Software firms to hire locally in tier 2 AND 3 cities; exports to rise by 25-30% by 2010

Tier 2 and tier 3 cities are in vogue. All the IT majors have been eyeing these cities and have been establishing their centers in cities such as Bhubaneshwar, Madurai, Dehradun, Ludhiana and so on. The good news is that they prefer to hire locally. Here we present what this means in terms of economic development and employment opportunities



Gone are the days when people from the hinterland migrated to the metros to pursue their careers. Initially, the influx happened into either Mumbai (the country’s financial hub) or Delhi (the national capital as well the political nerve center); later, with IT coming into the mainstream, the migration route shifted towards Bangalore and Hyderabad. This emergence of tier-2 cities, both as centers of choice for software majors as well as local markets for all major vendors, in a way symbolizes the democratization of Indian IT.



Unlike earlier, viable career options are available now for small city residents , thanks to the software majors who are moving to tier-2 and 3 destinations and hiring mostly locals. For example, in Bhubaneswar, Infosys alone has 3,000 employees; Satyam 1,000 while TCS has crossed 300 in a few months.



Tech vendors too are acknowledging the growing clout of the tier-2 and 3 cities. In 2006-07 Microsoft penetrated 21 new cities; Sun Microsystems 17; and Oracle 23 smaller locations. IBM and SAP too went upcountry into 20+ newer towns and cities. Cisco and Acer got into around 15 new locations. Every vendor"s roster has cities like Madurai, Dehra Dun, Nagpur, Bhubaneswar, Mangalore and Ludhiana .



The following numbers corroborate the successes of these upcountry forays. As per the MAIT-IMRB mid-year review of the IT industry’s performance in 2005-06, rest of India drove the market for PCs with 55% market share and a year-on-year growth of 55%. Top four metros grew by 16% compared to the previous year and 24% in the following four metros.



Together, class B and C cities accounted for 70% of the PC sales, while the sale of notebooks in the business segment in smaller towns grew by a whopping 192%, accounting for 37% of the market, up from 27% in H1/2004-05. Sales of servers too grew 110% in class C cities and 87% in class B cities.



Micro View

To acknowledge the growing clout of these small towns, Dataquest undertook an endeavor to explore what makes the IT index tick in these tier-2 and 3 cities. Twenty-five cities across India were selected keeping in mind a fair representation across the country. Mumbai, Delhi (including NCR), Bangalore, Chennai, Hyderabad, Kolkata, Ahmedabad and Pune were excluded owing to their established IT prowess.



Going by the first big influencer of a city’s IT index , Software Exports , the presence of the Big Three or Four (including Satyam in some cases) determines a city’s worth. The presence of at least two raises the prestige of a city ; three or all four in the city clearly puts it notch above the rest and on par with the other software hubs. Indeed, cities like Bhubaneswar, Kochi, Visakhapatnam, Madurai or Mysore score heavily on this front.



Data from Nasscom shows that software exports from tier-2 and 3 cities have grown dramatically from a mere 5% a couple years ago to 15-18% now. It’s expected to go up to 25-30% by 2010. What’s more, these new hotspots are expected to employ 30% of the projected strength of 850,000 IT professionals and 1.4 mn ITeS professionals by 2010.



So in future, more and more people will find their living in their own home towns and cities. As a result of such changes, the economic scene of those towns and cities will change for ever and these changes will be positive for the people living in them.





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