Location Roadmap For IT- BPO Growth: Assessment Of 50 Leading Cities

September 12, 2008: The IT–BPO sector in India has grown rapidly over the past years and has foreseen more potential in future. These industry revenues (Software and Services) for 2008 are estimated to be over USD 50 billion. The growth has been focused on a few leading cities in the country. Till now 90 per cent of the total direct employment (about two million in the IT-BPO industry) is contributed by the seven leading locations of Bangalore, Mumbai, NCR, Hyderabad, Pune, and Chennai and Kolkata. This has attributed not only to employment, but also improved social infrastructure, economic growth and promoting branding and visibility.

Nasscom (National Association of Software and Service Companies) along with A T Kearney released the ‘Location Roadmap For IT- BPO Growth: Assessment Of 50 Leading Cities’, a report first of its kind on the assessment of 50 locations in India that are suitable for the IT-BPO industry.

Based on the analysis on development of IT-BPO through out India, the report has the locations categorized into 4 groups, viz. Leader, Challenger, Follower and Aspirants.

Bengaluru, Kolkata, Pune, Chennai, Mumbai, Hyderabad, NCR(Delhi, Noida, Gurgaon, Faridabad)

Ahmedabad, Bhuvaneshwar, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Madurai, Mangalore, Nagpur, Thiruvananthapuram, Tiruchinapalli,Vadodera, Visakhapatnam.

Aurangabad, Bhopal, Goa, Gwalior, Hubli-Dharwad, Kanpur, Mysore, Nashik, Puducherry, Salem, Surat, Vijayawada

Allahabad, Dehradun, Durgapur, Gangtok, Guwahati, Ludhiana, Patna, Raiput, Ranchi, Shimla, Sillguri, Srinagar, Varanasi

The study was conducted by collecting and analysing data about the 50 locations on over 100 metrics brokendown into key parameters such as:

  • Knowledge pool availability and skill set assessment
    • Availability and quality of employable workforce, utilizing large size of incumbent talent pool in only Leader cities
    • The IT-BPO industry is facing a shortage of employable talent. Need to increase quality and quantity of workforce, improve curriculum and increase industry academic collaboration
    • Necessary support to the Challenger Locations where signs of reverse migration of talent is noticed.
  • Infrastructure
    • Improving infrastructure in many Challenger and Follower locations for better connectivity, power situation and hotel availability
  • Social and living environment
    • Resolving social and living environment issues like high cost of living, higer pollution and rapidly improving recreation / retailing options in Non-leader locations, etc.
  • Enabling business environment
    • Non Leader locations need better depth and breadth of overall business environment and opportunities.
    • BPO companies, particularly domestic BPO, appear to have a higher propensity to move to Follower / Aspirant locations – primarily driven by lower costs and lower mobility of BPO workforce in comparison to IT
  • Government support
    • Though most states promote IT-BPO growth, commitment, ground implementation by differents governments needs to be focused and time-bound.
    • Government support is seen to be the strongest in Challenger locations and has played a critical role in their development.
  • Operating cost
    • There is about 30% lower operating costs in Non leader cities as compared to Leader cities
    • Labour costs in Follower and Aspirant locations can be even lower for less complex / simpler work and small scale of operations
    • Challenger locations, with similar cost structures but better infrastructure, social and living environment as compared to Follower and Aspirant locations.

Apart from secondary research, a key aspect of the study was significant primary interactions in eachlocation with companies, educational institutions, government, etc.

Growth Initiatives for each category

Leader: develop long term plans to promote radial infrastructure and focus on issues of increased attrition, rising real estate and labour costs.

Challenger: Building an IT ecosystem to scale up the employment in IT-BPO sector by supporting IT SEZs and attracting major companies, take advantage of reverse migration.

Follower: Aggressively focus on establishing core set of companies and improve infrastructure to levels of Challenger/Leader locations, greater focus on academic and technical institutions.

Aspirant: Enhance awareness about IT-BPO, develop knowledge base, improving infrastructure and providing educational institutions.

Role of the Stake Holder: Decongestion of growth at a macro level and enhancing the attractiveness at a location level will require each IT-BPO industry stakeholder to play a proactive role in creating the ecosystem for the sector through research, development, enhance support from the government in the locations, focus on long term investment and expanding existing business.

Let us look at what some of the Leader locations have to offer:


Bangalore continuous to rightfully hold the title of ” IT Capital of India” and has been described as “a gateway to new global frontiers” and “a harbinger of a new global labour force that works in cyberspace and that, like much of the world’s financial markets, operates beyond the reach of governments”.

Bangalore climate with its mild winters and summers, pleasant through out the year has attracted IT BPO Industry. Another aspect is the culture of the city. The industry, which is comprised of a young, highly educated, dynamic, workforce, with tolerance to various cultures and backgrounds, itself breeds a certain lifestyle.

NASSCOM, which has a membership that represents 97 per cent of the industry’s revenues and is inclusive of all firms that have more than 20 employees, has a membership in Bangalore of 38 software firms.


The port city of Chennai has a distinct advantage of a major corridor to Southern India as it has already been catering to leading off shore industries. Tamil Nadu boasts of highest in bandwith availability in India, 13.5 Terabit, thus becoming lucrative destination for IT and ITeS industries.

A number of multinational companies to set up their campuses in Chennai owing to its high level of literacy and the finest English language pronunciation of the people. Chennai, capital of Tamil Nadu has real estate value is comparatively cheaper because of the availability of large tracts of unutilized land. Chennai is also gaining advantage over neighboring cities such as Hyderabad and Bangalore owing to the availability of space and manpower. The other reason fetching interest of foreign industries is the low operational cost and cheaper accommodation.


Pune is fast developing industries catering to biosciences, bioinformatics and genomics. Pune is considered as the industrial belt of Maharashtra is now considered to be one of the most progressive and happening cities of India. It promotes necessary infrastructure for setting up industries in both the IT, BPO and manufacturing sectors. There has been an increase in foreign investments with major Indian companies also expanding their operations in the city in recent years.There is a proposal for Hinjewadi Phase II project of the Software Technology Park of India (STPI), which is supposed to be called the IT-BT Park in Pune, shows that the government also is keen in promoting IT industry.


Hyderabad also called Cyberabad is known as HITEC City of India. HITEC City stands for Hyderabad Information Technology Engineering Consultancy City, a major technology township which is at the center of the information technology industry in Hyderabad. The Cyber Towers is the first phase of HITEC City and was inaugurated in November 1998. IT giants like TCS, 7Hills Business Solutions, AppLabs, Keane, Microsoft, Oracle Corporation, GE Capital and Prithvi Information Solutions operate offshore development facilities or call centers in this four-quadrant, 10-store building.

The phase-II of HITEC is the City Cyber Gateway. The Cyber Gateway is designed for ITES and BPO services with multiple redundancies for connectivity and power. Large offshore processing operations operate out of this building.

West Bengal

The government of West Bengal is pulling out all stops to showcase the potential of Kolkata as an IT destination. Banking upon Kolkata’s low cost of operations, large talent pool, low attrition and wage rates, abundant power and excellent infrastructure, the West Bengal government is hopeful that it would be able to attract hordes of IT and ITeS companies to the city.

Many companies have IT solutions development-cum-services centre in Kolkata. This has been the first time that the group has set up such a centre outside of Mumbai. The group has also set up a Dhirubhai Ambani Institute of Information & Communications.


Mumbai, the “Commercial capital of India”, is one of the world’s top ten trade centers. The city contributes 25 per cent of industrial output and 70 per cent of capital transactions to India’s economy. Mumbai, as befits a nation’s financial capital, has seen a major economic boom ever since India embraced economic reforms. With business talent and industial resources Mumbai has been made big investments in almost all sectors, especially the IT, ITeS and BPO sector. The city is home to a huge talent pool and although its infrastructure leaves a lot to be desired, it still is one of the best places in India to do business in.


Noida is now developing as the next big commercial hub in the National Capital Region (NCR). IT complexes in 3Q06, has brought in Giants like Accenture and further demand is expected to materialize soon. According to real estate services firm Jones Lang LaSalle; Noida is emerging as a preferred destination due to its fast developing infrastructure, proactive government policies and low costs.


The distribution of outsourcing companies is skewed towards non-IT services. in Gurgaon when GE Capital International Services (GECIS) in 1997 was set up, making it the first India’s outsourcing company. Later India-based business process services operations of GE Capital 2005, GECIS became an independent company – Genpact, which is now headquartered in Gurgaon. A number of BPO and KPO firms such as Accenture, British Telecom, Dell, Evalueserve, Genpact,Keane, Hewitt Associates and Convergys have Gurgaon as their regional operations hub. This trend continued after several other firms like Alcatel-Lucent, IBM, Opera Solutions Niksun, and Bain & Company established them near the capital city.

Role of the Stake Holder: Decongestion of growth at a macro level and enhancing the attractiveness at a location level will require each IT-BPO industry stakeholder to play a proactive role in creating the ecosystem for the sector through research, development, enhance support from the government in the locations, focus on long term investment and expanding existing business.

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