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March 16, 2000
Cyberabad's entrepreneurs in a rush to avail Budget benefits
Our Correspondent in Hyderabad
At 6 o'clock in the evening, the ten-storeyed Cyber Towers, better known as HITEC City (or Hyderabad Information Technology and Engineering Consultancy Services City), in Madhapur, 20 kilometres off Andhra Pradesh's capital Hyderabad, is buzzing with frenetic activity. On the sixth floor is the Software Technology Parks of India. The place is bustling with visiting information technology professionals, techies if you will. Other software professionals who work for the IT companies housed in the imposing building, are hurrying back home after a day’s hard work.
The STPI's receptionist enquires, politely, whether one has come to file the application for registration of a software unit. “I'm here for an interview with your director, Colonel Vijay Kumar,” one tells her. She flashes a disarming smile, requests one to wait. The place is overcrowded with techies, and waiting in the heavy air does not seem an attractive idea. One learns the crowd build-up is not a rush for invites to the planned meeting of IT professionals to be addresed by US President Bill Clinton on March 24.
It transpires, it is the last-minute hurry to register IT units before the end of the financial year 1999-2000 to avail the tax concessions and other incentives offered by the Indian government. Union Finance Minister Yashwant Sinha’s IT-friendly policies unveiled in Budget 2000 have prompted many to try making hay while the sun shines over the 'infotech revolution' in Hyderabad.
Every day, about 50 entrepreneurs take the applications and about 20 filled-in forms are submitted at the STPI office. Towards the end of February this year, there were 285 registered units with the STPH. In the last fortnight, their number has swelled to 370. More IT promoters are expected to come in to register their start-ups before the deadline of March 31.
“A lot of people are coming in for registration. We screen the applications and clear them if they fulfil the required criteria,” says the STPI director Colonel Vijay Kumar. “In terms of the number of units, we (STPI-Hyderabad) are second in the country, after STPI-Bangalore. We've added close to 110 companies during the current financial year, excluding this influx (over the last few days). NOIDA and Madras lag behind us in numbers. We may even overtake Bangalore soon on this score.”
How many of the new entrants will stay in the race? Col Kumar is not very sure but says that the IT units, too, require a minimum gestation period to become operational and profitable ventures. He explains that almost 210 units are operational. Prominent companies which have registered with the STPH in recent times include Hughes Software, HCL and many others. “Infosys Technologies also registered last week. It has taken space and connectivity also,” he informs.
Col Kumar says STPI-H ranks fourth among the STPIs in terms of software exports. Bangalore tops the list, followed by NOIDA and Madras. The gap between Bangalore and Hyderabad is wide. Bangalore's 1999-2000 software export target is Rs 45 billion; Hyderabad's is Rs 12 billion. Bangalore had recorded Rs 28.88 billion in 1998-99, Hyderabad Rs 5.73 billion.
“The STPI-H is growing at 100 per cent rate annually. The units here have exported software worth Rs 5 billion by 1999-end. The companies usually report their exports during the last quarter of the financial year. We are hopeful of hitting the target of Rs 12 billion,” says Col Kumar.
However, by way of caution, he adds that the software exports from Hyderabad are poised to cross the Rs 10 billion mark during the year. The reasons for the possible shortfall, he says, are manifold. There is a drop in the Y2K business and the IT units involved in this effort are reengineering their software development profile. The Euro conversion segment has not caught up. The IT-enabled services are yet to gather momentum.
“The major players in this place include Satyam Computer Services, Wipro, Baan Info Systems, Visualsoft (India), DE Shaw, TCS, Intelligroup Asia, Metamor Global Solutions, Infotech Enterprises, Intergraph, Citicorp, Sierra Optima, Mahadev.Com etc. Microsoft has only an R&D centre here,” he says.
The areas of expertise of the IT companies in Hyderabad include enterprise resource planning, supply chain management, network management, client-server applications, object-oriented design and technologies, UNIX internals, IBM mainframe and mid-range environment, multi-media related software development, Internet-based applications and solutions, CAD, CAM, CAE, GIS applications, Euro conversion, GUI, EDA tools.
The IT companies are offering software services covering telecom, manufacturing and financial/banking and insurance services, medical transcription services, e-commerce, software product development, re-engineering, etc.
The profile is, however, changing with many of the new players focussing on Internet-related services such as Web, content and portal development and maintenance, e-commerce and enabled services like medical transcription, et al.
“The IT-enabled services is the major growth area identified by the government which has announced a package of incentives tailored to the requirements of this sector to attract the maximum employment potential of the IT industry to the state. The IT-enabled services are expected to grow here in a big way,” Col Vijay Kumar points out. As many as 33 medical transcription units have registered with the STPI-H so far. Out of them, eight companies, including Worldtek, Elico, Credence, Care Technologies, AMR Mediscribe, Rap and Kamineni -- have become operational.
GE Capital International Services has started a major IT-enabled services facility at Hyderabad. GE Caps, which has rented two-and-a-half floors at the HITEC City, now has 400 IT professionals at its Hyderabad facility and this number will grow to 1,000 by September 2000. The company has targeted to employ over 4,000 people within three years.
Most of the IT start-ups belong to the IT technocrats, now settled in the United States. “About 100 NRIs have come and started their software units here. They have one foot here and one foot there,” says Col Kumar.
The investment in IT industry in Hyderabad has soared to Rs 7.50 billion by now, including substantial NRI and foreign investment. However, Bangalore leads in critical mass investment in this industry totalling Rs 26 billion. Madras and NOIDA also have sizable investments, with Madras witnessing rapid growth in 1998 and 1999.
Col Vijay Kumar estimates that there are about 18,000 IT professionals working in Hyderabad and another 1,000 elsewhere in the state. “This is still the half-way mark compared to Bangalore which has between 35,000 and 40,000 IT professionals,” he admits.
The reassuring thing about Hyderabad is that there are many Telugus engaged in the IT sector abroad and they can sustain Hyderabad’s future growth in this sector in terms of marketing, funding, technology, etc. Andhra Pradesh produces a large number of IT graduates which is evident from the fact that Hyderabad accounts for the maximum number of H1B visas.
The foreign presence and investment in the IT sector is also growing rapidly in Hyderabad. The foreign companies which have set up operations/software development centres here are Microsoft, Oracle, Motorola, IBM, GE, IBM, Lumley Technology, Toshiba, Metamor, Baan, DE Shaw, Ericsson etc. HSBC (formerly the Hongkong and Shanghai Banking Corporation) has set up its software development cenre and disaster management and customer services centre. Those who are poised to come to Hyderabad include Hewlett-Packard, Helios & Matheson, Sun Microsystems and Cisco. Many Indian companies have taken space at HITEC City.
Already, 92 per cent of the total space of 525,872 square feet of available office space at Cyber Towers (the first phase of the HITEC City) has been booked or blocked on lease/purchase basis. Almost two-thirds of the space has already been occupied. Some 2,200 IT professionals work in the HITEC City alone.
Excitement would only mount, industry observers say. For Chief Minister S M Krishna of neighbouring Karnataka is considered as computer-savvy as his counterpart in Andhra Pradesh, N Chandrababu Naidu. Krishna is seeking to consolidate his capital city Bangalore's pre-eminent position in the infotech industry even as Naidu attempts to project Hyderabad as the 'Cyberabad' of the millennium to foreign and domestic investors.
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