Hyderabad :

The Andhra Pradesh government  is wooing expat Indian businessmen to give the initial push to its plan of developing Visakhapatnam into an information technology hub.

Nearly 16 US-based small and medium enterprises in the IT and IT enabled services sectors are planning to begin operations in the region by the end of 2014. These companies, which mostly run their offshore operations in cities across India and have revenue ranging from $20 million to $100 million, are banking on government incentives to return the favour.

“This goes beyond the purview of business” and “has an emotional connect to the state” as the US has a large number of entrepreneurs from Andhra Pradesh, says B Sriram, tax partner at Ernst & Young. “Though that is the significant pull factor, the fact that Vizag is the only city with some infrastructure in the state makes it a favoured destination.” Though an appeal has been made to the NRI audience, according to him the bigger players are yet to make a move. “Once the tier-1 players move, it will attract tier-2 players as well.”

Around half a dozen companies from the US have agreed to be a part of the 50,000-square-foot incubation centre at the Madhurawada IT Layout to mentor and seed-fund promising ventures from a combined pool of $250,000. “These SMEs will create the critical mass for bigger players to come in,” said JA Chowdary, chairman of the Industrial Development Forum, which has been conducting roadshows to garner investment for the state.

“We are looking at adding Vizag operations for software development with a focus on enterprise services as well as that on mobile-cloud in six-eight months’ time,” said Satish Manduva, chief executive of Texasbased IntelliSoft Technologies, an IT-consulting and software development company. “We plan to set up a 200-member team at Vizag over the next three years generating around $15 million.” IntelliSoft, with a turnover of $50 million, currently has operations in Hyderabad, Chennai and Pune.

The SMEs making the move are focused on training and recruiting talent in emerging technologies such as mobile, cloud and big-data analytics. “Our main source of recruiting the fresh talent is through references, walk-ins and approaching institutions,” said Brahma Gupta, founder of Indrasol, a oneyear-old mobile and analytics company incorporated in California.

The blueprint issued by the AP government on its Information and Communication Technology Policy 2014-2020 promises land at rebated costs for development by companies, sops including 100% reimbursement of stamp duty for IT industry and 25% power subsidy for three years for IT companies identified as micro, small and medium enterprises. Beginning with a plug and play model for setting up operations, the SMEs are looking at owning office space as an additional asset to their operations.

“We would lease the space initially but would like to set up an office in a year and half ‘s time, given the land allocation by the government. Also, the cost arbitrage in terms of salaries will work out to be 25% cheaper than expanding in Bangalore or Hyderabad where we presently have operations,” said Sunil Kilaru, chairman and chief executive of PrimusGlobal, an IT solutions company registered in Texas with an annual turnover of $20 million.

“Visakhapatnam is the only possible destination with infrastructure – both social and regular in the state of AP. It will emerge as an IT destination in AP state,” said Sandeep Patnaik, managing director of real-estate consultancy Jones Lang LaSalle, Hyderabad. “Other cities such as Ananthapur and Tirupati will take another five years to develop for senior-level employees to move in.These cities lack a minimum captive audience.”

In order to overcome the gap in filling senior managerial positions, the companies are looking at bringing employees from other centres.”Initially two members from our senior management will be brought in to anchor the operations for six months,” says Satish Manduva of IntelliSoft Technologies.

source: http://www.timesofindia.indiatimes.com / The Times of India / Home> Business> India Business / Payal Ganguly, ET Bureau / September 24th, 2014