Smaller cities emerge as India's new software export hubs

 Sisir Pradhan | @TheDollarBiz Major software companies in India are increasing their presence in smaller cities and smaller states in a bid to reduce operational costs and improve profit margins. According to the Software Technology Parks of India (STPI), India's total software exports stood at around Rs.251,497 crore in FY2012-13. While IT cities like Bengaluru and Hyderabad remain leaders, software export from cities like Pune has registered a steady growth in recent years. Software export from Pune has increased to around Rs.29,500 crore in FY2012-13, which is almost 60% of total software export of around Rs.50,000 crore from Maharashtra that year. Software export from other smaller cities like Nagpur, Kolhapur, Nasik and Aurangabad has helped Maharashtra become the second largest software exporting state in the country, after Karnataka. Similarly, Bhubaneswar is hoping to establish itself as an IT city. Though smaller in comparison, software export from the state has registered a growth of 20% (YoY) compared to national growth of 17-20%. For FY2014-15, the Odisha government has set an ambitious software export target of Rs.3,200 crore, up 33% from Rs.2,400 crore in FY2013-14, Aditya Mohapatra, Chief of Odisha IT promotion Cell & Under Secretary, Department of IT, Government of Odisha told The Dollar Business. According to Mohapatra, all the top four IT exporters in Odisha – Infosys, Tata Consultancy Services (TCS), Tech Mahindra and Wipro -- are expanding their capacity in the state and this will boost IT export from the state. Mohapatra added that TCS’ second software development centre in the state will be fully operational by the end of December 2014. Manas Ranjan Panda, Director, Software Technology Parks of India (STPI) Bhubaneswar, told The Dollar Business that though states like Karnataka, Maharashtra and NCR (National Capital Region, which includes Delhi) are the largest exporters of software, recently smaller states like Odisha have registered steady growth in software export due to global economic slowdown. Panda said that IT companies, which primary serve clients in USA and Europe, have started setting up software development centres in Tier-II and Tier-III cities to save on operational cost and improve margins. This has fuelled growth of the sector in smaller cities like Bhubaneswar. A number of IT majors are scaling-up their software development facilities in Tier-II and Tier-III locations. In FY2013-14, TCS started investing in state-of-the-art facilities at Ahmedabad, Kochi, Hyderabad, Bhubaneswar and Pune, and initiated construction of large delivery centres across 15 locations in India. Infosys has set up its R&D centres in Chandigarh, Bhubaneswar, Pune, Mysore, Hubli and Thiruvananthapuram while Tech Mahindra has commenced operations at Hinjewadi, Pune, Chandigarh and Noida. STPI has also recognised the potential of smaller locations and has opened software technology parks in smaller cities. Notably, export from STPI-Mohali was Rs.2,228.72 crore in FY2012-13, up from Rs.1,929.61 crore in the previous financial year. Similarly, regions like Chandigarh (Rs.405.10 crore), Gujarat (Rs.982.40 crore), Chhattisgarh (Rs.12.29 crore), Himachal Pradesh (Rs.6.28 crore) , Jharkhand (Rs.7.04 crore), Kerala (Rs.2240.70 crore), Madhya Pradesh (Rs.244.54 crore), Pondicherry (Rs.117.20 crore), Uttarakhand (Rs.54.54 crore) and Rajasthan (Rs.637.76 crore) have added up to country’s software export in FY2012-13. With the new government’s focus to promote exports from states, the trend is like to continue.