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India Location Trends

Global Corporate Services, India. India Location Trends. June 17, 2009. “Location Decision” Trends. Location Decision “Tier-1 vs Tier-2/3” A large number companies are looking at setting up operations in Tier-2/3 cities to keep up the cost advantage they have over other countries/companies.

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India Location Trends

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  1. Global Corporate Services, India India Location Trends June 17, 2009

  2. “Location Decision” Trends • Location Decision “Tier-1 vs Tier-2/3” • A large number companies are looking at setting up operations in Tier-2/3 cities to keep up the cost advantage they have over other countries/companies. • Tier-2/3 cities offer lower operating costs as well as cheaper labor and real estate costs, which form a significant part of the cost structure for IT/ITES companies Tier – 1 cities “Leaders” Tier – 2 cities “Challengers” Tier –3cities “Followers/Aspirants”

  3. Click here… Click here… Key Drivers for “Location Decision” Change in Importance

  4. Recession Effect…Back to square one? • Rescission effect “Changing strategies in an uncertain world” • The past 6 months have made a lot of companies rethink their strategy to move to Tier-2/3 cities • Many companies who had made the move to Tier-2/3 cities are contemplating moving back to Tier-1 cities due to significant decrease in real estate rentals • Poor absorption of IT space in Chennai • May 23, 2009 • Office rentals to fall 20% in 2009; realty to recover in 2010 • May 14 2009 • Mumbai office rents fall, but still among world's highest • 4 Jun 2009

  5. Tier -2/3 Cities…Key Occupier Concerns • Developer & construction quality is a key concern for occupiersLarge occupiers are concerned about delivery of their facilities owing to in experienced developers holding prime lands • Social infrastructure is another key concern. The average age of employee in any large Indian IT player or BPO is 25 – 29 years. The smaller cities often lack the culture, “crowd” and “hang – outs” that the larger cities are famous for – a work / life balance • Infrastructure development is even more importantSmaller cities and newer locations must learn from the experience of their larger cousins, that the roads must be built before the buildings come up.

  6. Future Trends… Challengers mean serious business • Although the Tier-1 cities have seen a significant decrease in real estate costs, we have to consider the fact that real estate is not the largest factor in the overall cost structure of these companies • Labor costs are the most significant cost factors for these companies and even if the real estate costs have fallen sharply the Tier-2/3 locations are still presenting a 20- 25% cost benefit as compared to the Tier-1 cities • As and when an upward trend starts in the market, this difference in cost benefit will only widen 100% Move to Tier-2/3 cities 72% 67.5% NOTE : Examples of other costs include expenses like power, transport, utilities, etc.

  7. Delhi NCR LABOR AVAILABILITY • Population: 14,000,000 • Number of graduates: 78,500 • Literacy Rate : 81.67% • Population Growth (‘08-’13): 4% • St. Stephen’s College, LSR College for Women, Hindu College, Hansraj College, Jesus and Mary College, IP College for Women, Sri Venkateswara College, Delhi College of Arts and Commerce , Miranda House, Ramjas College, Gargi College • HP, Cognizant, IBM, Alcatel-Lucent, Dell, Convergys, Evalueserve, Accenture, Hewitt Associates COLLEGES & UNIVERSITIES STRENGTHS MAJOR OCCUPIERS • The ease of recruitment and ability to scale-up in NCR have been indicated as primary criterion for location selection • The high current base of companies in the NCR has been indicated as a location selection criterion - respondents have indicated that presence in Gurgaon for international operations is mandatory in order to get exposure to international clients • There is high attrition at all levels driven by compensation-based poaching RECENT MARKET ACTIVITY WEAKNESSES

  8. Pune LABOR AVAILABILITY • Population: 5,064,700 • Number of graduates: 35,000 • Literacy Rate : 77% • Population Growth : 4.1% • Fergusson College, Symbiosis College of Arts and Corn , Nowrosjee Wadia College, B.M. College of Commerce , St Mira’s College, Marathwada Mitra Mandal’s College • Chase Card Services 1,600 • Infosys, Tech Mahindra, Wipro, Sasken, Calsoft, Cognizant, Tata Elxsi, KPIT, Cummins, Aztecsoft (Disha), Persistent Systems, Zensar Technologies, WNS, Convergys, EXL and Mphasis COLLEGES & UNIVERSITIES MAJOR OCCUPIERS STRENGTHS • Cost of operations is lower compared to Bangalore and Delhi by 20 per cent • The quality of manpower available is very satisfactory due to availability of good communication and technical skills • Pune is a young location with more than 50 per cent of the population below 30 years of age • Infrastructure poses a challenge due to bad road conditions, traffic, lack of local transportation and international connectivity • Recruitment is beginning to become an issue as there is not enough supply to feed the increasing demand RECENT MARKET ACTIVITY WEAKNESSES

  9. Bangalore LABOR AVAILABILITY • Population: 6,200,000 • Number of graduates: 85,023 • Literacy Rate : 81.67% • Population Growth : 1.72% • Indian Institute of Management, Indian Institute of Science, Surana College P.G. Centre, the M. S. Ramaiah College of Arts, Science and Commerce, Dayanand Sagar College, Brindavan College, and the Community Institute of Commerce and Management Studies. • Wipro, Infosys, IBM Satyam, Patni, Mphasis, HTMT, IBM, Siemens, Dell Computers COLLEGES & UNIVERSITIES STRENGTHS MAJOR OCCUPIERS • The city has a favorable age profile with 67 per cent of the population in the working age • Availability of manpower due to the large graduate population within the city as well as other cities in the state / country make recruitment and ramp-up relatively easy • Social infrastructure and standard of living is good and hence is able to draw expats / senior management • There is high attrition at all levels driven by compensation-based poaching • Poor infrastructure in the city with heavy traffic congestion, poor road network and increasing pollution is drawing talent away from the city RECENT MARKET ACTIVITY WEAKNESSES

  10. Hyderabad LABOR AVAILABILITY • Population: 8,800,000 • Number of graduates: 100,000 • Literacy Rate : 69% • Population Growth : 3.92% • The city is home to three central universities, two deemed universities, and six state universities. Some of the prominent ones are : Osmania University, BITS Pilani, Indian Institute of Technology, International Institute of Information Technology, Jawaharlal Nehru Technological • Satyam, Infosys, Wipro, TCS, Polaris, Infotech, Apollo Health Street, Zavata Inc., Deloitte, Karvy Global Solutions, HSBC, UBS, Genpact, Dell, Nipuna, etc. COLLEGES & UNIVERSITIES STRENGTHS MAJOR OCCUPIERS • 63 per cent of the population is of working age • Enabling environment owing to a proactive State Government Availability of talent pool due to the large number of colleges in the location and state • Good infrastructure support from the Government: • The location has good domestic and international connectivity • Cost of operations are higher due to high labor costs as attrition rates are high and it is difficult to retain manpower RECENT MARKET ACTIVITY WEAKNESSES

  11. Jaipur LABOR AVAILABILITY • Population: 3,324,319 • Number of graduates: 14,000 • Literacy Rate : 65.38% • Population Growth : 2.14% • LNM Institute of Information Technology, Malviya National Institute of Technology, Rajasthan Sanskrit University, University of Rajasthan • Natural Technologies, Data Infosys, Infosys, Genpact, Truworth Infotech, Cyber Futuristics India • The top graduates from engineering colleges move out of the location to places like Chennai, Delhi, Bangalore, Pune and Hyderabad for jobs • There is some inbound migration because of home coming of Jaipur natives COLLEGES & UNIVERSITIES MAJOR OCCUPIERS STRENGTHS • The location’s proximity to Delhi makes it a potential alternate centre for establishing IT-BPO centres • The political stability, law and order scenario in the state is relatively better in comparison to other locations • Jaipur being a Tier-2 location, offers some cost advantages in terms of labour and real estate costs • Availability of adequate quality manpower for IT-BPO sector is a key challenge: • Majority of the schools are Hindi medium makes it hard to find good English speaking graduates • International connectivity is a problem as most of the flights are via Delhi MIGRATION WEAKNESSES

  12. Ahmedabad LABOR AVAILABILITY • Population: 4,525,013 • Number of graduates: 20,000 • Literacy Rate : 79.89% • Population Growth : 1.9% • Nirma University of Science & Technology • Dr. Babasaheb Ambedkar Open University • The Gujarat Vidyapith • Center for Environmental Planning and Technology • The Indian Institute of Management Ahmedabad • E-lnfochips Ltd., Motif India Infotech, Patni Computer Systems, L&T , Mphasis, Vodafone, Idea Cellular, iCall, Azure, Moksha, Hi-Tech • A large proportion of the graduates migrate to the metros of NCR, Bangalore and Mumbai due to better opportunities and higher pay • The major IT players recruit heavily from campuses in the location • Ex-residents would be amenable to moving back to the location even at lower compensation levels if opportunities become available indicating a potential talent pool that can be drawn to the location COLLEGES & UNIVERSITIES MAJOR OCCUPIERS STRENGTHS • Several of the IT and BPO firms were set-up by local promoters, being familiar with location’s business environment and potential • Lower cost and good catchment area for resources • Inability to get and retain employees as the majority tend to move to metros where opportunities and pay packages are higher • Unavailability of experienced resources and high attrition rate of lateral hires at experienced levels MIGRATION WEAKNESSES

  13. Mysore LABOR AVAILABILITY • Population: 799,228 • Number of graduates: 6,500 • Literacy Rate : 82.8% • Population Growth : 1.52% • Chamarajendra Technical Institute, University of Mysore, National Institute of Engineering, Central Institute of Indian Languages • Infosys • Wipro • Larsen & Toubro InfoTech • A large percentage of people migrate to other cities, mainly Bangalore and Chennai in search for better opportunities • The major IT players recruit heavily from campuses in the city COLLEGES & UNIVERSITIES MAJOR OCCUPIERS STRENGTHS • Cost of operations are lower in the location due to lower real state costs • Proximity and good connectivity to Bangalore • Availability of manpower due to the large number of graduates from within the state as well as proximity to Bangalore • Ability to retain qualified talent is a concern as most prefer to have careers in Bangalore • High dependence on Bangalore for connectivity to domestic and international locations • Commercial space with good infrastructure is limited in the city MIGRATION WEAKNESSES

  14. CB RICHARD ELLIS Global Corporate Services, India For more information, please contact: Mukesh Hemrajani Global Corporate Services – India M 91 9999 6868 44 mukesh.hemrajani@cbre.com Deepak DewaniGlobal Corporate Services – India M 91 9811 5716 90deepak.dewani@cbre.com  Himmat Singh Global Corporate Services – India M 91 9999 5533 55 himmat@cbre.com Contact Information

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