Tuesday, May 01, 2007

Advantage Chennai

PEOPLE who study far but play safe, and a city with little activity are descriptions often used to parody Chennai. The caricatures have had an unlikely spin off: companies providing support for overseas consulting, equity research and finance firms appear attracted by them.

Companies such as Frost & Sullivan, OfficeTiger and Irevna provide support to consultants and analysts overseas. More such work is headed here, say people working in the sector. The reason is that Chennai's caricatures provide it a cost advantage over competing cities such as Bangalore and Mumbai.

The US consultancy Frost & Sullivan's Chennai centre with about 160 people is its biggest operation in India. The Mumbai office deals largely with the Indian practice while a significant number of people in the city provide support to the overseas consultancy.

Mr Anand Rangachary, Deputy Director of Frost & Sullivan's India operations, said it is easier to retain skilled people at a lower cost here. Supporting the view was The World Bank's Vice-President, Mr Fayezul Choudhury, who felt there is stability in the workforce here because the attrition rate is low (the bank has established a back office in Chennai).

The low attrition rate may not stem from a deep-rooted sense of loyalty to employers. People working in the sector feel it could be partly explained by fewer opportunities the city offers in relation to Mumbai or Bangalore.

Another cost-related benefit is in the form of office space. Not only is it cheaper to lease office space here, but also there is room left to build new offices within the city. The World Bank back office centre, for instance, plans to build an office spread over 60,000 sq ft of land within the city.

Stable workforce and inexpensive real estate count only if a city has a communication infrastructure and a pool of qualified people. Chennai gets high marks on both counts.

A person employed in industry said that the metropolis has a large pool of finance professionals such as chartered accountants who are suited for the support jobs. Perhaps the large pool has nudged the World Bank to study the possibility of moving some of its complex work such as monthly valuation of bonds and derivatives here.

The fallout of the influx of new firms is bound to neutralise cost advantages. Mr Rangachary identified the development of the planned information technology corridor in south of the city as a factor that would drive up costs. "It's a good three years before Chennai loses advantages," he added.

Cost advantages that brought companies to the city have a limited shelf life. However, that may not be the end the story. Mr Joseph Sigelman, Co-CEO of OfficeTiger, feels Chennai has other advantages.

Mr Sigelman is sceptical about the importance of cost advantages. He felt locating business in cities such as Chennai is sustainable only if "we actually perform services better than they can be performed anywhere else." He said forces that make this business sustainable such as quality of people are available in Chennai.

Even with the benefit of hindsight, Mr Sigelman said if OfficeTiger had to start all over again the choice would be Chennai.

The search for a low-cost environment may have brought the companies. Improving quality of manpower may help them stay and grow here.

Source: The Hindu

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