Is Chennai Ready?
Once all companies set up their operation in and around Chennai, infrastructure such as road, power, and water are all set to come under pressure. According to an estimate, about 40,000 people would be employed in Sriperumbudur alone and due to lack of any housing township near this place, daily commuting from and to Chennai would be a nightmare.

	“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” -Jarmo Kolehmainen, GM, Perlos India		“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%” -Sanjeet Thadani, CEO of IndUs IT
	“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” -Suresh Kumar Bopparaju, center head, Software Engineering at Extreme Networks		“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” -Ramesh Nair, local director, and head of Industrial Services at Jones Lang Lasalle

Needless to say, this infrastructure and the pace with which most of the projects are going on (including the National Highway project), sustaining the growth might become a problem. This might result in a Bangalore like situation of not keeping pace with development. One new development is the change in guard in Tamil Nadu meaning a favorable government at the center which can pump in funds into projects and help Chennai in particular and Tamil Nadu in general to tide over its infrastructure woes. On the infrastructure side, the Tamil Nadu government needs to develop Sriperumbudur, Madurai, and Coimbatore as satellite towns and chart out clear cut plans to create a railroad infrastructure and quickly decide on the metro project if it has to sustain the heightened interest from communication companies.

“Chennai has deep reserves of technical talent and it renowned for its large pool of engineering expertise” -A Gururaj, GM & director, Flextronics India

“We decided to set up our facility in Chennai as the industrial ecosystem at Sriperumbudur was best suited to our requirements” -Firdose Vandrevala, chairman, Motorola India

Employment Generation
According to some estimates, once all the committed investments are in place and all facilities start their operations, there will be close to 50,000 people working out of Sriperumbudur alone. If we consider other IT Parks such as Mahindra, Ascendas, Guindy, Siruseri, the total manpower deployed would cross 1 lakh. In addition to this there were will immense opportunity for support services and hospitality industry.

The Maran Factor
Finally, credit goes to the meticulous way in which Dayanidhi Maran, the Minister of Communications and IT coaxed companies into setting up their facilities in Chennai (Maran contested election for the first time and got elected to the 14th Lok Sabha from the Central Madras constituency).
Making his position clear, Maran, while addressing an industry meet in Chennai recently said, “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.” He created a cell in the ministry in association with the Tamil Nadu government for smooth clearance of projects headed for Chennai. It is not without reason that he is often seen in Chennai making one announcement after the other. However, according to some media reports, some companies who finally selected Chennai were in favor of other locations like Mumbai and Bangalore.

It would be unfair to give all the credit to Maran. We should not overlook the contribution of J Jayalalitha who was at the helm of affairs in Tamil Nadu when all this started. She should be given the credit of making the infrastructure (specially road) of Chennai good enough to attract potential investors into the city.

For once, Chennai's interest was not sacrificed despite political enmity between Jayalalitha and Dayanidhi Maran's parties. The new coalition government led by Karunanidhi has already showed its seriousness to accelerate this momentum.

Local Sourcing
Most of the companies are silent on their local sourcing partners for confidential reasons. But one thing is clear, there are very few Indian component manufactures who can actually partner with companies such as Nokia, Salcomp or Perlos. Salcomp has a long-term relationship with a supplier from India. According to Jukka Lehtela of Nokia, “We plan to localize some components from India. We are looking for companies with the right technology, volume, right cost, and good quality. At the moment, there is nobody who has all these competencies.”

Climate Takes a Back Seat
STPI Bangalore lists “salubrious climate” as the second most important advantage after “central location”

For those setting up their facilities in Chennai, “hot and humid” is a non-issue. Climate is something which appears to have taken a back seat for most of the players who set up their facilities outside Bangalore. For everybody, it is now a matter of adjusting to the climate and getting on with business rather than regretting the decision of setting up their facility in Chennai. Good news for Mumbai and Hyderabad as well.

Outlook
As more and more vendors and EMS suppliers downscale their operations in high cost countries in Europe and US, the chances of India getting benefited from this is very high. We have examples of downscaling of production by Perlos in Finland and its decision to shut down its Fort Worth plant in Texas and shift operations to its Reynosa plant in Mexico. Company plans to move from high cost countries to low cost countries in emerging markets such as India. According to the company release, the transfer of workers to Mexico would save the company about $18 mn annually. There is high probability of more communication manufacturing companies coming to India due to these factors. Now it is for the respective state governments to pitch for their cities and do some PR to have a share of the investment pie.
-Sudesh Prasad in Chennai

Page(s)   1  2