Top-notch talent pool lures IT, BPO firms to Karnataka

The trend points to manpower availability for skills that are more than plain vanilla outsourcing work that companies indulged in earlier.

Despite a slowdown, Karnataka continues to draw IT and BPO companies due to the large talent pool and specialised skill sets.

In the last two months, four IT and BPO companies have opened development centres in Karnataka.

Nasdaq-listed Pegasystems opened a new development centre totalling 55,000 square feet in workspace. The Bangalore centre will support its global operations and will deliver R&D, engineering services, industry solutions framework and customer support to its global Fortune 500 clients, similar to other software majors.

In July, Xchanging, a London Stock Exchange (LSE)-listed IT and BPO company opened a new centre in Shimoga Special Economic Zone and aims to hire 3,000 people by 2013.

Similarly, Serco, a BPO company this week opened a new facility at Shimoga and plans to have a total headcount of 450 people by November. The facility will offer BPO services to a leading privately held telecom company.

‘ATTRACTIVE PROPOSITION’

According to analysts, despite higher costs due to inflation, availability of talent still makes it an attractive proposition.

“We did not open operations only due to cost but to help us drive the next wave of growth based on our value proposition,” said Alan Trefler, founder and CEO, Pegasystems.

“No other location in the world offers the large pool of quality talent found in cities such as Bangalore. They offer a bundle of distinct and mutually reinforcing benefits which companies can leverage for competitive advantage,” said Peter Schumacher, CEO, Value Leadership Group.

A further proof of this can be seen from the fact that this month, Ellucian, a company that provides technology for higher education opened a new development centre in the heart of Bangalore.

All this points to manpower availability for skills that are more than plain vanilla outsourcing work that companies indulged in earlier.

“Companies are focussing on areas such as predictive analytics for the US financial sector, regulatory compliance related work etc. as compared to call centre kind of jobs,” said Sanjoy Sen, senior director, Deloitte.

PREMIUM ON TALENT

Sidhant Rastogi, director, Zinnov, said: “In most cases, companies setting up their centres were unable to find the right talent in the right number in their native geography, or could not source talent locally in the near future.”

A recent study by Zinnov found that India will produce 250,000 engineers from only tier 1 engineering colleges over the next five years.

The new-age gold rush

Despite a global economic slowdown and increase in employee related costs, India continues to draw IT and BPO companies due to a large pool of available talent pool armed with specialised skill sets. In the last four months, more than half a dozen IT, BPO and start-up companies have opened development centres in Karnataka.

Chinese telecom equipment maker Huawei plans to open a product development centre in Bangalore built over 1 million square feet that can seat 4,000 people. eBay has opened a global development centre in Bangalore and plans to hire 1,000 people by 2015. The company plans to recruit senior technologists with product development experience to create new technologies for its ecommerce business. Competitor Walmart also opened a centre to undertake Walmart’s e-commerce work in India. Others like HP have opened a 2,00,000 square feet development and support centre in Bangalore.

Similarly, Nasdaq-listed Pegasystems has opened a new development centre totalling 55,000 square feet in workspace. The Bangalore centre will support its global operations and will deliver R&D, engineering services, industry solutions framework and customer support to its global Fortune 500 clients, similar to other software majors.

In July, Xchanging, a London Stock Exchange (LSE) listed IT and BPO company opened a new centre in Shimoga Special Economic Zone and aims to hire 3,000 people by 2013

So, at a time when the Indian IT majors are facing an uncertain global economic climate and increasing anti-outsourcing sentiment, why are companies opening up development centres in India? According to companies and analysts India despite its higher costs, availability of talent makes it an attractive proposition.

Alan Trefler, Founder and CEO, Pegasystems is of the opinion that talent available for data analysis or database concepts in addition to taken for granted skill sets like Java or SQL programming is higher in India.

“No other location in the world offers the large pool of quality talent that can be found in cities like Bangalore that offer a bundle of distinct and mutually reinforcing benefits which companies can leverage for competitive advantage,” said Peter Schumacher, CEO, Value Leadership Group.

A further proof of this can be seen from the fact that in August, Ellucian, a company that provides technology for higher education opened a new development centre in the heart of Bangalore. All this points to manpower availability for skills those are more than plain vanilla outsourcing work that companies indulged in earlier. “Companies are focusing on areas like predictive analytics for the US financial sector, regulatory compliance related work etc. as compared to call centre kind of jobs,” said Sanjoy Sen, Senior Director, Deloitte.

A lot also has to do with the specific talent that is needed in a particular geography. Companies in the developed markets (including Japan) have been struggling with this. Sidhant Rastogi, Director, Zinnov said, “In most cases companies setting up their centres were unable to find the right talent in the right number in their native geography, or could not source talent locally in the near future.” Whether it’s in areas like SAP consulting, networking or cyber security, India has options with 5.5 lakh engineering students graduating every year.

Startup story

Technology product startups based in the Silicon Valley and other places are following bigger companies to Bangalore. Snap MyLife Inc. headquartered in Princeton, New Jersey that provides cloud-based applications, opened its India development centre in February.

Companies from other countries are similarly setting up development centres in Bangalore. New Zealand-based Pingar, with offices in Hong Kong, India, the United Kingdom and the US entered India in February in partnership with CMC to develop and implement software products in India and abroad.

Bangalore is attractive for these companies due to the wide choice of talent pool available across different areas for technology companies. A couple of years back, top IT companies like Infosys and others started to move into Tier 2 cities like Trivandrum, but for product start-ups, Bangalore is a big draw.

“Despite high commercial real estate, we see the good quality of technical engineers for developing products like ours in Bangalore,” said Jiren Parikh, President and CEO of Snap MyLife. According to analysts and industry watchers, what has changed now is the increased maturity and the perception of building products that create higher value. Others share a similar point of view. “People migrate to different companies since they don’t get to build products and Bangalore has a wide talent pool to choose from. Also, opportunities in areas like cloud and mobility is making employees consider product companies,” said Vinodh Kumar, Global Director of Engineering, and Head of BloomReach India. The company is three years old and was started by ex-Google employees.

Snap MyLife currently employs 35 product engineers and according to company executives and will triple its employees in the next few months.

Pingar India is planning to increase its current staff in Bangalore of 13 to 35 over the next few months. “These positions will be focused largely on new business development and technical engineering support,” said Peter Wren-Hilton, CEO, Pingar. BloomReach did not give out its India hiring plans but said that has about 80 employees in the US and the company plans to hire aggressively in India. Karnataka has around 200 engineering colleges, according to state data.

Tier II play

To cut costs and contain attrition, MNC are increasingly moving into Tier 2 cities, says a recent Zinnov study. It went on to add that while 96 per cent of MNC R&D companies are located in cities like Bangalore, increasingly they are moving to Tier 2 cities like Ahmedabad, Jaipur, Chandigarh, Coimbatore, Vadodara, Nagpur, Pune and Trivandrum. Further, the study highlighted that there are around 2 lakh employees who work in R&D centres for multi-national companies.

This R&D talent pool is growing at the rate of 9 per cent every year and is expected to reach 250,000 by 2015. Chandramouli C S, Senior Director-Globalization Advisory, Zinnov, said, “MNCs started expanding to Tier-2 cities due to advantages like higher catchment area, lower attrition, cost arbitrage, etc.” Typically, Tier 2 cities were a preferred destination for IT and BPO companies who were grappling with commercial real estate and attrition costs. This trend is being seen now with multinationals like Dell, Nokia, Amazon and others who are looking at tier 2 cities that would be in addition to their existing centres in major cities.

Cost of living in Tier 2 cities in India is 10-25 per cent lower compared to Tier-1 cities and provide cost advantage of 15-40 per cent in commercial real estate costs. “Salary costs and other expenses go up in a tier 1 city over a period of time,” said Manohar Joshi, Director –Systems, IonIdea Inc. IonIdea set up a development centre in Hubli a few years ago.

Also, fresh talent pool in Tier 2 cities is estimated to form 35 per cent of the Indian R&D workforce going ahead. A majority of the work being undertaken involves testing, customer support and bug fixing. These typically tend to be lower level work in terms of profile but which is critical to a company’s operations, analysts say.

While India continues to be a draw, competition from countries like China in terms of engineering skills is catching up. Add to that, 25 per cent of graduates are unemployable and as a result organisations spend about a billion dollars every year in training them. The sooner Indian educational institutions address these issues, the better it would be for the sector. Else, Indian companies will be forced to look to their neighbour across the wall for software talent too.

Schneider Electric takes 5 lakh sq feet property on lease

In among the largest lease deal transactions in India in terms of space in the last two months, Schneider Electric, a global specialist in energy management, has taken 5 lakh square feet of office space on lease in Bearys Global Research Triangle (BGRT) in Whitefield, an upcoming commercial district in Bangalore, according to industry sources.

The lease rentals for the transaction could be anywhere between R30 and R33 per square feet per month in the building, making the deal around R20 crore annually on the higher side, said sources.

“The rentals in the vicinity are in the range of R29 per square feet per month, but BGRT being a Leadership in Energy and Environmental Design (LEED) certified building, could be in a position to command a couple of rupees extra,” said a consultant with knowledge of the transaction.

Schneider refused to divulge details of the transaction. A company spokesperson told FE, “We will not be able to validate or answer your questions at this point in time. Schneider Electric is and remains committed as always to its India operations”.

Built on a 21 acre triangular property, BGRT is a research and development complex being modeled on the Research Triangle Park (RTP), North Carolina, US, according to the project’s website.

It is said to be the first Platinum LEED certified green building research park.

In the first phase, the complex will have a built up area of 1.25 million square feet, and the second and third phase will be 2.71 million square feet. It will house two basements, ground floor and 10 floors.

The under construction office project, sources said, is six to nine months away from completion.

In the commercial and office space offtake, Bangalore has been overshadowing other cities of the country, say market experts.

From IT/ITeS to pharmaceuticals, companies are making a beeline to take up commercial space in Bangalore.

According to market estimates, Bangalore has been contributing a lion’s share to the office space offtake in the country, which has been as high as 50-60% in the last two months

Private equity play hots up Bangalore realty market

A resilient property market backed by perceptions of high quality standards and professionalism has seen private equity investments of at least Rs 400 crore flow into Bangalore-based developers in the last two months.

Global investment firm Xander has bought a49% stake for Rs 150 crore in the retail component of Mantri Developers integrated township,Mantri Serenity,located on Kanakapura Main Road.Sushil Mantri,CMD,Mantri Developers,confirmed the deal .Prior to this,Mantri Developers raised Rs 100 crore from ASK Property Investment Advisors,the real-estate private equity arm of ASK,for its luxury residential project in the heart of the city,near Lalbagh.

On Tuesday,ASK announced another Rs 100 crore fund infusion for a 50% stake in a residential project comprising of villas and apartments being developed by Shriram Properties,located off Sarjapur Road,near the Wipro Campus.Commenting on the companys recent funding activities,Sunil Rohokale,CEO of ASK Investment Holdings,said: Our second round of investments in Bangalore shows our confidence in the outlook for the citys real estate market.The market is stable due to constant job creation. 

Samir Jasuja,CEO of real estate analytics firm PropEquity,said Bangalores absorption rate had been fantastic and the market was doing way better than its peer cities in west and north of the country.Jasuja said the PE interest was also because,south-based developers have proven to be much more professional than developers in the west and north.Also,their project execution and quality is far better than what one sees in the rest of the country.

Anuj Nangpal,director of investment advisory in real estate consultancy DTZ India noted,Mumbais real estate market is whopped,Delhi is too investor led and there is a lot of underwriting in sales,Chennai has seen a slowdown,but Bangalore continues to remain strong and steady.

The PE party may continue in the coming months.Project level funding to the tune of Rs 300 crore is on the cards,with deal closures expected to happen as early as end of September.

Century Real Estate led by P Ravindra Pai,one of the largest owners of real estate (about 3,000 acres) in Bangalore,recently raised Rs 40 crore for its project Century Indus,located in Rajarajeshwari,from Anil Ambanis Reliance Capital.Century is in the process of raising an additional Rs 150 crore to be channeled into two SPVs (special purpose vehicles ),and it is said that Reliance Capital may again participate.

Another Bangalore-based premium developer,Jain Heights,is in talks with three fund houses,including Reliance Capital,to raise around Rs 100 crore at the SPV level for multiple projects.The funding is being planned in two tranches a first round of Rs 60 crore and then Rs 40 crore.The first round of funding will see closure by September end,company sources said.From the consumer standpoint,it is very good news when a PE fund comes on board a project,as it guarantees financial stability,and ensures that the project goes on to completion.


FUND FLOW

Xander invests Rs 150 crore for 49% stake in Mantri Serenity retail ASK invests Rs 100 crore in Mantris luxury residential project near Lalbagh and another Rs 100 crore in Shrirams residential project off Sarjapur Road Reliance Capital invests Rs 40 crore in Century Indus Century is raising an additional Rs 150 cr from Reliance Capital for 2 residential projects Jain Heights is raising Rs 100 crore in two tranches,in which Reliance Capital is the front-runner

Its official: City to host AeroIndia 2013

Sources say the ministry of defence has directed the IAF to make arrangements for staging the country's premier aeronautical show at Yelahanka as usual

Ending the confusion over the venue of Aero-India 2013,the Ministry of Defence (MoD) has decided to continue organizing the country's premier aeronautical show in Bangalore.Marking the beginning of preparations for the much-awaited global event,the MoD,according to sources,has directed the Indian Air Force (IAF) to make arrangements at its Yelahanka Air Force Station to host the show.
The 2013 edition of AeroIndia,scheduled to be held between February 6 and 10,was mired in controversy following rumours of the Union governments decision to shift the event out of Bangalore.Even though there was no consensus over the alternative venue,the buzz in the aviation industry was that the country's IT hub was all set to miss the global event.

But,unwilling to let go of the event,the then chief minister of Karnataka D V Sadananda Gowda had met defence minister A K Antony and requested him not to shift the venue.

However,the IAF is said to have begun preparations for the much-awaited air show.IAF head quarters has written to various squadrons base dat Yelahanka.Speaking to media,a commanding officer of one of the squadrons,said,We have got an official communication from HQ about the show.Major obstacles like disturbance of civilian air traffic,airspace management and other aspects have been resolved by the MoD.We have been asked to make due arrangements to accommodate the aircraft that will land in Yelahanka. 

Asked whether the show would affect their operational exercises,one of the pilots explained,Even though the event does come on the way of our exercises,we will stream line our schedule for a few days.If in inevitable,we will carry out important exercises from other nearby bases. According to sources in the MoD,the registration process for AeroIndia 2013 has begun.Ever since the nation begantohosttheairshowin1994,the premier defence show has made Bangalore a major destination for aerospace companies to showcase their technology,inventions and R&D activities.

The Yelahanka Air Force Station will be hosting the show between February 6 and 10,2013

B’lore to boast of biggest aerospace park

Bangalore that is already on the international air map, connecting most of the cities in the world, will be home to a biggest aerospace park in the world.

Principal secretary to the department of industries and commerce M N Vidyashankar told media, foundation will be laid for the park, intended to be developed at a cost of nine billion US dollars on 1,000 acres of land near Bengaluru International Airport (BIA) in the month of December.

The park will boast of Airbus, Boeing, Bombardia to name a few among the international aeroplane manufacturers, all coming under one roof.

As a prelude to this, 40 biggest aerospace companies are taking part in a meet in Bangalore on Monday (September 10).

“Name a company, you can find them in the conclave,” the officer said in a confident tone.

Investments

Reiterating that reiteration didn’t have a least impact on the industrial growth in the State, the officer substantiated his claim with the recent expressions of interest. Recently, Rs 48,000 crore worth projects were inked (apart from those signed in GIM 2012).

Most of the investments are in the area of solar energy and wind energy, besides IT and BT too with north Karnataka getting major share of it. The investors are preferring Gadag, Bijapur, Raichur and other districts in north Karnataka for the availability of water in abundance.

In addition to this, Taiwan is coming to India, particularly Bangalore in a bigger way. Taiwan is a country known for its hardware expertise and with that country evincing interest in Bangalore, it will be a wedding between software (of which India is the master) and hardware.

The minister for external affairs, Taiwan is scheduled to lead a delegation of 400 industrialists to Bangalore on September 26, the officer added.

Karnataka clears 23 projects worth Rs 16,077 cr

Kirloskar Toyoda Textile Machinery (KTTM) has received clearance from the Karnataka Government to set up a Rs 3,847 crore factory in Kittur in Belgaum district.

The company will set up an engine and a textile machinery unit which will generate over 1,200 jobs there. KTTM was among the 23 projects cleared by the state high-level clearance committee (SHLCC) on Friday. The total investment involved is over Rs 16,000 crore and it will create nearly 4 lakh jobs.

Clearance was also given to Reliance Cement Company for setting up a Rs 690 crore cement grinding unit in Gowribidanur taluk.

Wadhwan Mega Infrastructure’s proposal to set up agro industrial clusters and agri Infrastructure project in many districts of the state with a total investment of Rs 10,000 crore was also cleared.

The other projects which were cleared were:

Zonasha Estates & Projects’ proposal to establish software development centre at Devanahalli near Bangalore involving an investment of Rs 242.56 crore. It will generate over 17,000 jobs.

Enrich Private Limited’s proposal to establish EPC solar PV project in Aliyabad, Bijapur District, with an investment of Rs 980 crore.

Gopalan Institute of Medical Sciences and Research to set up a medical college and a hospital in Attibele near Bangalore involving an investment of Rs 248.10 crore.

Showa India’s project to set up a unit to make shock absorbers for vehicles with an investment of Rs 342 crore. It will lead to jobs for nearly 1,000 people.

TB Kawashima Automotive Textile’s proposal to set up a unit to manufacture high quality woven and tricot / circular knitted textile fabrics for car seat including weaving, knitting, dyeing, coating and finishing process. The company will invest Rs 100 crore in the project which will be set up in Kadakola Industrial Area, Mysore District.

JSS Mahavidya Peetha’s proposal to set up three education institutions in Kadakola Industrial Area, Mysore District with a total investment of Rs 647 crore. It will create jobs for 14,500 people.