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April 20, 1998


Chennai challenger

Email this story to a friend. Tamil Nadu aims to be the premier state for IT in India. And it fancies its chances are good as long as the country is politically stable.

Shobha Warrier in Madras

Microsoft was musing on where it should set up its software centre in India. All things appeared equal between Madras and Hyderabad and it was only
Chennai challenger
Infosys trips up
Net policy review
MACH-Iridium tie-up
the issue of a "better standard of living" that allegedly gave Hyderabad the edge. And now the Tamil Nadu government is working to obviate even that difference.

That Madras figured when Bangalore, the erstwhile silicon capital of India, didn't figure among the cities shortlisted, may be a surprise to those who haven't noted the intense efforts made by the Electronics Corporation of Tamil Nadu and the Tamil Nadu Industrial Development Corporation.

According to the CMIE relative development of infrastructure index, Tamil Nadu comes third behind Punjab and Kerala -- surprised again? -- and is likely to move into the slot two sometime this year.

But Tamil Nadu had already moving into the IT industry by setting up ELCOT to promote the state's electronic produce. In 1995-96, the Tamil Nadu IT industry's turnover was Rs 2.89 billion -- Rs 1.39 billion in hardware, Rs 1.5 billion in software. By the year 2001-2002, the targeted turnover is Rs 130 billion -- Rs 50 billion from hardware, Rs 80 billion from software. Not easy, unless the government bends over backwards too. And the Tamil Nadu government is doing just that.

Bangalore had a head start but the demands of software professionals and the power and infrastructure problems there hobbled its hopes. And then there is an unresponsive government. But Tamil Nadu puts out a large number of software engineers every year, not all eager to seek fresh pastures.

"We are very strong in manpower here, with 20,000 engineers coming out every year from 92 engineering colleges. Out of these, 12,000 are software engineers. We can use this strength and develop Tamil Nadu as a base for software activities," says ELCOT Chairman K Madhavan Nambiar.

Already, TVS Electronics has shifted from Bangalore to Madras, and Infosys is investing Rs 1 billion in Tamil Nadu. Already, a 30,000 sq ft office for 250 employees is ready in Madras. Infosys has maintained Bangalore as its HQ though.

Tata Consultancy Services has invested Rs 2 billion in the state while Pentafour hopes to put in Rs 1 billion over the next two years. Wipro and HCL also propose to be major investors while Alcatel hopes to put in Rs 4.5 billion. Bangalore clearly doesn't worry the think tanks in Tamil Nadu.

"Now our competition is with Hyderabad, where Chief Minister Chandrababu Naidu has used his muscle. He got Microsoft because of his salesmanship. See, he has gone and met Bill Gates. When the chief minister himself shows that much interest, it makes all the difference. He has the image of a man who can get things done," says Nambiar, exuding confidence about the way Tamil Nadu is developing and building its infrastructure steadily, if slowly.

The other problem is that of power. A major one, naturally, for the electronics industry.

Growth of TN's IT industry
Year Software parks Software export
(in Rs millions)
1992-93 3 12.1
1993-94 8 23.5
1994-95 20 121.7
1995-96 29 362.8
1996-97 56 1619.8
1997-98 90 3000 (projected)
New private sector projects and 20 short gestation power projects finalised by TIDCO are expected to provide a total capacity of 2,000 MW. And the way former chief minister J Jayalalitha has been hectoring her coalition partners in the central government to provide more power to the state, hasn't done any harm either.

Nambiar said talks were also on with Videsh Sanchar Nigam Limited and the department of electronics to set up new earth stations in Tamil Nadu. DoE, slated to be the next Internet gateway after VSNL, has already committed nearly Rs 500 million for earth stations over the next one-and-a-half years.

ELCOT had seen the problems faced by software parks in Bangalore, Hyderabad and Thiruvananthapuram. In Bangalore only 30 per cent of space was filled; in Thiruvananthapuram too there was a lot of space left unused. So ELCOT asked TCS to find the possible demand for software space in Tamil Nadu. ELCOT officials were reassured when they were told there was a demand of 300,000 to 400,000 sq ft a year.

Nambiar says that though demand is high, there isn't enough built-up space to satisfy it. That shortcoming is being dealt with. Fortunately, there is more demand for the smaller premises which are easier to provide.

But when ELCOT called bids for a possible software park in Kelambakkom, only Reliance came up with a suitable offer. And the officials learnt that the companies preferred to be provided with facilities like water, power, roads etc and be left to develop patches of land themselves.

"They are asking for 10, 15, or 20 acres of land, saying, 'I will build my own township, my own buildings,' etc... See, now HCL wants 55 acres of land which we are going to give them so that they can develop it on their own," says Nambiar.

But a Rs seven billion software park is coming up in Taramani, funded by Alcatel, Elnet, Future Software, Infosys, Nittany, TCS and Wipro, described in official pop-speak as the 'golden cyber triangle'. Expected to start functioning in 18 months, it will cover 7,000 square feet. It will also have an IT university, Tanitec, being developed along the lines of Stanford University, with active industry participation. The first course begins this June.

What about transparency? But no, ELCOT won't rely on obscure memoranda of understanding that even Nambiar admits aren't transparent.

"If we are putting in our equity in the value of land, there is no question about the lack of transparency. These people are developing the company and we are clearing the way. But I feel that either you have to in for transparency and do nothing yourself, or take certain decisions as transparent as possible," says Nambiar, clarifying that ELCOT will opt for the latter.

And red tape? How about that?

"I approve things fast. As soon as you leave, I will ring up HCL and tell them to take the 55 acres they want tomorrow itself. It is that fast... A single window clearance."

Amazing, but is there a snake lurking in this virtual paradise?

Apparently yes. The habit that certain mutinous partners have of pulling down the central government can play havoc with any industry. Particularly since it is Jayalalitha, the former chief minister, who threatens to yank the rug. And if she messes up, the consequences could be disastrous for Tamil Nadu.

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