Tier 2 Cities Location Analysis

Location Analysis: Emerging cities of India
January 2012
January 2012
Zinnov LLC
Zinnov LLC CONFIDENTIAL
This report is solely for the use of Zinnov and Zinnov Clients.
No part of it may be circulated, quoted, or reproduced for distribution without prior written permission
The location study covers 12 locations in India for assessment based on an exhaustive
list of suitability and cost parameters
Tier 1
Tier - 2
1. Chandigarh
2. Coimbatore
3. Ahmedabad
4. Vadodara
5. Jaipur
6. Nagpur
7. Trivandrum
Locations
1. Bangalore
2. NCR
3. Chennai
4. Hyderabad
5. Pune
- The study tries to analyze major

locations in India on a
comprehensive list of parameters
- The objective of the study is to
help MNCs identify the optimal
locations in India to setup their
R&D centers
- Infrastructure
- Human Resource
- Support Ecosystem
- Quality of Life
- Business Continuity Risk
- Cost
Agenda
TRENDS
RANKINGS
CITY
PROFILING
Agenda
TRENDS
RANKINGS
CITY
PROFILING
Prior to 2005, majority of MNC R&D centers were concentrated in tier-1 Indian cities
Chandigarh
Till about mid 2000s, MNCs were
looking at tier-1 cities in India
primarily due to high talent
availability, investment friendly
policies and high quality of life
NCR
Jaipur
Ahmedabad
Vadodara
Pune
Bangalore
Tier-1 cities constituted almost

100% of R&D talent pool in India.
Nagpur
Gradually, growth of tier-1

locations exposed issues like poor
urban infrastructure, rapidly
increasing operating costs, higher
cost of living, high attrition, etc.
Hyderabad
Chennai
Coimbatore
Trivandrum
1990
Source: Zinnov Analysis
Note: Map not to the scale
2004
5
Post 2005, MNCc started looking at tier-2 Indian cities as future R&D hubs
MNCs started expanding to tier-2

cities due to advantages like higher
catchment area, lower attrition,
cost arbitrage, etc.
Chandigarh
NCR
Jaipur
Tier-2 cities, which were initially

looked upon for IT/BPO services,
now are serious contenders for
setting up R&D centers due to the
distinctive advantages they
provide.
Ahmedabad
Vadodara
Pune
Bangalore
Nagpur
Companies also started looking at

tier-2 locations for creating a hub&-spoke model especially in
automotive sector.
Hyderabad
Chennai
But tier-2 are still in nascent stage

in terms of establishment as IT
hubs and constitute around 2% of
MNC R&D talent pool in India.
Coimbatore
Trivandrum
2005
Note: Map not to the scale
2012
6
More than 50% of the MNC R&D talent pool is concentrated in Bangalore Region;
tier-2 cities are effective sources of fresh talent pool
Talent Pool
Vertical
Focus
Expansion to
tier-2 cities
Start-up
Ecosystem
Academia
Ecosystem
Manufacturing
Ecosystem
Fresh Talent Pool distribution

by location
2.0%
9.8%
Proactive state IT
organizations
19.2
NCR
4%
Chennai
10%
13%
Hyderabad
6%
17%
7%
8%
16.5%
Mumbai Region
Hyderabad Region
Bangalore
Region
31.1
52.7%
Chennai
Region
12.5%
Bangalore
NCR
3.7
Other
Locations
Cost
Pune
Coimbatore
9%
13%
12%
Jaipur
Nagpur
23.0
6.5%
Trivandrum
35%
Others*
24.0
102.5
Total MNC R&D Talent in India in 2011 ~ 204,196
MNC R&D Talent pool in India is

growing at the rate of nearly 9
percent every year and is expected
to reach ~250,000 by 2015.
Mean Value :Headcount per MNC R&D Center
Bangalore still dominates overall and software MNC R&D ecosystem in India; other
locations like Pune and Hyderabad are catching up
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
MNC R&D centers distribution in India by

locations
Academia
Ecosystem
Manufacturing
Ecosystem
Proactive state IT
organizations
Software MNC R&D centers distribution in

India by locations
12%
11%
11%
43%
11%
40%
4%
4%
13%
13%
NCR
Mumbai
Chennai
Hyderabad
Cost
15%
11%
6%
Others
Bangalore
NCR
Mumbai
Pune
Chennai
Hyderabad
6%
Others
Bangalore
Pune
Discussion
96% of MNC R&D centers in India are still concentrated in tier-1 cities, tier-2 cities constitute just
around 4%
Pune, backed by strong service provider and academia ecosystem, has emerged as a preferred choice of
MNCs in software vertical
While Bangalore is the clear leader in semiconductor vertical, automotive vertical is

much more scattered
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
Semiconductor MNC R&D centers

distribution in India by locations
Academia
Ecosystem
Manufacturing
Ecosystem
54%
NCR
Mumbai
Chennai
Hyderabad
Others
Bangalore
9%
22%
3%
24%
1%
9%
11%
13%
Cost
Automotive MNC R&D centers distribution

in India by locations
10%
9%
Proactive state IT
organizations
1%
24%
Pune
NCR
Mumbai
Chennai
Hyderabad
11%
Others
Bangalore
Pune
Discussion
All 4 tier-1 cities (Hyderabad, Chennai, Pune and NCR) are gaining good traction among MNCs in
Semiconductor vertical
Chennai and Pune are the two largest automotive hub of India, accounting for just less than half of
automotive MNC R&D centers
MNCs are looking to expand to tier-2 locations to setup their secondary centers due to
the unique advantages provided by tier-2 locations
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
Academia
Ecosystem
Manufacturing
Ecosystem
Proactive state IT
organizations
Cost
Key
Drivers
Examples of MNCs in tier-2 cities

Company
Tier 2 location
FTE
Bosch
Coimbatore
~800
Quark
Chandigarh
~300
Allscripts
Baroda
~250
Cignex
Ahmedabad
~150
Radiance
Ahmedabad
<50
10
Talent Pool
Vertical
Focus
Most companies with

more than 1000
headcount in one city/one
building
Expansion to
tier-2 cities
Start-up
Ecosystem
Business
Continuity Risk
(People, Geo
political, Cost
escalation etc.)
Academia
Ecosystem
Saturated
Talent Market
(Narrowed
talent net,
Attrition,
Relocation
etc.)
Infrastructure
saturation
Pressure to
grow an
acquired site
Manufacturing
Ecosystem
Proactive state IT
organizations
Cost
Most companies beyond 2,500+

headcount in one city.
Companies in some domains
become the hunting ground for
large companies
Contribution to
more than 5%
of the talent in
the city
Cost Benefits
of Tier 2 Cities
11
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
Academia
Ecosystem
Manufacturing
Ecosystem
Proactive state IT
organizations
Cost
Number of companies with multiple locations

575
Discussion
84% of the US based MNCs have only one location
for R&D center in India
No. of companies
Close to 13% of US based MNCs have R&D centers

at two locations in India
93
22
No of Locations
One
Two
Three
Around 14% of Europe based MNCs have R&D

centers at two locations in India
Four
Companies with 2 locations
AMD
Adobe
Broadcom
Atrenta
Avaya
Applied Materials
D-Link
Halliburtun.
Companies with 3 locations
Amazon
Dell
Nvidia
FreeScale
AT&T
BMW
Nokia
Mentor Graph
Invensys
12
Of the ~2100 product companies started in India in last 2 decades, 55% are based in
Bangalore and NCR regions, but off late tier-2 cities have started gaining traction
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
Academia
Ecosystem
Kolkata
51
486
Mumbai
Region
326
Pune
Hyderabad
625
Bangalore
Hyderabad
Hyderabad
Hyderabad, Secundrabad,
Vishakhapatnam, Vijayawada
Pune
Pune
Chennai
Chennai, Calicut, Trivandrum,

Madurai, Coimbatore, Cochin,
Vellore
Mumbai
Mumbai, Goa, Ahmedabad,

Vadodara, etc.
NCR
Delhi, Gurgaon, Noida, Chandigarh,

Mohali
Kolkata
Kolkata, Patna, Bhubaneswar
244
Bangalore
Note: The cities marked in bold are emerging Tier-II cities for product startups
Cities
Bangalore, Mysore, Belgaum,
Gulbarga, Hubli
238
Chennai
Cost
Bangalore
Kolkata
Pune
142
Proactive state IT
organizations
Though the number of start-ups originating from

tier-2 cities is minimal, many start-ups originating
out of tier-1 cities are expanding to the nearest tier2 cities to lower the cost of operations. In the
last 5 years, tier-2 cities have witnessed
more than 40 such start-ups.
Product start-ups split across regions

NCR
Manufacturing
Ecosystem
13
With new IITs and NITs coming up in tier-2 and tier-3 cities, these locations are poised
for a major growth in academia infrastructure
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
Academia
Ecosystem
Manufacturing
Ecosystem
Proactive state IT
organizations
Cost
25
Tier-2
/Tier-3
Locations
20
15
10
8 of the 9 new IITs have been set up in

tier-2 or tier-3 cities and 9 new NITs are
coming up in tier-3 cities, giving a major
boost to education infrastructure in these
locations.
Indian Institute of Software Engineering

is coming up in Pune in association with
Carnegie Mellon University, USA.
NCR and Pune are the best locations in

the country in terms of technology
university ecosystem. Pune is known as
the Oxford of the East due to presence
of historically strong university
ecosystem.
3 out of every 10 colleges^ in India are

present in tier-2 cities, with Coimbatore
and Jaipur being the leaders
Tier-1
Locations
5
0
Established Upcoming Established Upcoming
IITs
IITs
NITs
NITs
Engineering Colleges distribution

by location
Bangalore
NCR
6%
3%
4%
13%
Chennai
7%
19%
8%
Hyderabad
Pune
8%
Coimbatore
15%
15%
Jaipur
Nagpur
Trivandrum
Others*

Note: * Others include Ahmedabad, Chandigarh and Vadodara, ^ Analysis is only for the 12 cities taken into consideration
14
Fast growing manufacturing hubs like Ahmedabad have good potential to attract
MNCs in to set up their R&D centers in the long run
Talent Pool
Vertical
Focus
Expansion to
tier-2 cities
Pantnagar
NCR
Start-up
Ecosystem
Ahmedabad
Kolkata
Academia
Ecosystem
Manufacturing
Ecosystem
Strategically located
in central India
Proactive state IT
organizations
Cost
Availability of
greenfield land and
well developed
ports
Speedy execution
and transparency in
dealing
Investor friendly
policies and ease of
doing business
Pune(Western Ghats)
Chennai
Emerging Automotive
Manufacturing Hubs
Ahmedabad
Advantages
Established Automotive
Manufacturing Hubs
Some of the big automotive companies which have their manufacturing plant in Ahmedabad are Tata
Motors, General Motors, Ford Motors and Peugeot.
Chennai, often referred to as the "Detroit of India, is still the largest auto hub in India, accounting for
60% of the country's automotive exports.
15
Many state IT associations in the country are making proactive efforts to establish
their states as major IT hubs
Talent Pool
Vertical
Focus
Expansion to
tier-2 cities
Start-up
Ecosystem
IT & ITES Industry

association of AP
ITSAP representing the

software industry in
Andhra Pradesh; started
in 1991 with 15 people
and has more than 300
registered members till
2011.
ITSAP has played a vital
role in recommending
and lobbying for
incentives policy and
branding AP as an IT
destination.
Academia
Ecosystem
Manufacturing
Ecosystem
GESIA was started in

1995 to promote
Electronics Industry in
Gujarat; now it has 280+
registered members.
GESIA played a key role
in development of
Gujarat as a major IT hub
by recommending
incentives and branding
initiatives (Vibrant
Gujarat is the most
successful branding
campaign in India).
Cost
Software Exporters
Association of Pune
Gujarat Electronics &

Software Industries
Association
Proactive state IT
organizations
SEAP was started in 1998

and now has more than
100 registered members
which includes all the
major IT/ITES companies
operating out of Pune.
SEAP acts as an umbrella
under which various
technical and marketing
issues can be discussed
and learning opportunity
provided within the
member companies
through SIGs.
16
Tier-2 cities provide a huge cost advantage over tier-1 cities but costs in these cities
have shown an exponential surge in last couple of years
Vertical
Focus
Talent Pool
Expansion to
tier-2 cities
Start-up
Ecosystem
Academia
Ecosystem
Manufacturing
Ecosystem
Average Commercial Real Estate Rentals/sq.ft

66
55
53
50
48
47
40
39
38
38
Cost
Cost of Living Index

37.9
58
Proactive state IT
organizations
36.6 35.1
34.2
33.7
33.1
32.6 32.4 32.1
29.8
34
Commercial Real Estate prices in tier-2 cities are Tier-2 are 15-20% lower than the tier-1 cities on an
average. Rentals in Chandigarh and Trivandrum are on the higher side, partially due to presence of just
one technology park these cities
In the last couple of years, tier-2 cities have witnessed a major surge in Commercial Estate costs and
Cost of Living due to infrastructure development and increased traction. Commercial Real Estate Prices
have risen sharply in Nagpur after the offset of Multi-modal International Cargo Hub and Airport
(MIHAN), which is the biggest economical development project in India in terms of investments.
Source: www.magicbricks.com, www.numbeo.com, Zinnov Analysis
17
Agenda
TRENDS
RANKINGS
CITY
PROFILING
18
R&D Suitability Index across different locations
Bangalore
3.5
Pune
3
Hyderabad
Suitability*
2.5
Chennai
Ahmedabad
2
NCR
Trivandrum
Coimbatore
Chandigarh
1.5
Vadodara
1
Nagpur
Jaipur
0.5
0
0.5
0.6
0.7
0.8
0.9
Differential Cost*
There is a sizable gap between tier-1 and tier-2 locations in terms of both Suitability and Cost.
Bangalore continues to top the suitability index followed by Hyderabad and Pune; NCR tops in Cost
parameter
Tier-2 cities are more clustered compared to tier-1 cities in suitability ratings but are quite scattered in
cost ratings, with Chandigarh being the costliest

*Note: Suitability is the weighted average of ratings on various sub-parameters; Differential Cost includes rentals cost and people cost
19
Vertical wise city ranking
Software Product
Development
Embedded R&D*
Core Engineering
R&D*
BANGALORE
BANGALORE
PUNE
PUNE
NCR
BANGALORE
HYDERABAD
HYDERABAD
CHENNAI
NCR
PUNE
NCR
CHENNAI
CHENNAI
HYDERABAD
TRIVANDRUM
COIMBATORE,
AHMEDABAD
Bangalore continues to be the leading R&D hub of India but Pune is the leader in Core Engineering
vertical due to strong manufacturing ecosystem and presence of indigenous companies & MNCs
Cities like Coimbatore and Ahmedabad are coming up in core engineering vertical

Note: Embedded R&D includes R&D in Telecom, Semiconductors, Storage, Networking and Computer Hardware; Core Engineering R&D includes R&D in Automotive, Energy, Industrial and Aerospace
20
City wise Infrastructure Ranking

Excellent IT infrastructure but Poor Transportation infrastructure
BANGALORE
Good rating on all parameters
CHENNAI
Excellent IT infrastructure but Poor Civic infrastructure
NCR
PUNE
11
12
Good Hotel infrastructure but Poor IT infrastructure
TRIVANDRUM
Good IT infrastructure but poor international connectivity
JAIPUR
10
Good Transportation infrastructure but Poor Civic infrastructure
HYDERABAD
AHMADABAD
COIMBATORE
Excellent Civic infrastructure but Poor international connectivity

Average Physical and Civic infrastructure but no international airport
Average transportation infrastructure but Poor Hotel infrastructure
NAGPUR
Good Physical infrastructure but no international airport
VADODARA
CHANDIGARH
Average Transportation infrastructure but Poor

international connectivity
Average transportation infrastructure but no international airport

Note: Rankings based on weighted average of sub-paramerts ratings
21
Infrastructure - Sub Parameters Rating
Cities
Transportation within
city
IT Infrastructure
Hotel Infrastructure
Physical and civic

infrastructure
International
Connectivity
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor
- Fair
Good
Very Good
- Excellent
22
Tier-2 cities have shown major improvement in Infrastructure and are poised for a
major revamp in coming years
Overall tier-1 and tier-2 cities have comparable Physical and Civic
infrastructure ; tier-2 cities have advantages of lower population and
size, which is easy to govern.
Ahmedabad was ranked best city in India in terms of civic infrastructure
by survey done by Times of India-IMRB
All tier-2 cities suffer from poor to zero international connectivity

especially to USA and Europe countries.
International connectivity of Pune is expected to improve with the new
airport
New international airports are coming up in Chandigarh (2012) and
Coimbatore (2013)
Ahmedabad BRTS is the most successful BRTS project in India; it also

won the most Sustainable Transport Award in the world (2010)
Vadodara City Bus Service implemented through PPP model has been
one of the most successful projects among peers.
Metro Rail projects are undertaken in many tier-2 cities like Jaipur,
Nagpur, Chandigarh
NCR has the best Hotel infrastructure among Indian cities; tier-2 cities
lack considerably in presence of quality hotels
15 new hotels consisting of 3,502 rooms are expected to become
operational in Pune by 2013
23
City wise Human Resource Ranking
Excellent in-country movement

of talent and good installed
talent pool
HYDERABAD
Excellent fresh talent pool and

in-country movement of talent
CHENNAI
Excellent fresh talent pool and

good expatriate movement
Excellent fresh talent pool but

average installed talent pool.
COIMBATORE
Good Fresh Talent pool but poor

In country movement of Talent
JAIPUR
Good Fresh Talent pool but

expatriate movement of talent
Average in-country movement

of talent, but poor talent pool
10
11
TRIVANDRUM
Good Fresh Talent pool but poor

In country movement of Talent
CHANDIGARH
Average talent pool and poor

expatriate movement
NCR
NAGPUR
Excellent talent pool and incountry movement of talent
PUNE
BANGALORE
12
AHMEDABAD
Good in-country movement of

talent, but poor talent pool
VADODARA
Average in-country movement

of talent, but poor talent pool
24
Human Resource Availability - Sub Parameters Rating
Cities
Installed Talent Pool
Fresh Talent Pool
In country movement
Expatriate movement
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor
- Fair
Good
Very Good
- Excellent
25
City wise Quality of Life Ranking
NAGPUR 12
1
Very low pollution levels but less number of

weekend outing locations
Excellent climate and a number of languages

spoken
VADODARA 11
Excellent cultural diversity but poor

medical facilities
Good medical facilities but poor

climate
CHANDIGARH
NCR
Excellent medical facilities but high pollution
levels
Large number of weekend outing

locations but poor climate
HYDERABAD
Low pollution levels but less number of
weekend outing locations
Large number of languages spoken

but low cultural diversity
JAIPUR
PUNE
Excellent climate and medical facilities
AHMEDABAD 10
CHENNAI
BANGALORE
COIMBATORE
Excellent climate but low cultural diversity
TRIVANDRUM
Excellent climate but low cultural diversity
Large number of weekend outing

locations but poor medical facilities
26
Quality of Life - Sub Parameters Rating
Cities
Climate
Languages Spoken
Pollution levels
Weekend outing
options
Medical facilities Cultural diversity
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor
- Fair
Good
Very Good
- Excellent
27
Tier-2 cities provide advantages like good hospital infrastructure, low pollution levels
and weekend outing options which can be a major plus for them
1
Quality of
Life
Cultural Diversity
- Cities like Chennai,
Ahmedabad are not
perceived to be open to
other cultures and
religions which can prove
to be a major roadblock in
attracting talent
5
5
3
4
Medical Facilities
- Coimbatore is a major center for medical
tourism; there are nearly 750 hospitals in
and around Coimbatore with a capacity of
5000 beds
- 12 new multi-specialty hospitals are
expected to come up in Hyderabad in the
next 5 years
Climatic Conditions
- Jaipur, Nagpur, Vadodara and Ahmedabad

have drawback of very extreme climatic
conditions compared to other locations
Pollution Levels
- NCR is the most polluted location and Chennai
is the least polluted location among all cities
- On an average, tier-2 cities pollution levels are
20% lower than tier-1 cities
Weekend outing options
- Nagpur and Chennai figure low in weekend outing options

compared to other cities
- Cities like Pune, Bangalore, Chandigarh provide many options
for weekend outings due to their geographic advantage
- Lonavala, a hill station on Pune-Mumbai expressway, is fast
emerging as a preferred choice for second homes for many
people working in Pune or Mumbai
28
City wise Support Ecosystem Ranking
Excellent MNC R&D and StartUp ecosystem
Overall good Innovation ecosystem
Excellent academia eco-system but

poor Start-Up eco-system
Good academia ecosystem but poor Start-up

ecosystem
Overall poor
Innovation Ecosystem
Overall poor Innovation
Ecosystem
Excellent academia ecosystem but

poor Start-Up ecosystem
Excellent Research and start-up

ecosystem
Good academia ecosystem but
overall poor innovation ecosystem
Good academia ecosystem
but overall poor innovation
ecosystem
Overall poor
Innovation
Ecosystem
Overall poor Innovation ecosystem

29
Support Ecosystem - Sub Parameters Rating
Cities
Academia Ecosystem
Research Labs
MNC R&D Ecosystem
Start-up Ecosystem
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor
- Fair
Good
Very Good
- Excellent
30
City wise Business Continuity Risk Ranking
1
3
5
7
9
11 HYDERABAD
Overall below
average business
continuity risk.
PUNE
Politically stable
but has
experienced
terrorist/commun
al attacks.
NCR
Less political risks
but risk of
terrorist/
communal attacks.
Low crime rate but

has experienced
natural calamities.
10 AHMADABAD
BANGALORE
High crime rate
but less prone to
natural calamities.
Politically stable
but high crime
rate.

Low crime rate

and less prone
to natural
calamity.
2
6
12
TRIVANDRUM
4
8
CHANDIGARH
VADODARA
Low political risks
but has
experienced
terror/ communal
attacks.
JAIPUR
Less prone to
natural calamities
but high crime
rate.
NAGPUR
Low political risks
and average
crime rate.
CHENNAI
Low crime rate
but above
average political
risks.
COIMBATORE
Low political risks
and low crime
rate.
31
Business Continuity Risk - Sub Parameters Rating
Cities
Crime Rate
Natural Calamities
Terrorist Attacks/
Communal Riots
Political Risks
Tier-1
Bangalore
Chennai
NCR
Hyderabad
Pune
Tier-2
Ahmedabad
Chandigarh
Coimbatore
Jaipur
Nagpur
Vadodara
Trivandrum
- Poor
- Fair
Good
Very Good
- Excellent
32
Degree of business continuity risk is distributed across all locations and each location
has its own pros and cons
Crime
Rate
Natural
Calamities
Terrorist
Attacks/
Communal
Riots
Political
Risks
According to National Crime Rate Bureau, Jaipur registered maximum

number of crimes under IPC in 2010, followed by Bangalore.
Chennai registered minimum number of registered crimes under IPC, just
next were Coimbatore and Chandigarh.
Overall all the cities possess very low risk of any natural calamities.
Only exceptions are Chennai and Trivandrum, which have history of
natural disasters like Tsunami
Tier-2 cities are less prone to terrorist attacks compared to tier-1 cities
Ahmedabad and Vadodara and the 2 cities which have the history of
communal riots.
Overall all the cities possess very low political risks and have stable
political structure in place
Hyderabad has some political risks pertaining to creation of new state
Telangana.
Source: National Crime Rates Bureau reports, Zinnov Analysis
33
Agenda
TRENDS
RANKINGS
CITY
PROFILING
34
Bangalore Silicon Valley of India
TALENT
Key Drivers
Bangalore has a well developed eco-system of

skilled resources and managerial talent; it
employs 35% of Indias talent pool
Thriving start-up ecosystem with more than
60% of the product start-ups in India
originating out of Bangalore
Infrastructure in terms of steady supply of real
estate, in the form of SEZs is improving. New
power generation and Metro Rail projects have
been major boost to city infrastructure
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
40,000
MNC R&D Talent

Pool
1,08,220
STPI Exports (Rs)
58,850 Crores (2010)
Software Exports
growth
23% (2009-10)
Illustrative list of companies present
PROS
Good Academia and IT Infrastructure, Large
Human Resource, Favorable Climate,
CONS
High Operations Cost, High Attrition
Source: Zinnov Talent Pool Study, STPI India, Indiastats.com, National Crime Rate Bureu report, Zinnov Analysis
Note: Red, Yellow, Green colours highlight Good, Aerage and Bad respectively
35
Hyderabad - The Cyberabad of India
TALENT
Key Drivers
Compared to other metros, the cost of living

and lease rentals are lower in Hyderabad by
around 10-20%.
Andhra Pradesh is one of the largest supplier
engineering students in the country, majority of
them being from Hyderabad and adjoining
areas
Strategically located equidistant from
Bangalore, Pune and Chennai
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
39,000
MNC R&D Talent

Pool
25,520
STPI Exports (Rs)
27,000 Crores (2010)
Software Exports
growth
24.5% (2009-10)
PROS
Good Academia and IT Infrastructure, Ease of
doing business, Good physical infrastructure
CONS
Relatively higher business continuity risk, poor
city perception
36
Chennai Detroit of South India
TALENT
Key Drivers
Chennai has a large human resource pool at all

levels. The presence of an industrial base
(automotive and engineering sectors) has lead
to strong skill sets in these sectors.
Infrastructure availability is quite good
especially reliable power, supply of office space,
national and international connectivity.
Cost of living and real estate costs are 10-12%
lower than Bangalore, the nearest IT hub which
is a big plus
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
42,000
MNC R&D Talent

Pool
13,270
STPI Exports (Rs)
22,400 Crores (2010)
Software Exports
growth
14% (2009-10)
PROS
Good Academia and IT Infrastructure, Good
physical infrastructure, Lower pollution levels
CONS
Poor city perception, Low cultural diversity
37
NCR 2nd largest metropolitan city of India
TALENT
Key Drivers
Delhi has well developed infrastructure

including steady supply of office space and 52
SEZs (spanning 900 hectares) in the NCR region.
National and international connectivity from
Delhi is also among the best in India
Very strong academia infrastructure due to the
presence of more than 100 engineering colleges
and research institutes
Places like Noida, Faridabad provide significant
cost advantages compared to other metros
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
55,000
MNC R&D Talent

Pool
20,000
STPI Exports (Rs)
21,700 Crores (2010)
Software Exports
growth
Almost 0%
PROS
Excellent IT and transportation infrastructure,
Excellent international connectivity.
CONS
Relatively average start-up ecosystem, High
pollution levels, history of terrorist attacks
38
Pune Oxford of East
TALENT
Key Drivers
Proximity to the financial capital of India has

helped Pune to emerge as center of IT services
and support arm of some of the major global
banks
Pune boasts of very strong manufacturing
ecosystem
Pune is home to some of the oldest education
institutes and prominent research institutes in
India
Thriving Physical infrastructure with projects
like new airport, metro rail and 18 new SEZs
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
30,000
MNC R&D Talent

Pool
24,000
STPI Exports (Rs)
29,000 Crores, (2010)
Software Exports
growth
40% expected (2011-12)
PROS
Good Academia and IT Infrastructure, Favorable
climatic conditions, Strong service provider
ecosystem
CONS
Poor international connectivity
39
Coimbatore Manchester of South India
TALENT
Key Drivers
More than 40,000 SMBs primarily in textiles,

automobiles and other engineering component
industries
Commercial Real Estate costs are around 2055% lower than tier-1 cities
Coimbatore being one of the educational hubs
of South India ,has abundance of graduate
talent available
Strategically located equidistant from both
Bangalore and Chennai
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
25,000
STPI Exports (Rs)
570 Crores (2010)
Software Exports
growth
90% (2009-10)
PROS
Good Academia Infrastructure, Favorable
Climate, Low Business Continuity Risk
CONS
Absence of international airport, Average
transport infrastructure
40
Nagpur The Orange city
TALENT
Key Drivers
Rapidly growing infrastructure due to the Multimodal International Cargo Hub & Airport
Educational hub of central India with more than
40 engineering and medical colleges and good
availability of fresh talent
Major engineering hub with presence of
companies like Mahindra & Mahindra, NECO
Ltd, Bajaj Auto, etc.
Commercial real estate costs are around 40%
lower than the tier 1 cities on an average
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
20,000
STPI Exports (Rs)
140 Crores (2010)
Software Exports
growth
10% (CAGR in last 3 years)
PROS
Very Low pollution levels, Favorable state
government laws, strategically located in central
India
CONS
Extreme Climate, Average medical facilities ,
poor international connectivity
41
Chandigarh The Pensioner's Paradise
TALENT
Key Drivers
Chandigarh ranks 1st in India in terms of Human

Development Index and quality of life, thereby
.attracting a large number of professionals from
other locations
The city has a 10-50% cost advantage in
comparison to tier 1 cities in terms of
Commercial Real Estate Costs
Availability of Good fresh talent pool and strong
university ecosystem due to universities like
Panjab University is a big advantage
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
10,000
STPI Exports (Rs)
470 Crores (2010)
Software Exports
growth
20% (2009-10)
PROS
High quality of life, Moderate climatic
conditions, low crime rates
CONS
Relatively small fresh talent pool, poor
international connectivity, average power
infrastructure
42
Trivandrum - The highest literacy rate
TALENT
Key Drivers
Abundant available business space (around 20

million sq. ft. ) with natural beauty of the city is
ideal for MNCs to set up their delivery centers
Strong Research Ecosystem due to presence of
research institutes and academic institutes like
CDAC, Indian Institute of Science, Education and
Research, Indian Institute of Information
Technology and Management, etc.
Onset of huge companies like Oracle for
development of next gen products is a big plus
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
12,000
STPI Exports (Rs)
1120 Crores (2010)
Software Exports
growth
5% (2009-10)
PROS
Highest literacy rate in the country, Excellent
climatic conditions
CONS
Poor international connectivity with EU and
USA, relatively small fresh talent pool
43
Ahmedabad Detroit of East
TALENT
Key Drivers
Ahmedabad is one of the fastest growing cities

in India in terms of infrastructure and attracting
investments
Commercial Real Estate cost is 20-40% less than
that of tier-1 cities
Huge and fast growing auto manufacturing base
with onset of companies like Tata, Ford and
Peugeot
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
10,000
STPI Exports (Rs)
490 Crores (2010)
Software Exports
growth
72% (2009-10)
PROS
Investor friendly policies, Very good
infrastructure, High quality of life
CONS
Extreme Climate, Relatively small fresh talent
pool, history of communal riots and floods
44
Jaipur The Pink city
TALENT
Key Drivers
Flourishing infrastructure with the construction

of Mahindra World City(India's largest
integrated IT SEZ) and World Trade Park
Good service provider ecosystem due to
presence of all major Indian service providers
Cost advantage of 20-40% in Commercial Real
Estate costs compared to tier-1 locations
Due to the citys proximity to NCR, Jaipur can be
grown as supporting location to create a hub-&spoke model
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
22,000
STPI Exports (Rs)
410 Crores (2010)
Software Exports
growth
50% (2009-10)
PROS
Excellent hotel infrastructure, Many weekend
outing options, Low Crime Rate
CONS
Poor power infrastructure, Extreme weather,
Relatively high pollution levels
45
Vadodara The Knowledge City
TALENT
Key Drivers
Vadodara offers a cost advantage of over 25%

with respect to compensation levels and around
20-40% with respect to cost of living in tier-1
cities
Presence of companies like ABB, L&T, Alstom,
Siemens and Bombardier have given a major
boost to Vadodaras industrial ecosystem
Thriving civic infrastructure (Vadodara City Bus
Service implemented through PPP model has
been one of the most successful projects among
peers)
Pros and Cons
COST
ECOSYSTEM
Quick Facts
Fresh Talent Pool
8,000
STPI Exports (Rs)
310 Crores (2010)
Software Exports
growth
70% (2009-10)
PROS
Good Industrial Ecosystem, Investor friendly
policies, growing civic infrastructure
CONS
No international airport, High pollution, Has
witnessed floods, earthquakes and communal
violence.
46
Glossary
Term
Definition
R&D
Includes product software development, product testing and futuristic research

Doesnt include IT services, IT Enabled services, BPO/IT Support, etc.
Tier-1 cities
Cities which have established themselves as R&D destinations and contribute significantly towards R&D
ecosystem in India
Tier-2 cities
Cities whose contribution towards Indian R&D ecosystem is very small and are emerging as future R&D
hubs
Suitability
Measures how suitable is the location for setting up a MNC R&D center. It is calculated using a weighted
average of ratings of various sub-parameters like support ecosystem, human resource, etc.
Differential Cost
Measures the differential cost of locations relative to most expensive location (NCR in this case). Cost is
approximated using a weighted average of Rentals cost and People cost
Software Product
Development
Includes R&D in verticals such as Software products/Internet
Embedded R&D
Includes R&D done in Telecom, Semiconductors, Storage, Networking and Computer Hardware verticals
Core Engineering
R&D
Includes R&D done in Core Engineering R&D includes R&D in Automotive, Energy, Industrial and
Aerospace verticals
Fresh Talent Pool
Approximated based on number of engineering colleges in the location
47
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Tier 2 Cities Location Analysis

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Tier 2 Cities Location Analysis

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Location Analysis: Emerging cities of India

- The study tries to analyze major

Tier-1 cities constituted almost

Gradually, growth of tier-1

MNCs started expanding to tier-2

Tier-2 cities, which were initially

Companies also started looking at

But tier-2 are still in nascent stage

Fresh Talent Pool distribution

Total MNC R&D Talent in India in 2011 ~ 204,196

MNC R&D Talent pool in India is

Mean Value :Headcount per MNC R&D Center

Source: Zinnov Analysis

MNC R&D centers distribution in India by

Software MNC R&D centers distribution in

Source: Zinnov Analysis

While Bangalore is the clear leader in semiconductor vertical, automotive vertical is

Semiconductor MNC R&D centers

Automotive MNC R&D centers distribution

Source: Zinnov Analysis

Examples of MNCs in tier-2 cities

Source: Zinnov Analysis

Most companies with

Source: Zinnov Analysis

Most companies beyond 2,500+

Number of companies with multiple locations

Close to 13% of US based MNCs have R&D centers

Around 14% of Europe based MNCs have R&D

Companies with 2 locations

Source: Zinnov Analysis

Companies with 3 locations

Chennai, Calicut, Trivandrum,

Mumbai, Goa, Ahmedabad,

Delhi, Gurgaon, Noida, Chandigarh,

Kolkata, Patna, Bhubaneswar

Though the number of start-ups originating from

Product start-ups split across regions

8 of the 9 new IITs have been set up in

Indian Institute of Software Engineering

NCR and Pune are the best locations in

3 out of every 10 colleges^ in India are

Engineering Colleges distribution

Source: Zinnov Analysis

Source: Zinnov Analysis

IT & ITES Industry

ITSAP representing the

Source: Zinnov Analysis

GESIA was started in

Gujarat Electronics &

SEAP was started in 1998

Average Commercial Real Estate Rentals/sq.ft

Cost of Living Index

32.6 32.4 32.1

Source: www.magicbricks.com, www.numbeo.com, Zinnov Analysis

R&D Suitability Index across different locations

Source: Zinnov Analysis

Vertical wise city ranking

Source: Zinnov Analysis

City wise Infrastructure Ranking

Good rating on all parameters

Excellent IT infrastructure but Poor Civic infrastructure

Good Hotel infrastructure but Poor IT infrastructure

Good IT infrastructure but poor international connectivity

Good Transportation infrastructure but Poor Civic infrastructure