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Move over Bangalore and Hyderabad for some time. It is time to say hi to Chennai. Call it bad PR for Bangalore due to its infrastructure woes and exit of Chandrababu Naidu as the CEO Andhra Pradesh, Tamil Nadu has grabbed the opportunity at the right time when there is a positive investment atmosphere and companies are regaining their confidence about India. Companies such as Hyundai, Ford, and BMW have already reposed faith in the city and is an important part of Chennai's growing auto industry. Chennai has of late also been home to some of the largest BPO operations such as World Bank, Standard Chartered Bank's Scope International, apart from OfficeTiger. Other industrial activities which have not caught adequate attention include the export of women's innerwear (Victoria's Secret makes 6.5 mn bras every year from here) and condoms (Medtech of Reddy Group makes 200 mn pieces of condoms every year) out of Chennai.

Year 2005-2006 has been a momentous year in the history of Chennai and saw several announcements by companies to set up their operations in Chennai. It all started in March 2005 with Ericsson and Alcatel. While Ericsson announced the setting up of their R&D facility, Global Service Delivery Center, Alcatel announced the setting up of C-DoT-Alcatel Research Center. A total of about $1 bn dollar of investment has been announced for Chennai and more is in the pipeline.

All Eyes on India
For the time being, all eyes are on mobile subscriber projections. Picture this-500 mn mobile phone subscribers by 2010, addition of about 5 mn mobile subscribers every month. The total broadband subscribers is projected to be 20 mn by 2010.

India's total mobile subscriber base is 82.4 mn (July 2006). New technologies such as 3G and Wimax are in the pipeline. Above all, India is a country of 1 bn people and the second largest market after China of telecom product and services. According to iSuppli, the Indian market for EMS and Original Design Manufacturing (ODM) will be a $2 bn industry by 2009.

Genesis
The beginning of telecom-related manufacturing in Chennai can be traced to the setting up of Hindustan Teleprinters (HTL) in 1960 to make teleprinters and later telecom switches, till it was acquired by HFCL in 2001 (See box-'HTL: From teleprinter to digital switching'). That was followed by the setting up of a telecom practice hub by TCS in 2002 for working on telecom projects including product development, implementation, maintenance, and enhancements. Today, TCS has more than 14,000 employees in Chennai and services more than 20 of its top 30 clients from Chennai. Incidentally, most of the current telecom R&D companies are full of ex-TCS employees. There was hardly any major activity after this till 2005 when Nokia, Ericsson, and Alcatel decided in favor of Chennai for their facilities. The rest is history.

Why Chennai?
In hindsight, these companies who have set up their operations in Chennai do not regret their decision and have strong reasons to justify their move. Nokia has really played the role of a magnet and has attracted (in fact invited) its partners to be part of its telecom park. Says Jukka Lehtela, director-India Operations, Nokia (and credited with the setting up of the state-of-the art Nokia factory in Sriperumbudur), “Logistics is very important in the kind of business we are in. The presence of a good airport in Chennai was the most important reason apart from the availability of quality manpower.”

According to Arto Makela, director, Salcomp India, “We were invited by Nokia to be part of their park and so coming to Chennai was a business decision. We have been looking at setting up new factories from early 2003 in different locations in India including Mumbai, Pune, Bangalore and Chennai.” Adds Jarmo Kolehmainen, general manager, Perlos India, “Nokia is our main customer and it makes a sense to be near the customer. Other telecom manufactures are also planning to set up their factories here in India which is good for our business.”

Other factors which worked in favor of Chennai include its airport infrastructure, the presence of a port, and manpower availability. Everybody VOICE&DATA spoke to, felt these were the crucial factors for their location selection. Talking about manpower and employment scenario, Ramesh Nair, local director, and head of Industrial Services at Jones Lang Lasalle, a leading real estate services firm, however feels, “Tamil Nadu produces 80,000 engineering graduates every year. Chennai is the primary urban employment center in Tamil Nadu and most of the qualified persons would prefer to come from other parts of the state to work in Chennai and not go to places like Delhi or Bangalore or Hyderabad.” He also says that the state and central government worked together and provided land at a very affordable rates to companies. A Gururaj, GM and director, Flextronics India airs similar views when he says, “Chennai has deep reserves of technical talent and it is renowned for its large pool of engineering expertise. In addition, it also has favorable infrastructure and policies that make it conducive as an investment destination for Flextronics.” However, those setting up their R&D within the city, land cost was very high if we compare it with the industrial lands that companies such as Nokia got.
Patrick Veron, CEO of C-DoT-Alcatel Research Center says “Alcatel has been in Chennai since 1996 and there is a very good ecosystem of manufacturing, R&D and IT companies. Apart from this, there are a number of very good institutions and traffic condition here is better than Bangalore.” Firdose Vandrevala, chairman, Motorola India, expresses similar views. He says, “We decided to set up our facility here after reviewing several short-listed potential locations. The industrial ecosystem at Sriperumbudur was best suited to our requirements. Moreover, the many engineering institutes in that area are expected to offer requisite manpower.”

Getting space when it is required is also a big issue for companies who look out for new locations. V Swaminathan, head of Chennai Software Lab of Telcordia “We did not get the right space at the right time in Gurgaon and Bangalore which we got in Chennai. Also we felt that Chennai had a strong base for telecom companies who have set up their operations. In addition to this we felt that the state government is investing in infrastructure in areas where IT is developing.” According to Sanjeet Thadani, CEO of IndUs IT, a US-based consulting firm specializing in providing services to guide companies in establishing their operations, “Bangalore was getting too expensive, real estate and talent wise, even though it offered more of a talent pool, Chennai was proving to be more cost effective at the time by 25%. On top of that Bangalore's infrastructure is being stretched beyond limits and Gurgaon has positioned itself more as a customer support hub rather than a developmental hub.” IndUs IT helped Extreme Networks select Chennai as the location for its R&D Operations.

	“Logistics is very important in the kind of business we are in. The presence of a good airport in Chennai was the most important reason, apart from the availability of quality manpower” -Jukka Lehtela, director, India Operations, Nokia		“Alcatel has been in Chennai since 1996 and there is a very good ecosystem of manufacturing, R&D and IT companies. Apart from this, there are a number of very good institutions, and traffic condition here is better than Bangalore” -Patrick Veron, CEO of C-DoT-Alcatel Research Center
	“We did not get the right space at the right time in Gurgaon and Bangalore” -V Swaminathan, head of Chennai Software Lab of Telcordia		“We were invited by Nokia to be part of their park, and so, coming to Chennai was a business decision. We have been looking at setting up new factories from early 2003” -Arto Makela, director, Salcomp India

There is also a feeling that Chennai did not get the adequate attention earlier due to Bangalore and Hyderabad's dominant position. According to Suresh Kumar Bopparaju, center head, Software Engineering at Extreme Networks, “Chennai as a city has not been hyped up or has not been in the limelight and it did not get proper attention due to lack of its cosmopolitan flavor as was the case with Bangalore. It was also because the younger generation work force preferred Bangalore.” He also goes back in time and says, “It was a dead and laid back city in 1986 when I started my career here and the people used to go to sleep by 9 pm. Chennai has seen a transformation in the last 10 years.”

“I am trying to promote India as a major destination for investment in software and hardware, and Chennai, in particular, for telecom-related activities. I believe there are going to be several more telecom companies that will invest in this southern city” -Dayanidhi Maran, Minister of Communications and IT

Sanctum Sanctorum
Sriperumbudur is more famous for an unfortunate incident resulting in the assassination of Rajiv Gandhi, the ex -prime minister of India in 1991. Also, Sri Ramanuja, one of the most prominent Hindu Vaishnava saints was born here. Surprisingly, SIPCOT on its website mentions automobile, engineering, and chemicals as preferable industries for Sriperumbudur and not Telecom and IT. It is not only telecom, but there are others like Hyundai who have a huge auto facility in the area. Strategically located on the Chennai-Bangalore Highway, it is 40 km from the main city and the airport. Sri Venkateswara College of Engineering is located nearby. If everything goes as planned, Sriperumbudur has the potential to emerge as India's telecom hub. It will be a tribute to the man who was at the helm of the country when the Indian PCO revolution happened. Some have already started comparing it with Shenzhen of China. The companies who are in Sriperumbudur or have announced their plans to set up include Nokia, Motorola, Alcatel, Extreme Networks, and Telcordia. (See box: 'Telecom's Who's Who in Chennai')

Next Page : Is Chennai Ready?

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