
Less political risks has experienced
9 PUNE but risk of natural calamities.
Politically stable terrorist/
but has communal attacks.
11 HYDERABAD experienced
Overall below terrorist/commun 2 COIMBATORE
average business al attacks.
Low political risks
continuity risk. 4 NAGPUR and low crime
6 JAIPUR Low political risks rate.
and average
Less prone to crime rate.
8 VADODARA natural calamities
Low political risks but high crime
10 AHMADABAD but has rate.
12 BANGALORE Politically stable experienced
but high crime terror/ communal
High crime rate
rate. attacks.
but less prone to
natural calamities.


Business Continuity Risk - Sub Parameters Rating

Terrorist Attacks/
Cities Crime Rate Natural Calamities Political Risks
Communal Riots

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

 According to National Crime Rate Bureau, Jaipur registered maximum
number of crimes under IPC in 2010, followed by Bangalore.
Crime  Chennai registered minimum number of registered crimes under IPC, just
Rate next were Coimbatore and Chandigarh.

Natural  Overall all the cities possess very low risk of any natural calamities.
 Only exceptions are Chennai and Trivandrum, which have history of
Calamities
natural disasters like Tsunami

Terrorist  Tier-2 cities are less prone to terrorist attacks compared to tier-1 cities
Attacks/
 Ahmedabad and Vadodara and the 2 cities which have the history of
Communal
Riots communal riots.

Political  Overall all the cities possess very low political risks and have stable
Risks political structure in place
 Hyderabad has some political risks pertaining to creation of new state
Telangana.

Source: National Crime Rates Bureau reports, Zinnov Analysis 33

Agenda

TRENDS

RANKINGS

CITY
PROFILING

34

Bangalore – Silicon Valley of India TALENT COST ECOSYSTEM

Key Drivers Quick Facts

 Bangalore has a well developed eco-system of
skilled resources and managerial talent; it Fresh Talent Pool 40,000
employs 35% of India’s talent pool
 Thriving start-up ecosystem with more than MNC R&D Talent
1,08,220
60% of the product start-ups in India Pool
originating out of Bangalore
 Infrastructure in terms of steady supply of real STPI Exports (Rs) 58,850 Crores (2010)
estate, in the form of SEZs is improving. New
power generation and Metro Rail projects have Software Exports
23% (2009-10)
been major boost to city infrastructure growth

Pros and Cons Illustrative list of companies present
PROS
 Good Academia and IT Infrastructure, Large
Human Resource, Favorable Climate,
CONS
 High Operations Cost, High Attrition

Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis 35
Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively

Hyderabad - The Cyberabad of India TALENT COST ECOSYSTEM


 Compared to other metros, the cost of living
and lease rentals are lower in Hyderabad by Fresh Talent Pool 39,000
around 10-20%.
 Andhra Pradesh is one of the largest supplier MNC R&D Talent
25,520
engineering students in the country, majority of Pool
them being from Hyderabad and adjoining
areas STPI Exports (Rs) 27,000 Crores (2010)
 Strategically located – equidistant from
Bangalore, Pune and Chennai Software Exports
24.5% (2009-10)
growth

PROS
 Good Academia and IT Infrastructure, Ease of
doing business, Good physical infrastructure
CONS
 Relatively higher business continuity risk, poor
city perception


Chennai – Detroit of South India TALENT COST ECOSYSTEM


 Chennai has a large human resource pool at all
levels. The presence of an industrial base Fresh Talent Pool 42,000
(automotive and engineering sectors) has lead
to strong skill sets in these sectors. MNC R&D Talent
13,270
 Infrastructure availability is quite good Pool
especially reliable power, supply of office space,
national and international connectivity. STPI Exports (Rs) 22,400 Crores (2010)
 Cost of living and real estate costs are 10-12%
lower than Bangalore, the nearest IT hub which Software Exports
14% (2009-10)
is a big plus growth

PROS
 Good Academia and IT Infrastructure, Good
physical infrastructure, Lower pollution levels
CONS
 Poor city perception, Low cultural diversity


NCR – 2nd largest metropolitan city of India TALENT COST ECOSYSTEM


 Delhi has well developed infrastructure
including steady supply of office space and 52 Fresh Talent Pool 55,000
SEZs (spanning 900 hectares) in the NCR region.
National and international connectivity from MNC R&D Talent
20,000
Delhi is also among the best in India Pool
 Very strong academia infrastructure due to the 21,700 Crores (2010)
presence of more than 100 engineering colleges STPI Exports (Rs)
and research institutes
 Places like Noida, Faridabad provide significant Software Exports
Almost 0%
cost advantages compared to other metros growth

PROS
 Excellent IT and transportation infrastructure,
Excellent international connectivity.
CONS
 Relatively average start-up ecosystem, High
pollution levels, history of terrorist attacks


Pune – Oxford of East TALENT COST ECOSYSTEM

 Proximity to “the financial capital of India” has
helped Pune to emerge as center of IT services Fresh Talent Pool 30,000
and support arm of some of the major global
banks MNC R&D Talent
24,000
 Pune boasts of very strong manufacturing Pool
ecosystem
STPI Exports (Rs) 29,000 Crores, (2010)
 Pune is home to some of the oldest education
institutes and prominent research institutes in
India Software Exports
40% expected (2011-12)
 Thriving Physical infrastructure with projects growth
like new airport, metro rail and 18 new SEZs

PROS
 Good Academia and IT Infrastructure, Favorable
climatic conditions, Strong service provider
ecosystem
CONS
 Poor international connectivity


Coimbatore – Manchester of South India TALENT COST ECOSYSTEM


 More than 40,000 SMBs primarily in textiles,
automobiles and other engineering component Fresh Talent Pool 25,000
industries
 Commercial Real Estate costs are around 20- STPI Exports (Rs) 570 Crores (2010)
55% lower than tier-1 cities
 Coimbatore being one of the educational hubs Software Exports
of South India ,has abundance of graduate 90% (2009-10)
growth
talent available
 Strategically located –equidistant from both
Bangalore and Chennai

PROS
 Good Academia Infrastructure, Favorable
Climate, Low Business Continuity Risk
CONS
 Absence of international airport, Average
transport infrastructure


Nagpur – The Orange city TALENT COST ECOSYSTEM


 Rapidly growing infrastructure due to the Multi-
modal International Cargo Hub & Airport Fresh Talent Pool 20,000
 Educational hub of central India with more than
40 engineering and medical colleges and good STPI Exports (Rs) 140 Crores (2010)
availability of fresh talent
 Major engineering hub with presence of Software Exports
companies like Mahindra & Mahindra, NECO 10% (CAGR in last 3 years)
growth
Ltd, Bajaj Auto, etc.
 Commercial real estate costs are around 40%
lower than the tier 1 cities on an average

PROS
 Very Low pollution levels, Favorable state
government laws, strategically located in central
India
CONS
 Extreme Climate, Average medical facilities ,
poor international connectivity


Chandigarh – The Pensioner's Paradise TALENT COST ECOSYSTEM


 Chandigarh ranks 1st in India in terms of Human
Development Index and quality of life, thereby Fresh Talent Pool 10,000
.attracting a large number of professionals from
other locations STPI Exports (Rs) 470 Crores (2010)
 The city has a 10-50% cost advantage in
comparison to tier 1 cities in terms of Software Exports
Commercial Real Estate Costs 20% (2009-10)
growth
 Availability of Good fresh talent pool and strong
university ecosystem due to universities like
Panjab University is a big advantage

PROS
 High quality of life, Moderate climatic
conditions, low crime rates
CONS
 Relatively small fresh talent pool, poor
international connectivity, average power
infrastructure


Trivandrum - The highest literacy rate TALENT COST ECOSYSTEM


 Abundant available business space (around 20
million sq. ft. ) with natural beauty of the city is Fresh Talent Pool 12,000
ideal for MNCs to set up their delivery centers
 Strong Research Ecosystem due to presence of STPI Exports (Rs) 1120 Crores (2010)
research institutes and academic institutes like
CDAC, Indian Institute of Science, Education and Software Exports
Research, Indian Institute of Information 5% (2009-10)
growth
Technology and Management, etc.
 Onset of huge companies like Oracle for
development of next gen products is a big plus

PROS
 Highest literacy rate in the country, Excellent
climatic conditions
CONS
 Poor international connectivity with EU and
USA, relatively small fresh talent pool


Ahmedabad – Detroit of East TALENT COST ECOSYSTEM


 Ahmedabad is one of the fastest growing cities 10,000
Fresh Talent Pool
in India in terms of infrastructure and attracting
investments
 Commercial Real Estate cost is 20-40% less than STPI Exports (Rs) 490 Crores (2010)
that of tier-1 cities
 Huge and fast growing auto manufacturing base Software Exports
72% (2009-10)
with onset of companies like Tata, Ford and growth
Peugeot

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


Jaipur – The Pink city TALENT COST ECOSYSTEM


 Flourishing infrastructure with the construction 22,000
Fresh Talent Pool
of Mahindra World City(India's largest
integrated IT SEZ) and World Trade Park
 Good service provider ecosystem due to STPI Exports (Rs) 410 Crores (2010)
presence of all major Indian service providers
 Cost advantage of 20-40% in Commercial Real Software Exports
50% (2009-10)
Estate costs compared to tier-1 locations growth
 Due to the city’s proximity to NCR, Jaipur can be
grown as supporting location to create a hub-&-
spoke model

PROS
 Excellent hotel infrastructure, Many weekend
outing options, Low Crime Rate
CONS
 Poor power infrastructure, Extreme weather,
Relatively high pollution levels


Vadodara – The Knowledge City TALENT COST ECOSYSTEM


 Vadodara offers a cost advantage of over 25%
with respect to compensation levels and around Fresh Talent Pool 8,000
20-40% with respect to cost of living in tier-1
cities STPI Exports (Rs) 310 Crores (2010)
 Presence of companies like ABB, L&T, Alstom,
Siemens and Bombardier have given a major Software Exports
boost to Vadodara’s industrial ecosystem 70% (2009-10)
growth
 Thriving civic infrastructure (Vadodara City Bus
Service implemented through PPP model has
been one of the most successful projects among
peers)

PROS
 Good Industrial Ecosystem, Investor friendly
policies, growing civic infrastructure
CONS
 No international airport, High pollution, Has
witnessed floods, earthquakes and communal
violence.


Glossary

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 Includes R&D in verticals such as Software products/Internet
Development
Embedded R&D Includes R&D done in Telecom, Semiconductors, Storage, Networking and Computer Hardware verticals

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

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

47

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