Transcript Slide 1

IT Parks
A catalyst for growth*
*connectedthinking
IT sector defined
Goods

Electronic Data Processing (EDP) and office equipment
 Telecommunication equipment
 Integrated circuits and electronic components
Services

System integration, software development and maintenance, information technology
infrastructure management etc.
 Business process outsourcing: Customer care & support, finance & accounting,
human resources, content development etc.
PricewaterhouseCoopers | 3
IT and Development

Contribution to GDP > Domestic and export value-added

IT usage by citizens > informed and connected society with “global”
expectations

e-Government > Citizen service delivery – transparency, effective
monitoring and productivity

IT in business > Operational efficiencies and productivity
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Global IT Sector…Key players
UK
Canada
Ireland
Germany
EU
USA
Japan
China
South Korea
Mexico
India
Philippines
Malaysia
Singapore
Source: WTO Trade Statistics , 2004 and
PwC analysis
Goods
Services
Services
EDP & Office Eqpmt
Telecom Eqpmt
IC & Components
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ICT Development Indicators
Parameters
Korea
Malaysia
China
India
United
States
48
81
25
64
1296
40
1080
29
294
80
128
66
83
88
4
100
Telephone lines (per 1000)
Internet users (per 1000)
Personal computers (per 1000)
Mobile Subscriber (per 1000)
Population covered by mobile
Telephony (%)
467
656
558
760
99
176
392
170
573
96
241
73
40
258
73
43
23
11
48
41
606
569
760
615
95
531
606
425
669
99
660
472
440
858
99
430
559
565
891
100
Broadband subscribers (per 1000)
International Internet Bandwidth
(bits/person)
ICT Expenditure (% of GDP)
247
993
10
127
17
57
0.6
4
129.1
3308
145.8
1038
83.6
6850
118
5699
6.6
6.9
5.3
3.7
8.8
7.4
5.7
10.4
Social Indicators
Total Population (millions)
Urban Population (%of total
population)
Japan Germany
Singapore
ICT Sector Indicators
Source: World Bank, UNDP, ITU and others
PricewaterhouseCoopers | 3
IT Parks: Sample for assessment

Focus on “developing” countries at a relatively lower level of ICT maturity

Mix of successful and “not so successful” IT Parks
Park
Singapore Science Park
(SSP)
Taedok Science Town
(Taedok)
Hitec City, Hyderabad
(Hitec)
IT Park, Hubli (Hubli)
Country
Singapore
Year
1984
Occupancy
> 150 IT companies
South Korea
1983
> 350 IT companies
India
1998
> 150 companies
India
2002
< 10 companies
Zhongguancun Science
Park (ZSP)
Cyberjaya Flagship Zone
(CFZ)
China
1991
Malaysia
1998
> 200 medium size IT
companies
> 100 companies
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The “CLIP” framework
Sources of Debt
Ownership
Anchor Tenants
Business Incubator
Venture Capital
Capital
Market
Internal Services
Value Chain
Centers of Excellence
Linkage
Land
Communication
Physical Infrastructure
Social Infrastructure
Environment
Infrastructure
Quality
Salary
Throughput
People
PricewaterhouseCoopers | 3
Capital
SSP, Singapore
Owned and operated by Ascendas Pty; Significant initial support from the Government
through relocation of key institutions; Business incubation services offered to start-up
companies; Large number of anchor occupants like Lucent, Sony, Silicon Graphics etc.
Taedok, South
Korea
Promoted and managed by the Government; Significant Government support initially
through relocation of key institutions; Business incubation services offered to start-up
companies; Dedicated venture capital fund and occupants like LG, Samsung
Hitec City,
Hyderabad, India
Promoted & managed by a joint venture L&T Infocity, with shareholders being Larsen &
Toubro, State Government and Ascendas; Primarily occupied by large companies like
HSBC, Microsoft, IBM, Motorola, CSC, Oracle etc.
IT Park, Hubli,
India
Promoted and managed by the State Government; Business incubation services
offered to start-up companies by the state-owned Software Technology Parks of India
ZSP, China
Promoted by Government and managed by different Government bodies; Business
incubation services offered to start-up companies; Dedicated venture capital funds
managed by municipal Government; Anchor occupants like Stone, Microsoft, IBM etc.
CFZ, Malaysia
Promoted by a joint venture company between the Government and private
companies; Managed by Multimedia Development Corporation, a Government
company; Business incubation services to start-up companies; Anchor occupants like
HSBC, EDS, Motorola, Ericsson, Nokia etc.
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Linkages
SSP, Singapore
Products primarily include EDP & office equipment, IC & components etc; R&D support
from The Centre of Wireless Communication and The Institute of Microelectronics,
NUS and Singapore University; Facilitation services by Ascendas & partners
Taedok, South
Korea
Products include EDP & office equipment, telecommunication equipment & software
etc.; R&D support through Electronics & Telecom Research Institute, KAIST,
Chungnam University etc. Regular fairs and events for technology partnerships
Hitec City,
Hyderabad, India
Primarily IT and BPO Services with export focus; No significant requirement of R&D
support; A number of occupants like HSC, Google operate as global shared services
centres
IT Park, Hubli,
India
Primarily BPO Services with export focus but lacking depth; No significant requirement
of R&D support
ZSP, China
Focusing on EDP & office equipment, Software and IT Services for domestic and
export market; R&D support from Qinghua and Beijing University, Chinese Academy of
Science; Facilitation services at the incubation centres
CFZ, Malaysia
Primary focus on IT & BPO services for exports in the global shared services centre
model; No significant requirement of R&D support; Significant e-Government related
business opportunities in Malaysia, facilitated by Multimedia Development Corpn.
PricewaterhouseCoopers | 3
Infrastructure
SSP, Singapore
Within 30 minutes from Changi International Airport; Low occupancy charges;
Leveraging the urban & social infrastructure of Singapore together with data & voice
connectivity
Taedok, South
Korea
Within 30 minutes from Cheon Gju International Airport; Well connected through road
& rail network; Own urban and social infrastructure in the form of residential clusters
with all amenities, recreation halls, swimming pools
Hitec City,
Hyderabad, India
Within 30 minutes from Hyderabad International Airport; Data connectivity through the
VSNL hub within the Park and STPI; Optical fibre networking within the Park;
Leveraging the urban and social infrastructure of Hyderabad city
IT Park, Hubli,
India
More than 8 hours from Bangalore International Airport; Optical fibre networking within
the Park by Software Technology Parks of India (STPI) and then through 1 Mbps
satellite gateway; Urban and social infrastructure at Hubli appears inadequate
ZSP, China
Within 30 minutes from Beijing International Airport; Optical fibre networking within the
Park and then International Gateways at Beijing; Leveraging the urban and social
infrastructure in Beijing
CFZ, Malaysia
Within 45 minutes from Kuala Lampur International airport; External connectivity
through 2.5-10 Gbps optical fibre backbone and international gateway at Kuala
Lampur; Own urban and social infrastructure in the form of residential clusters with all
amenities; Leveraging the urban & social infrastructure of Kuala Lampur
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People
SSP, Singapore
Around 7,000 research engineers, scientists and support staff deployed; Proximity to
NUS, Nanyang Technological University, Ngee Ann and Singapore Polytechnics;
Average annual salary of USD 40,000 at the middle management level
Teadok, South
Korea
Over 25,000 IT specialists, R&D experts deployed; Houses the Korea Advanced
Institute of Science and Technology, Chungnam National University and Chungnam
college
Hitec City,
Hyderabad, India
More than 20,000 engineers, MBAs, IT specialists and graduates deployed; More than
150,000 resources from 23 universities and over 200 colleges in Andhra Pradesh
annually. Average annual salary of USD 8,500 at the middle management level
IT Park, Hubli,
India
Around 100 engineers, IT specialists deployed; More than 75,000 IT professionals,
engineers, MBAs from 19 universities and over 100 colleges in Karnataka annually;
Average annual salary of USD 8,500 at the middle management level
ZSP, China
30,000 IT specialists, engineers, scientists annually from over 68 Universities &
colleges in region, prominent being Beijing University, Qinghua University and Chinese
Academy of Science; Average annual salary of USD 8,800 for middle management
CFZ, Malaysia
More than 10,000 IT specialists, engineers and graduates deployed; Houses the
Multimedia University and LimKokWing University College of Creative Technology;
Average annual salary of USD 19,900 at the middle management level
PricewaterhouseCoopers | 3
The 7 Divine Virtues

Having the right product-services mix is critical

A supportive and proactive Government is key

World class physical and virtual infrastructure represent bare necessities

A judicious mix of anchor occupants and smaller companies help
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The 7 Divine Virtues, cont.

Availability of angel investment, venture capital and private equity financing
are essential pre-requisites

Linkages with centres of excellence are critical for select products &
services, while skill linkages are essential for all

A vibrant and pro-active IT park management team represents an added
advantage
PricewaterhouseCoopers | 3
Thank You
Roopen Roy
Email: [email protected]
Tel: +91 (33) 2485 8891
+91 (33) 2357 7207
+91 98302 55522
© 2006 PricewaterhouseCoopers Pvt.Ltd. All rights reserved.
*connectedthinking
Case Study: India
India: The IT Growth Story
$23.9 bn
FY 2005-06
IT-ITES exports from India grew
$18.2bn
FY 2004-05
$13.3 bn
FY 2003-04
PricewaterhouseCoopers | 3
India: The IT Growth Story
The IT-ITES industry has grown at a CAGR of over 28 per cent
since FY 1999-2000.

Indian IT-ITES industry continues to chart remarkable double-digit growth for the nth successive
year and it crossed $36 billion in annual revenue in FY 2005-06, a growth of nearly 28 per cent

Export earnings accounted for 64 per cent of the total IT-ITES aggregate in FY 2004-05

IT-ITES exports from India grew from $13.3 billion in FY 2003-04 to $18.2 billion in FY 2004-05.
The total IT-ITES exports from India exceeded $23.9 billion in FY 2005-06

Software and services exports (excluding hardware) are projected to grow at 32 per cent in the
current fiscal
Source : Nasscom
PricewaterhouseCoopers | 3
Made in India MNCs
Global Delivery
Model Matures

Indigenous players start cross-border acquisitions

Win bigger deals

Grow organically in other low-cost nations

Service portfolio expands into higher value-added activities
PricewaterhouseCoopers | 3
*
The evolution:
Phases of growth*
*
IT Industry: Timeline
70s
80s
Building the base
90s
1991: Setup of
STPI
2000s
2000: Telecom
Deregulation
Regulatory Measures
1993: STPI sets up
gateways
New IT Policy
Reversal of Liberalization
1986: DOE
announces software
policy
2001: Formation
of MCIT
Revived liberalization
Aiming at Superpower
Status
1987: Texas instruments
sets up first gateway for
data com
1998: National IT Taskforce
by Govt. of India
PricewaterhouseCoopers | 3
IT Industry: Timeline
1960
TATA sets up TCS, India’s first Software company
1970
TCS begins exporting, beginning of Indian Software Industry
1980
Industry begins to flourish, with many software companies joining
1990
1992
Onsite services (Body Shopping)
1994
Offshore Methodology, Satyam and Infosys list on BSE
1996
1998
2000
Software exports mostly low end services, based on
transient demand for things like Y2K Bug, etc.
Software companies move up the value
chain, capturing markets in niche areas
and set high quality standards
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India’s big 5 enter global league
Period
Phase I 1985-95
Phase II 1995-00
Phase III 2001-04
Phase IV 2005-2007
Size of Industry
Negligible
Under $1
billion
US$ 6 billion
Service Lines
App dev &
Maintenance
+ E-biz, ERP,
Y2K
+ SI, NM, Pack
Soft, BPO,
Products, Tech
Delivery Model
Staff Aug.,
Onsite
Staff Aug.,
Onsite
Onsite,
Offshore
Industry Structure
Large no. of
startups
Big 5 increase share
and SME growth
Mid-size expand, Big 5
grow and niche firms
emerge
Peak Contract Size
< US$ 5,00,000
= US$ 5 million
= US$ 40 million
Customer Profile
Large Fortune 100
Industry value to
customers
Lower costs
Large Fortune 500
+ quality, productivity
US$ 14 billion
plus
+ IT consult, IT
Outsourcing
Global Delivery
Big 5 in global
league
= US$ 100 million
Global 2000
Global 5000
+ security, data
protection,
process mgt
+ business
innovation
Notes; SI: System Integration; NM: Network Management; Pack Soft: Package Software
PricewaterhouseCoopers | 3
The Evolution of India’s IT industry
Pre-1984:



Government focused on self-reliance in hardware
Exit of IBM, on account of restrictive Foreign Exchange Regulation Act (FERA) rules;
Impact on fledging software and IT firms
1985–1991:





Worldwide crash in hardware prices
De-regulation of import licensing policy in India
Large multinational firms moved from mainframe to client–server systems.
Acceleration in demand for software programming services
From 1986, software policy de-linked from indigenous hardware
1992–1999:



Full financial liberalization followed by large-scale entry of MNCs
Phenomenal growth in demand for software services.
STPI scheme established to offer infrastructure, low-cost connectivity and plug-and-play facility for SMEs and
other enterprises.
2000 onwards:


A slowdown in the demand for software services
Expansion in the demand for outsourcing
PricewaterhouseCoopers | 3
The 90s hurdles
Restrictive
Policies
In early 90s, the main hurdles identified in the path of India
becoming an attractive destination for software development
and outsourcing were:





Bureaucracy and cumbersome govt. procedures
Poor communication infrastructure
Limited access to financial resources
Limited access to emerging technologies
Lack of information about international IT market
PricewaterhouseCoopers | 3
STPI:
A revolutionary
concept
STPI: A landmark policy change
Established by the government in 1988 STPs are autonomous bodies to
encourage and support small software exporters
They offered:









100% export-oriented firms a tax-free status for 5 years within the first 8 years of
operation
Office space and computer equipment, access to high-speed satellite links
Uninterrupted supply of electricity
Services such as import certification, software valuation, project approvals, market
analysis, marketing support and training
Single-window clearance for projects
STPs connected by an integrated network
Point-to-point digital channel
Access to the internet with subscriber owned TCP/IP number, providing
e-mail, remote log in, file-transfer services and access to the WWW
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International Connectivity Architecture
Satellite Connectivity
Earth Station
STPI
Customer
Premises
Foreign End
Service provider
Customer’s
Foreign Office
International Fiber Connectivity
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Incubation Facility
STPI has introduced ultra-modern office facilities available to small units and
entrepreneurs with minimal capital expenditure. This plug-and-play office space is
uniform across India
Facilities Available:

Fully Furnished office space

Latest Computer Workstations

Broadband Internet Access

Fully Air-conditioned spaces

24x7 Power Backup

Complete Business Center Support
PricewaterhouseCoopers | 3
Technology Parks: meeting the challenges
India’s STPI strategy addressed a range of mission critical issues that
led to the IT services export boom. These were:
Issues
STPI Service
Infrastructure
Plug-and-play facilities (Office space, HW & SW
Support, training facilities)
Telecommunication
International Private leased circuits (IPLC)
Broadband Internet access
Bureaucratic hurdles
Single window clearance for projects Custom bonding facilities
Govt. Policy
Fiscal Relief: Tax free status for 100% EoUs
SME Startup challenges
Incubation support
Full Corporate Income Tax exemption for 10 years
Full Import duty exemption on goods
100% Foreign Equity participation
Providing access to VC Funding firms
Access to talent
Linkages with IITs , IIMs, Engineering Colleges, Technology incubators
PricewaterhouseCoopers | 3
Software
exports boom*
*
Software Exports
Software Exports (in Rs Crores)
105399
100809
2005-06
82446
2004-05
74019
55000
51219
2003-04
46100
2002-03
37,176
36,500
29,523
2001-02
2000-01
20,051
28,350
17150
99-2000
6300
10940
6300
98-99
6400
3400
97-98
3900
1780
96-97
2520
730
95-96
94-95
1535
245
93-94
1020
116
0
STP Units Exports
20000
40000
60000
80000
National Exports
100000
120000
PricewaterhouseCoopers | 3
STPI Centers: Nationwide spread
1991
1995
After IT Taskforce


Bangalore

Mohali

Aurangabad

NOIDA

Jaipur

Bhilai
Mumbai

Chennai

Coimbatore

Dehradun


Guwahati


Hubli


Indore

Kanpur

Kolkata

Lucknow


Nasik


Allahabad


Jodhpur

Jammu

Hubli

Pune

Hyderabad

Trivandrum

Ghandinagar

Bhubaneswar










Mangalore
Manipal
Madurai
Mysore
Nagpur
Pondicherry
Pune
Rourkela
Srinagar
Shimla
Thirupati
Trichy
Vijayawada
Vizag
Warangal
Tirunaveli
PricewaterhouseCoopers | 3