location analysis: emerging cities of india
TRANSCRIPT
Location Analysis: Emerging cities of India April 2012
Zinnov LLC CONFIDENTIAL
January 2012
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
Zinnov LLC
The location study covers 12 locations in India for assessment based on an exhaustive list of suitability and cost parameters
2
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
- Infrastructure
- Human Resource
- Support Ecosystem
- Quality of Life
- Business Continuity Risk
- Cost
- The study tries to analyze major locations in India on a comprehensive list of parameters
- The objective of the study is to help MNCs identify the optimal locations in India to setup their R&D centers
Loca
tio
ns
Agenda
3
TRENDS
RANKINGS
CITY PROFILING
Agenda
4
TRENDS
RANKINGS
CITY PROFILING
Prior to 2005, majority of MNC R&D centers were concentrated in tier-1 Indian cities
5
NCR
Bangalore Chennai
Pune Hyderabad
Jaipur
Coimbatore Trivandrum
Ahmedabad
Nagpur
Chandigarh
Vadodara
Till about mid 2000s, MNCs were looking at tier-1 cities in India primarily due to high talent availability, investment friendly policies and high quality of life
Tier-1 cities constituted almost
100% of R&D talent pool in India.
Gradually, growth of tier-1 locations exposed issues like poor urban infrastructure, rapidly increasing operating costs, higher cost of living, high attrition, etc.
1990 2004
Source: Zinnov Analysis Note: Map not to the scale
Post 2005, MNCc started looking at tier-2 Indian cities as future R&D hubs
6
NCR
Bangalore Chennai
Pune Hyderabad
Jaipur
Coimbatore Trivandrum
Ahmedabad
Nagpur
Chandigarh
Vadodara
MNCs started expanding to tier-2 cities due to advantages like higher catchment area, lower attrition, cost arbitrage, etc.
Tier-2 cities, which were initially
looked upon for IT/BPO services, now are serious contenders for setting up R&D centers due to the distinctive advantages they provide.
Companies also started looking at tier-2 locations for creating a hub-&-spoke model especially in automotive sector.
But tier-2 are still in nascent stage in terms of establishment as IT hubs and constitute around 2% of MNC R&D talent pool in India.
2005 2012 ……………
Source: Zinnov Analysis 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
7
Bangalore Region
Chennai Region
Mumbai Region
NCR
Other Locations
Hyderabad Region
19.2
31.1 23.0
16.5%
9.8%
6.5%
12.5%
2.0%
M Mean Value :Headcount per MNC R&D Center
102.5
52.7%
Total MNC R&D Talent in India in 2011 ~ 204,196
3.7
24.0
Source: Zinnov Analysis
MNC R&D Talent pool in India is growing at the rate of nearly 9 percent every year and is expected to reach ~250,000 by 2015.
Fresh Talent Pool distribution by location Bangalore
NCR
Chennai
Hyderabad
Pune
Coimbatore
Jaipur
Nagpur
Trivandrum
Others*
13%
12%
17%
13%
9%
8%
7%
6% 4%
10%
35%
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
Bangalore still dominates overall and software MNC R&D ecosystem in India; other locations like Pune and Hyderabad are catching up
8
MNC R&D centers distribution in India by locations
NCR Chennai Others Pune
Mumbai Hyderabad Bangalore
Source: Zinnov Analysis
Software MNC R&D centers distribution in India by locations
NCR Chennai Others Pune
Mumbai Hyderabad Bangalore
13%
43%
6%
13%
4%
11% 11%
40%
11%
12%
6%
15%
4%
11%
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
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
While Bangalore is the clear leader in semiconductor vertical, automotive vertical is much more scattered
9
Semiconductor MNC R&D centers distribution in India by locations
NCR Chennai Others Pune
Mumbai Hyderabad Bangalore
Source: Zinnov Analysis
Automotive MNC R&D centers distribution in India by locations
NCR Chennai Others Pune
Mumbai Hyderabad Bangalore
54%
13%
11%
9% 3%
10%
24%
24%
22%
11%
9%
9%
1%
1%
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
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
MNCs are looking to expand to tier-2 locations to setup their secondary centers due to the unique advantages provided by tier-2 locations
10
Key Drivers
Source: Zinnov Analysis
Company Tier 2 location FTE
Bosch Coimbatore ~800
Quark Chandigarh ~300
Allscripts Baroda ~250
Cignex Ahmedabad ~150
Radiance Ahmedabad <50
Examples of MNCs in tier-2 cities
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
MNCs are looking to expand to tier-2 locations to setup their secondary centers due to the unique advantages provided by tier-2 locations
11 Source: Zinnov Analysis
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
Saturated Talent Market
(Narrowed talent net, Attrition,
Relocation etc.)
Business Continuity Risk (People, Geo political, Cost
escalation etc.)
Infrastructure saturation
Contribution to more than 5% of the talent in
the city
Cost Benefits of Tier 2 Cities
Pressure to grow an
acquired site
Most companies beyond 2,500+ headcount in one city. Companies in some domains become the hunting ground for large companies
Most companies with more than 1000
headcount in one city/one building
MNCs are looking to expand to tier-2 locations to setup their secondary centers due to the unique advantages provided by tier-2 locations
12 Source: Zinnov Analysis
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
One Two Three Four
575
93
22 6
No. of companies
No of Locations
Number of companies with multiple locations
• 84% of the US based MNCs have only one location for R&D center in India
• Close to 13% of US based MNCs have R&D centers at two locations in India
• Around 14% of Europe based MNCs have R&D centers at two locations in India
Discussion
• Amazon • Dell • Nvidia • FreeScale • AT&T • BMW • Nokia • Mentor Graph • Invensys
Companies with 3 locations
• AMD • Adobe • Broadcom • Atrenta • Avaya • Applied Materials • D-Link • Halliburtun.
Companies with 2 locations
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
13
Bangalore Chennai
Hyderabad
Pune
Kolkata
486
326
142
625
238
51
244
NCR
Mumbai
Pune
Bangalore
Hyderabad
Product start-ups split across regions
Region Cities
Bangalore Bangalore, Mysore, Belgaum, Gulbarga, Hubli
Hyderabad Hyderabad, Secundrabad, Vishakhapatnam, Vijayawada
Pune Pune
Chennai Chennai, Calicut, Trivandrum, Madurai, Coimbatore, Cochin, Vellore
Mumbai Mumbai, Goa, Ahmedabad, Vadodara, etc.
NCR Delhi, Gurgaon, Noida, Chandigarh, Mohali
Kolkata Kolkata, Patna, Bhubaneswar
Though the number of start-ups originating from tier-2 cities is minimal, many start-ups originating out of tier-1 cities are expanding to the nearest tier-2 cities to lower the cost of operations. In the last 5 years, tier-2 cities have witnessed more than 40 such start-ups.
Note: The cities marked in bold are emerging Tier-II cities for product startups Source: Zinnov Analysis
Kolkata
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
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
14
8 of the 9 new IITs have been set up in tier-2 or tier-3 cities and 9 new NITs are coming up in tier-3 cities, giving a major boost to education infrastructure in these locations.
‘Indian Institute of Software Engineering’ is coming up in Pune in association with Carnegie Mellon University, USA.
NCR and Pune are the best locations in the country in terms of technology university ecosystem. Pune is known as the “Oxford of the East” due to presence of historically strong university ecosystem.
3 out of every 10 colleges^ in India are present in tier-2 cities, with Coimbatore and Jaipur being the leaders
Source: Zinnov Analysis Note: * Others include Ahmedabad, Chandigarh and Vadodara, ^ Analysis is only for the 12 cities taken into consideration
0
5
10
15
20
25
Established IITs
Upcoming IITs
Established NITs
Upcoming NITs
Tier-2 /Tier-3 Locations
Tier-1 Locations
Engineering Colleges distribution by location Bangalore
NCR
Chennai
Hyderabad
Pune
Coimbatore
Jaipur
Nagpur
Trivandrum
Others*
19%
15% 15%
13%
8%
8%
7% 6%
4% 3%
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
Fast growing manufacturing hubs like Ahmedabad have good potential to attract MNCs in to set up their R&D centers in the long run
15
Pune(Western Ghats)
Chennai
NCR Ahmedabad
Pantnagar
Emerging Automotive Manufacturing Hubs
Established Automotive Manufacturing Hubs
Kolkata
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.
Ahmedabad Advantages
Speedy execution and transparency in
dealing
Strategically located in central India
Availability of greenfield land and
well developed ports
Investor friendly policies and ease of
doing business
Source: Zinnov Analysis
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
Many state IT associations in the country are making proactive efforts to establish their states as major IT hubs
16
IT & ITES Industry association of AP
Gujarat Electronics & Software Industries
Association
Software Exporters’ Association of Pune
ITSAP representing the software industry in Andhra Pradesh; started in 1991 with 15 people and has more than 300 registered members till 2011.
ITSAP has played a vital role in recommending and lobbying for incentives policy and branding AP as an IT destination.
Source: Zinnov Analysis
GESIA was started in 1995 to promote Electronics Industry in Gujarat; now it has 280+ registered members.
GESIA played a key role in development of Gujarat as a major IT hub by recommending incentives and branding initiatives (Vibrant Gujarat is the most successful branding campaign in India).
SEAP was started in 1998 and now has more than 100 registered members which includes all the major IT/ITES companies operating out of Pune.
SEAP acts as an umbrella under which various technical and marketing issues can be discussed and learning opportunity provided within the member companies through SIGs.
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
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
17
66
58 55 53 50 48
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.
Average Commercial Real Estate Rentals/sq.ft
37.9 36.6 35.1 34.2 33.7 33.1
32.6 32.4 32.1 29.8
Cost of Living Index
Source: www.magicbricks.com, www.numbeo.com, Zinnov Analysis
Academia Ecosystem
Expansion to tier-2 cities
Talent Pool Manufacturing
Ecosystem Proactive state IT
organizations Start-up
Ecosystem Vertical Focus
Cost
Agenda
18
TRENDS
RANKINGS
CITY PROFILING
R&D Suitability Index across different locations
19
0
0.5
1
1.5
2
2.5
3
3.5
4
0.5 0.6 0.7 0.8 0.9 1
Su
itab
ilit
y*
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
Bangalore
NCR
Pune
Hyderabad
Chennai
Chandigarh
Trivandrum
Ahmedabad
Jaipur
Nagpur
Coimbatore
Vadodara
Source: Zinnov Analysis *Note: Suitability is the weighted average of ratings on various sub-parameters; Differential Cost includes rentals cost and people cost
Vertical wise city ranking
20
1 BANGALORE
2 PUNE
3 HYDERABAD
4 NCR
5 CHENNAI
6 TRIVANDRUM
Source: Zinnov Analysis 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
1 BANGALORE
2 NCR
3 HYDERABAD
4 PUNE
5 CHENNAI
1 PUNE
2 BANGALORE
3 CHENNAI
4 NCR
5 HYDERABAD
Software Product Development
Embedded R&D* Core Engineering
R&D*
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
6 COIMBATORE, AHMEDABAD
BANGALORE 1
CHENNAI 2
NCR 3
HYDERABAD 4
PUNE 5
JAIPUR 6
TRIVANDRUM 7
AHMADABAD 8
COIMBATORE 9
NAGPUR 10
VADODARA 11
CHANDIGARH 12
City wise Infrastructure Ranking
Excellent IT infrastructure but Poor Transportation infrastructure
Source: Zinnov Analysis Note: Rankings based on weighted average of sub-paramerts ratings
21
Good rating on all parameters
Excellent IT infrastructure but Poor Civic infrastructure
Good Transportation infrastructure but Poor Civic infrastructure
Good IT infrastructure but poor international connectivity
Good Hotel infrastructure but Poor IT infrastructure
Average Transportation infrastructure but Poor international connectivity
Excellent Civic infrastructure but Poor international connectivity
Average Physical and Civic infrastructure but no international airport
Average transportation infrastructure but Poor Hotel infrastructure
Good Physical infrastructure but no international airport
Average transportation infrastructure but no international airport
Infrastructure - Sub Parameters Rating
22
Cities Transportation within
city IT Infrastructure Hotel Infrastructure
Physical and civic infrastructure
International Connectivity
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor - Fair – Good – Very Good - Excellent
Source: Zinnov Analysis
Tier-2 cities have shown major improvement in Infrastructure and are poised for a major revamp in coming years
23
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
Source: Zinnov Analysis
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
24
BANGALORE 1
Excellent talent pool and in-country movement of talent PUNE 2
Excellent in-country movement of talent and good installed talent pool
NCR 4
Excellent fresh talent pool but average installed talent pool.
HYDERABAD 3
Excellent fresh talent pool and in-country movement of talent
COIMBATORE 6
Good Fresh Talent pool but poor In country movement of Talent JAIPUR 7
Good Fresh Talent pool but expatriate movement of talent
AHMEDABAD 9
Good in-country movement of talent, but poor talent pool
CHENNAI 5
Excellent fresh talent pool and good expatriate movement
NAGPUR 8
Average in-country movement of talent, but poor talent pool
TRIVANDRUM Good Fresh Talent pool but poor In country movement of Talent CHANDIGARH
Average talent pool and poor expatriate movement VADODARA
Average in-country movement of talent, but poor talent pool
10
11
12
Source: Zinnov Analysis Note: Rankings based on weighted average of sub-paramerts ratings
Human Resource Availability - Sub Parameters Rating
25
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
- Poor - Fair – Good – Very Good - Excellent
Source: Zinnov Analysis
City wise Quality of Life Ranking
26
1 BANGALORE Excellent climate and a number of languages spoken
2 PUNE Excellent climate and medical facilities
3 HYDERABAD Low pollution levels but less number of weekend outing locations
4 NCR Excellent medical facilities but high pollution levels
5 COIMBATORE Excellent climate but low cultural diversity
6 TRIVANDRUM Excellent climate but low cultural diversity 7 CHANDIGARH
Large number of weekend outing locations but poor medical facilities
8 JAIPUR Large number of weekend outing
locations but poor climate
9 CHENNAI Large number of languages spoken
but low cultural diversity
10 AHMEDABAD Good medical facilities but poor
climate
11 VADODARA Excellent cultural diversity but poor
medical facilities
12 NAGPUR Very low pollution levels but less number of
weekend outing locations
Source: Zinnov Analysis Note: Rankings based on weighted average of sub-paramerts ratings
Quality of Life - Sub Parameters Rating
27
Cities Climate Languages Spoken Pollution levels Weekend outing
options Medical facilities Cultural diversity
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor - Fair – Good – Very Good - Excellent
Source: Zinnov Analysis
Tier-2 cities provide advantages like good hospital infrastructure, low pollution levels and weekend outing options which can be a major plus for them
28
- Jaipur, Nagpur, Vadodara and Ahmedabad have drawback of very extreme climatic conditions compared to other locations
- NCR is the most polluted location and Chennai is the least polluted location among all cities - On an average, tier-2 cities pollution levels are 20% lower than tier-1 cities
Pollution Levels
Climatic Conditions
- Nagpur and Chennai figure low in weekend outing options compared to other cities - Cities like Pune, Bangalore, Chandigarh provide many options for weekend outings due to their geographic advantage - Lonavala, a hill station on Pune-Mumbai expressway, is fast emerging as a preferred choice for second homes for many people working in Pune or Mumbai
Weekend outing options Medical Facilities
- Coimbatore is a major center for medical tourism; there are nearly 750 hospitals in and around Coimbatore with a capacity of 5000 beds - 12 new multi-specialty hospitals are expected to come up in Hyderabad in the next 5 years
Cultural Diversity
- Cities like Chennai, Ahmedabad are not perceived to be open to other cultures and religions which can prove to be a major roadblock in attracting talent
1
2
3
4
5
5
Quality of
Life
Source: Zinnov Analysis
City wise Support Ecosystem Ranking
29
Excellent MNC R&D and Start-Up ecosystem
Overall good Innovation ecosystem Excellent academia ecosystem but poor Start-Up ecosystem
Excellent Research and start-up ecosystem
Good academia ecosystem but overall poor innovation ecosystem
Good academia ecosystem but overall poor innovation ecosystem
Overall poor Innovation Ecosystem
Excellent academia eco-system but poor Start-Up eco-system
Good academia eco-system but poor Start-up
ecosystem
Overall poor Innovation Ecosystem
Overall poor Innovation Ecosystem
Source: Zinnov Analysis Note: Rankings based on weighted average of sub-paramerts ratings
Overall poor Innovation ecosystem
Support Ecosystem - Sub Parameters Rating
30
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
- Poor - Fair – Good – Very Good - Excellent
Source: Zinnov Analysis
City wise Business Continuity Risk Ranking
31
12 BANGALORE
8 VADODARA
10 AHMADABAD
6 JAIPUR
4 NAGPUR
2 COIMBATORE
11 HYDERABAD
7 NCR
9 PUNE
5 TRIVANDRUM
3 CHANDIGARH
1 CHENNAI
Source: Zinnov Analysis Note: Rankings based on weighted average of sub-paramerts ratings
Overall below average business continuity risk.
Politically stable but has experienced terrorist/communal attacks.
Less political risks but risk of terrorist/ communal attacks.
Low crime rate but has experienced natural calamities.
Low crime rate and less prone to natural calamity.
Low crime rate but above average political risks.
High crime rate but less prone to natural calamities.
Politically stable but high crime rate.
Low political risks but has experienced terror/ communal attacks.
Less prone to natural calamities but high crime rate.
Low political risks and average crime rate.
Low political risks and low crime rate.
Business Continuity Risk - Sub Parameters Rating
32
Cities Crime Rate Natural Calamities Terrorist Attacks/ Communal Riots
Political Risks
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor - Fair – Good – Very Good - Excellent
Source: Zinnov Analysis
Degree of business continuity risk is distributed across all locations and each location has its own pros and cons
33
Crime
Rate
Natural
Calamities
Terrorist Attacks/
Communal Riots
Political
Risks
According to National Crime Rate Bureau, Jaipur registered maximum number of crimes under IPC in 2010, followed by Bangalore.
Chennai registered minimum number of registered crimes under IPC, just next were Coimbatore and Chandigarh.
Overall all the cities possess very low risk of any natural calamities. Only exceptions are Chennai and Trivandrum, which have history of
natural disasters like Tsunami
Tier-2 cities are less prone to terrorist attacks compared to tier-1 cities Ahmedabad and Vadodara and the 2 cities which have the history of
communal riots.
Overall all the cities possess very low political risks and have stable political structure in place
Hyderabad has some political risks pertaining to creation of new state Telangana.
Source: National Crime Rates Bureau reports, Zinnov Analysis
Agenda
34
TRENDS
RANKINGS
CITY PROFILING
Bangalore – Silicon Valley of India
35
Key Drivers
Bangalore has a well developed eco-system of skilled resources and managerial talent; it employs 35% of India’s talent pool
Thriving start-up ecosystem with more than 60% of the product start-ups in India originating out of Bangalore
Infrastructure in terms of steady supply of real estate, in the form of SEZs is improving. New power generation and Metro Rail projects have been major boost to city infrastructure
Pros and Cons
PROS Good Academia and IT Infrastructure, Large
Human Resource, Favorable Climate, CONS High Operations Cost, High Attrition
Illustrative list of companies present
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
TALENT COST ECOSYSTEM
Fresh Talent Pool 40,000
STPI Exports (Rs)
MNC R&D Talent Pool
1,08,220
Quick Facts
Software Exports growth
23% (2009-10)
58,850 Crores (2010)
Hyderabad - The Cyberabad of India
36
Key Drivers
Compared to other metros, the cost of living and lease rentals are lower in Hyderabad by around 10-20%.
Andhra Pradesh is one of the largest supplier engineering students in the country, majority of them being from Hyderabad and adjoining areas
Strategically located – equidistant from Bangalore, Pune and Chennai
Pros and Cons
PROS Good Academia and IT Infrastructure, Ease of
doing business, Good physical infrastructure CONS Relatively higher business continuity risk, poor
city perception
Illustrative list of companies present
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
TALENT COST ECOSYSTEM
Fresh Talent Pool 39,000
STPI Exports (Rs)
MNC R&D Talent Pool
25,520
Quick Facts
Software Exports growth
24.5% (2009-10)
27,000 Crores (2010)
Chennai – Detroit of South India
37
Key Drivers
Chennai has a large human resource pool at all levels. The presence of an industrial base (automotive and engineering sectors) has lead to strong skill sets in these sectors.
Infrastructure availability is quite good especially reliable power, supply of office space, national and international connectivity.
Cost of living and real estate costs are 10-12% lower than Bangalore, the nearest IT hub which is a big plus
Pros and Cons
PROS Good Academia and IT Infrastructure, Good
physical infrastructure, Lower pollution levels CONS Poor city perception, Low cultural diversity
Illustrative list of companies present
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
TALENT COST ECOSYSTEM
Fresh Talent Pool 42,000
STPI Exports (Rs)
MNC R&D Talent Pool
13,270
Quick Facts
Software Exports growth
14% (2009-10)
22,400 Crores (2010)
NCR – 2nd largest metropolitan city of India
38
Fresh Talent Pool 55,000
STPI Exports (Rs) 21,700 Crores (2010)
Key Drivers
Delhi has well developed infrastructure including steady supply of office space and 52 SEZs (spanning 900 hectares) in the NCR region. National and international connectivity from Delhi is also among the best in India
Very strong academia infrastructure due to the presence of more than 100 engineering colleges and research institutes
Places like Noida, Faridabad provide significant cost advantages compared to other metros
Pros and Cons
PROS Excellent IT and transportation infrastructure,
Excellent international connectivity. CONS Relatively average start-up ecosystem, High
pollution levels, history of terrorist attacks
MNC R&D Talent Pool
20,000
Quick Facts
Illustrative list of companies present
Software Exports growth
Almost 0%
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
TALENT COST ECOSYSTEM
Pune – Oxford of East
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Key Drivers
Proximity to “the financial capital of India” has helped Pune to emerge as center of IT services and support arm of some of the major global banks
Pune boasts of very strong manufacturing ecosystem
Pune is home to some of the oldest education institutes and prominent research institutes in India
Thriving Physical infrastructure with projects like new airport, metro rail and 18 new SEZs
Pros and Cons
PROS Good Academia and IT Infrastructure, Favorable
climatic conditions, Strong service provider ecosystem
CONS Poor international connectivity
Illustrative list of companies present
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
TALENT COST ECOSYSTEM
Fresh Talent Pool 30,000
STPI Exports (Rs)
MNC R&D Talent Pool
24,000
Quick Facts
Software Exports growth
40% expected (2011-12)
29,000 Crores, (2010)
Coimbatore – Manchester of South India
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Fresh Talent Pool 25,000
STPI Exports (Rs) 570 Crores (2010)
Key Drivers
More than 40,000 SMBs primarily in textiles, automobiles and other engineering component industries
Commercial Real Estate costs are around 20-55% lower than tier-1 cities
Coimbatore being one of the educational hubs of South India ,has abundance of graduate talent available
Strategically located –equidistant from both Bangalore and Chennai
Pros and Cons
PROS Good Academia Infrastructure, Favorable
Climate, Low Business Continuity Risk CONS Absence of international airport, Average
transport infrastructure
Quick Facts
Illustrative list of companies present
Software Exports growth
90% (2009-10)
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
TALENT COST ECOSYSTEM
Nagpur – The Orange city
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Fresh Talent Pool
STPI Exports (Rs) 140 Crores (2010)
Key Drivers
Rapidly growing infrastructure due to the Multi-modal International Cargo Hub & Airport
Educational hub of central India with more than 40 engineering and medical colleges and good availability of fresh talent
Major engineering hub with presence of companies like Mahindra & Mahindra, NECO Ltd, Bajaj Auto, etc.
Commercial real estate costs are around 40% lower than the tier 1 cities on an average
Pros and Cons
PROS Very Low pollution levels, Favorable state
government laws, strategically located in central India
CONS Extreme Climate, Average medical facilities ,
poor international connectivity
Quick Facts
Illustrative list of companies present
Software Exports growth
10% (CAGR in last 3 years)
20,000
TALENT COST ECOSYSTEM
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
Chandigarh – The Pensioner's Paradise
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Fresh Talent Pool 10,000
STPI Exports (Rs) 470 Crores (2010)
Key Drivers
Chandigarh ranks 1st in India in terms of Human Development Index and quality of life, thereby .attracting a large number of professionals from other locations
The city has a 10-50% cost advantage in comparison to tier 1 cities in terms of Commercial Real Estate Costs
Availability of Good fresh talent pool and strong university ecosystem due to universities like Panjab University is a big advantage
Pros and Cons
PROS High quality of life, Moderate climatic
conditions, low crime rates CONS Relatively small fresh talent pool, poor
international connectivity, average power infrastructure
Quick Facts
Illustrative list of companies present
Software Exports growth
20% (2009-10)
TALENT COST ECOSYSTEM
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
Trivandrum - The highest literacy rate
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Fresh Talent Pool
STPI Exports (Rs) 1120 Crores (2010)
Key Drivers
Abundant available business space (around 20 million sq. ft. ) with natural beauty of the city is ideal for MNCs to set up their delivery centers
Strong Research Ecosystem due to presence of research institutes and academic institutes like CDAC, Indian Institute of Science, Education and Research, Indian Institute of Information Technology and Management, etc.
Onset of huge companies like Oracle for development of next gen products is a big plus
Pros and Cons
PROS Highest literacy rate in the country, Excellent
climatic conditions CONS Poor international connectivity with EU and
USA, relatively small fresh talent pool
Quick Facts
Illustrative list of companies present
Software Exports growth
5% (2009-10)
12,000
TALENT COST ECOSYSTEM
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
Ahmedabad – Detroit of East
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Fresh Talent Pool
STPI Exports (Rs) 490 Crores (2010)
Key Drivers
Ahmedabad is one of the fastest growing cities in India in terms of infrastructure and attracting investments
Commercial Real Estate cost is 20-40% less than that of tier-1 cities
Huge and fast growing auto manufacturing base with onset of companies like Tata, Ford and Peugeot
Pros and Cons
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
Quick Facts
Illustrative list of companies present
Software Exports growth
72% (2009-10)
10,000
TALENT COST ECOSYSTEM
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
Jaipur – The Pink city
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Fresh Talent Pool
STPI Exports (Rs) 410 Crores (2010)
Key Drivers
Flourishing infrastructure with the construction of Mahindra World City(India's largest integrated IT SEZ) and World Trade Park
Good service provider ecosystem due to presence of all major Indian service providers
Cost advantage of 20-40% in Commercial Real Estate costs compared to tier-1 locations
Due to the city’s proximity to NCR, Jaipur can be grown as supporting location to create a hub-&-spoke model
Pros and Cons
PROS Excellent hotel infrastructure, Many weekend
outing options, Low Crime Rate CONS Poor power infrastructure, Extreme weather,
Relatively high pollution levels
Quick Facts
Illustrative list of companies present
Software Exports growth
50% (2009-10)
22,000
TALENT COST ECOSYSTEM
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
Vadodara – The Knowledge City
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Fresh Talent Pool
STPI Exports (Rs) 310 Crores (2010)
Key Drivers
Vadodara offers a cost advantage of over 25% with respect to compensation levels and around 20-40% with respect to cost of living in tier-1 cities
Presence of companies like ABB, L&T, Alstom, Siemens and Bombardier have given a major boost to Vadodara’s industrial ecosystem
Thriving civic infrastructure (Vadodara City Bus Service implemented through PPP model has been one of the most successful projects among peers)
Pros and Cons
PROS Good Industrial Ecosystem, Investor friendly
policies, growing civic infrastructure CONS No international airport, High pollution, Has
witnessed floods, earthquakes and communal violence.
Quick Facts
Illustrative list of companies present
Software Exports growth
70% (2009-10)
8,000
TALENT COST ECOSYSTEM
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
Glossary
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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 Development
Includes R&D in verticals such as Software products/Internet
Embedded R&D Includes R&D done in Telecom, Semiconductors, Storage, Networking and Computer Hardware verticals
Core Engineering R&D
Includes R&D done in Core Engineering R&D includes R&D in Automotive, Energy, Industrial and Aerospace verticals
Fresh Talent Pool Approximated based on number of engineering colleges in the location
Zinnov LLC
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48 Zinnov LLC ( Confidential)