Andhra Pradesh

Front door to back-office IT services

After largely sitting out the software exports boom, Andhra Pradesh has decided to rectify its past mistakes and ramped up its infrastructure to lure ITES business to the state. It has also set itself the ambitious target of accounting for 50 percent of all the backoffice business flowing into India, by 2008. Venkat Pulapaka has the details

As far as power supply and transport facilities go, infrastructure in Andhra Pradesh is quite satisfactory, says shakti sagar

The IT-enabled services (ITES) segment has been the star performer in Andhra Pradesh’s (AP) IT industry, recording growth of more than 300 percent in the last fiscal itself. Software Technology Park of India (STPI) Hyderabad’s exports for 2002-03 grew by around 35 percent over the previous year’s rate of 42 percent. “All this was possible due to the proactive IT policy of the AP government, which gave a good push to development of infrastructure in the state. The availability of first-class technological space with all the necessary facilities is a great incentive for IT companies to set up shop on a fast track,” says
J Satyanarayana, principal secretary, IT & C Department, government of Andhra Pradesh.

Located within the Hyderabad Information Techn-ology Engineering City (HITEC) at Madhapur is Hyderabad’s pride and joy—the Cyber Towers. This complex is home to software majors like Microsoft, IBM, Oracle and Keane. However, its not just MNCs that have set up base in Andhra Pradesh, Indian’s software giants like Satyam Computers and Wipro also operate from Hyderabad. The MNCs kept coming—GE Power Controls India, GE Power Services (India), Global Customer Value Management LLC, Versata (India) and Geonav Technologies—have established their units in Hyderabad. Last year saw the Class of 2002, Deloitte, Nokia, Net Plane, Datalytic and Cyber Bills—companies who had set up base in 2002—commence operations, while companies like TCS, Infosys, GE Capital and Kernex Microsystems either completed construction of their campuses or are in the process of completing on-going projects in and around Hyderabad.

Land and space

HITEC is being developed on 140 acres of land. 167 acres of land have been developed for the upcoming hardware park near the proposed international airport at Shamshabad outside the Hyderabad city limits. Two acres of land each in Visakhapatnam and Vijayawada are being developed for the establishment of mini-IT parks.

Cyber Towers is presently the hub of ITES activity in Andhra Pradesh. The 5.5-lakh-square-feet facility is fully occupied. Cyber Gateway, located a short distance away from Cyber Towers, offers 8.6 lakh square feet of space in two blocks. It already boasts of a 90 percent occupancy rate. Cyber Pearl, which will be ready for occupation by December 2003, will have 5.5 lakh square feet to offer. It is being developed in a joint venture with L&T Infocity-Ascendas and is coming up in two phases at a cost of $25 million. Cyber Pearl is expected to house a workforce of about 5,000 people once completed.

The Andhra Pradesh Industrial Infrastructure Corp-oration (APIIC) also provides developed areas, where companies can set up independent campuses. Infotech parks like Vanenburg Park, Millennium Centre, White House, Laxmi Cyber Centre, Sanali Towers, SDE, Pradeep Constructions, and Silicon Counties, offer a total area of over 4 million square feet.

“This clearly shows that we have plenty of space available for IT companies to set up shop in Andhra Pradesh,” says Colonel M Vijay Kumar, director of Software Technology Parks of India-Hyderabad. There is not only plenty of built up space available, but facilities have also improved,” he adds.

Ever since the IT business focus shifted from software solutions and development to business process outsourcing (BPO) and ITES, AP has seen a spurt in the construction activity and infrastructure development of the state. BPO and ITES are labour- and infrastructure-intensive segments. Hence the boom in construction.

Public-private partnership

At present, the demand for IT infrastructure in the state is exceeding supply. Therefore, additional infrastructure is being built at a rapid pace through the Public-Private Partnership (PPP) model and various incentive schemes are being offered to boost development in the private sector.

Vanenburg IT Park, designed and managed by Vanenburg Group, is a striking example to the PPP model. Built on a sprawling 20 acres of land near HITEC, Vanenburg IT Park spans 10 acres of open space. It is a green township with landscaped gardens. 5,50,000 square feet across two buildings—Mariner and Auriga—are occupied by companies like Deloitte Consulting, Baan-Invensys, Orillion, and the Surgical Information Systems, besides the Vanenburg Group’s software R&D centre.

The state government, through its PPP initiative, has established L&T Infocity, a joint venture company of Larsen & Toubro and APIIC. In the ITES policy, the Andhra Pradesh government provides rebate on the cost of government land to IT infrastructure companies. Builders in the private sector can build IT parks with concessions on registration stamp duty, transfer of property duty, etc.

Power, telecom, roads and transport

AP is comfortable in terms of power and communications. Industry consensus is that power has never been an issue. “In fact, the supply of power has been uninterrupted and rarely has it tripped. The tariff is affordable and on par with the other states in the country,” says Shakti Sagar, president of the Hyderabad Software Exporters Association (Hysea) and managing director of ADP Wilco (India).

Andhra Pradesh’s chief minister, N Chandrababu Naidu has been at the forefront of the state’s IT initiatives

The state government has tied up with the Indian Space Research Organisation (ISRO) and MEASAT for creating bandwidth in Ku band. Currently, the total bandwidth out of AP is roughly 500 Mbps. To provide international connectivity on the Trans-Pacific route, the state government has installed four satellite dishes. Further, STPI is contracting international fibre as a better technology option for software companies through Sea-Me-We 3 on both Atlantic and Pacific routes. STPI has established satellite earth stations based on Digital Video Broadcasting (DVB) Internet gateways at Vijayawada, Tirupati and Warangal. It also proposes to provide earth stations at Guntur, Mamid-ipally and Manikonda layouts.

Facilities like double feeder line with abundant power supply, multiple telecom providers offering bandwidth are available on-demand. AP also has a good road network. HITEC, Hyderabad is linked to almost all the localities in and around the city. Similarly, IT parks that are coming up in Visakhapatnam and Vijayawada are located in the centre of these cities. “Except for some minor irritants, the transport facilities are by and large good,” says Sagar.

The state government is proposing to construct a four-lane highway connecting the HITEC City with the airport at Hyderabad to shorten commuting time. “The idea is to cut down intra-city travel time,” says Kumar.

Going forward

When it comes to infrastructure, Andhra Pradesh leaves no stone unturned to ensure its position on the topmost rung. The power situation is good and construction of the road network is been undertaken on a war footing. With 500 Mbps of bandwidth on-tap, connectivity issues are addressed too. AP has a stated goal of grabbing half the backoffice business flowing to India by 2008. With Hyderabad getting saturated, the state government has set its sights on positioning Vishakapatnam as its second IT hub. It will also be investing Rs 100 crore into the first phase of the 2 lakh square feet IT park in the city, which should be operational by January 2004.

Microsoft and Oracle have shown interest in setting up offices here. Thought AP has a lot going for it, competition in ITES sector is brutal. Unlike the software boom that unfolded slowly giving Bangalore time to take centre stage, the ITES story is playing out under a spotlight with locations like Gurgaon, Tamil Nadu and Karnataka hungry for business. Still, anybody who’s has visited Hyderabad and seen the pace at which things happen there will not discount AP’s chances of achieving its
goals.

Andhra Pradesh as an IT/ITES destination

Strengths

• Good power supply, road network, 500 Mbps bandwidth on tap
• Many MNCs have already set-up R&D centres in the city
• First state in the country to enact a specific law to promote ITES business

Weaknesses

• Andhra largely missed the software-exports boom of the 1990s

Target

• The state wants a 50 percent share in the back-office operations business in the country by 2008

Threats

• Bangalore’s software ramp-up happened on the quiet. Competitors took time to react. The competition in the ITES sector is a free-for-all, and is played out under a spotlight. It won’t be easy for Hyderabad to do a Bangalore in ITES. Tamil Nadu, Karnataka and Gurgaon are all chasing the same pie.