Karnataka

Is Maharashtra still numero uno?

A few years back, Maharashtra was the leading industrial state in the country. In IT too, it was no different with software behemoths such as TCS headquartered in Mumbai. But in the face of acute competition and demand, the state has been seeing business gradually shift to progressive states like Andhra Pradesh and Karnataka. Srikanth R P & Stanley Glancy analyse Maharashtra’s endeavours to regain the top slot

According to Ravi Datar, Maharashtra scores when it comes to telecom connectivity and infrastructure, power infrastructure and even overall industrial culture

When one thinks of IT in Maharashtra, the focus is narrowed down to two cities, big brother Mumbai and sibling Pune. The only two cities that can be considered as significant contributors to the IT revolution in the state. Of these, Mumbai attracts a majority of the investment flowing into Maharashtra for almost every industry and IT is no exception.

The name Mumbai conjures up images of a mighty city, forever bursting with action. The city’s indomitable spirit can be seen from examples of common people in Mumbai who are willing to work undeterred through any obstacle—even torrential rains and bandhs cannot crush the city’s spirit. It is this energy that has attracted hordes of financial houses and top-notch multinationals to set up base in Mumbai.

However, of late, there has been a growing perception that Maharashtra is fast losing out to other states, especially in the field of IT. This is not good news for a state that prides itself on an excellent track record. Consider the following figures put forward by Maharashtra Industrial Development Corporation.

• Maharashtra has the highest number of software export units (1,251).
• It contributes around 30 percent of the country’s software exports
• The largest number of ISPs in India are based in Mumbai
• Over 35 percent of total PC penetration is in Maharashtra.

Moreover, specialised institutions like C-DAC, IIT, VJTI and NCST are churning out skilled technical manpower to spearhead the IT revolution. Mumbai was also the first choice of the early movers in the software space like TCS, Mastek, Datamatics and Patni.

But despite the impressive track record, recent reports indicate that Mumbai could be losing out to cities in more progressive southern states like Andhra Pradesh and Karnataka. Nasscom, which recently released a report titled, ‘Super Nine Indian ITES destinations,’ to assess the competitiveness of nine Indian cities for IT-enabled service companies revealed some startling facts. According to Nasscom, the ITES industry in India is experiencing the third wave of growth in terms of geographical areas of operation and services offered.

In the first phase, the industry was dominated by captive centres of large multinationals such as GE, American Express and Swiss Air, who set up operations in metros such as Mumbai and Delhi. In its second phase, the growth of the industry attracted entrepreneurs who set up operations in and around Delhi (NCR) and Mumbai. The third phase of growth has been more geographically dispersed with new locations emerging such as Hyderabad, Pune, Bangalore, Chennai and more recently Kochi.

It is this shift that is hurting old-favourites like Mumbai, as every ITES company is looking to cut down operating costs. As factors like employee costs, transportation costs and cost of real estate in Mumbai is higher than those in emerging cities, ITES companies have naturally been attracted to cities like Kochi and Hyderabad, which offer lower operating costs. Hence, while other states are now going all out to attract IT or ITES companies, Maharashtra, which could earlier boast of its infrastructure facilities, is now grappling to build infrastructure in line with the new demands.

Cdr Rawat suggests that the government should facilitate immediate transfer of goods once the bill of entry is filed

This view is best summed by P Venugopal, STPI Mumbai’s director who says, “Maharashtra was the leading state in terms of infrastructure and in attracting IT companies, but this position has gradually been taken away by the southern states. Maharashtra lags behind because we did not aggressively take initiatives to stay at the number one slot. Compare this with southern states, where state governments are more proactive in interacting with foreign delegations. Due to this, one can see many multinational companies preferring Bangalore to Mumbai. Also, one cannot be smug in the fact that our infrastructure was one of the best. In progressive sectors like IT, even in a short span of six months one can see infrastructure reach saturation levels. Hence, provisions need to be made on a continuous basis and infrastructure needs to be upgraded with the times. The southern states built infrastructure first and then invited IT companies to set up shop. Maharashtra is different from other states as we already have big companies operating and hence infrastructure needs to keep pace with the rising demand.”

The perfect analogy to this problem of infrastructure coping with demand, can be seen in Mumbai’s crowded local trains. Despite having one of the most efficient public transport networks in the country, the demand is so high that even a minor stoppage can throw the services out of gear.

Despite these shortcomings Mumbai still ranks among the very best in factors like telecom infrastructure and international connectivity. In fact, a recent study conducted by research group Gartner ranked Maharashtra as the most preferred state in the country for the ITES industry.

Says Ravi Datar of Gartner, “In terms of overall suitability no other state can compare to Maharashtra. When you look at availability of trained and trainable manpower we are way ahead of other states. No other state comes even close in terms of telecom connectivity and infrastructure, power infrastructure and overall industrial culture.”

So while new players may think of setting up operations in different states, most of the existing players are happy with Mumbai.

Says Prakash Gurbaxani, chief executive officer for TransWorks, “Maharashtra would still rank among the very best in terms of infrastructure for IT/ITES companies from a power, connectivity and availability of talent standpoint. Take telecom connectivity, for instance. Mumbai has over 800 Mbps of international satellite connectivity through VSNL and STPI. Besides BSNL, private players like Hughes Telecom, Reliance Infocomm and Bharti Telesonic plan to connect various cities in Maharashtra through their own optic fibre network. Maharashtra’s high investments in power generation over the last 10 years have made it one of the few power-surplus states in India. Further, Mumbai offers good connectivity to international locations.”

Atul Kunwar says Maharashtra should follow other states in setting up a single-window clearance system

Even in terms of quality of skilled manpower, ITES players are satisfied. Says E-funds International’s president Pradeep Saxena, “When it comes to quality of personnel, Maharashtra is undoubtedly number one. From our experience we find that students who come out of colleges in Mumbai have a flat accent. Hence it is easier to train them in any way we want.”

Besides this, Maharashtra has a strong presence in financial services. Most banks are headquartered in Mumbai, over 35 private and foreign banks are present in the city. This has consequently translated to the local talent having strong domain knowledge in the financial services segment, which is one of the largest spenders on IT in the world today.

Also, few know that it was the vision of the Maharashtra state government when it set up the first export zone SEEPZ back in 1973, which sowed the seeds for software exports in later years. Soon some of the major names in the industry like TCS, Datamatics and Patni set up shop in SEEPZ.

With the success of SEEPZ, similar initiatives were set
up across the country. Additionally, the government has been trying to reduce traffic congestion in Mumbai by setting up specialised IT Parks outside the city, like the Millennium Business Park at Navi Mumbai and International Infotech Park at Vashi.

MIDC is also developing SEEPZ++ and Dronagiri Hardware Park, which should give a fillip to the state’s plan to attract IT companies.

But while Maharashtra touts impressive statistics, it has to realise that past laurels does not count in this competitive age and a state has to constantly adapt to changing times to attract businesses. For instance, the government has to take a serious look at the state of roads and try to reduce travel time.

Says Cdr (Retd) N D Sharma, general manager, facilities and logistics, Mastek, “There are certainly some areas that need immediate attention. Road conditions, local transportation and hygiene. One of our foreign customers made a telling remark when he pointed out that it took 90 minutes to cover a distance of seven kilometres (from SEEPZ to a hotel in Powai). The problem of slums around these technoparks does not send positive signals. Solutions to problems like these are not easy but the state has to focus on these aspects. Broadening and quality improvement of roads must be taken up on a priority basis. Secondly, the government should undertake a serious view of slum management and provide basic amenities like toilets in sufficient numbers.”

This view is shared by countless IT and ITES companies in Mumbai who say that while they were happy with factors like power, telecom infrastructure and bandwidth—the problem of traffic is still a huge challenge that the state government must address immediately.

According to Prakash Gurbaxani Maharashtra's high investments in power generation over the last ten years have made the state one of the few stable power supply

Another bottleneck that software companies in Mumbai face is with respect to getting imported equipment cleared through customs. This despite the fact that Mumbai has more connecting flights than any other city in the country. Says Cdr Rawat, facilities head of Intelenet, “Materials imported by air reach the city in a matter of hours, but on an average it takes 10-12 days between landing and permission for installation of the goods at the STP unit. Although we are not shy of following any procedure, we do feel that most formalities can be completed later.” Rawat suggests that the government should facilitate immediate transfer of goods once the bill of entry is filed.

Another problem cited by Rawat is with respect to power supply outside of Mumbai. Says he, “While Mumbai boasts of uninterrupted power supply the same is not the case with cities like Navi Mumbai where a large number of IT players have centres.” Big companies can afford to install generators but smaller players lose out in terms of revenues, as clients don’t want to face the likelihood of data loss due to power failure.

But Datar believes that the situation in Maharashtra is far better than in other states. According to him, most state governments resort to power subsidies to keep tariffs low but they won’t be able to sustain the same for long.

Says Atul Kunwar, CEO, Syntel, “The state government is not proactive. They should look at what states like Andhra Pradesh and Karnataka have done. The state should also market itself better to attract IT and ITES companies.” Adds Datar, “The government needs to create an atmosphere conducive to development. The tax structure needs to be revisited and the octroi system should be completely done away with. Maharashtra should also follow other states in setting up a single-window clearance system as any other system is seen as unfriendly.”

While Maharashtra still has a considerably good infrastructure when it comes to factors like power, telecom infrastructure and international connectivity, it has to realise that being good in this competitive age is not sufficient—one has to be the best.

Till the state realises this, IT companies will continue to check out other places.