Promoting Kozhikode as an IT Destination
- A Strategic Dilemma
Kumar Nishant Raman
Post Graduate Student (PGP II)
Phone: 91-79-26326089, 91-9979229250
Address: Dorm – 20, Room – 39,
Post Graduate Student (PGP II)
Phone: 91-79-26326215, 91-9898704886
Address: Dorm – 2, Room – 15,
Team Name: I-Tonic
Promoting Kozhikode as an IT Destination - A Strategic Dilemma
The Indian IT-enabled services export industry is growing at full throttle. By the year 2012, it is
estimated to employ close to 3.2 million professionals, with revenue generation of $119 billion1.
Despite the bright outlook, competition from emerging low-cost off-shoring locations, like
countries in the Eastern Europe, Asia Pacific and the ever-growing English-speaking populace of
China, has increased the challenge for India. There is tremendous pressure on the country to make
itself increasingly viable as a preferred off-shoring destination.
So far, the IT industry has been expanding around a few nodes across the country and the most
important lesson that it has learnt is the vitality of development infrastructure and extension across
both domains as well as technology. There are a few strategic decisions that need to be made to
sustain this growth. The government is encouraging extension to Tier-II cities. The prime benefits
would be 1) Decongestion of Tier-I locations 2) Exploiting the available potential at other
locations 3) Economic development.
2. Requirements of IT companies
Consultations with various IT professionals and study of educational resources have helped us
identify a set of requirements which are extremely essential for setting up of IT & ITES
infrastructure. A brief discussion follows:
2.1. Natural Factors – Sheer presence (or absence) of certain natural factors can make it feasible,
or otherwise, to develop a location as an IT hub. Good weather, low variations in weather
conditions, ample supply of natural sources of water, low level of pollution, low recurrence of
diseases and natural calamities are some of the basic requirements that can not be overlooked.
Moreover, easy accessibility to other places, easier commutation, and inherent transaction cost
advantages, or proximity to demand or supply centres (companies & work force, respectively
in this case), is a big plus and would make operations of organizations competitive, especially
in the Indian context where the Indian subsidiaries are treated as cost centres.
2.2. Infrastructure – Due to heavy dependence on work force, the basic infrastructural support
requirements of IT organizations includes requirements that directly affect the operations of
the company as well as the ones concerning their employees.
IT Infrastructure: Any city which boasts of an existing network of IT and already has
software companies running would surely lead to a trigger effect and attract other
companies. An existing IT infrastructure and network of companies ensures that there is
a flow of work and workforce towards the location, thereby making life easy for the
late entrant, especially smaller concerns that have constrained resources.
Civic Infrastructure: The companies would look for locations where civic amenities
like, healthcare facilities, markets, electricity, housing, water supply, et al, are
available. At the same time, in the case of organizations planning to subsequently
expand their operations, these requirements would be equally important.
Transport: Accessibility of the place from outside through rail, air and water is
necessary as it facilitates business transactions and movement of work force.
Security: The location should ideally be free from threats of natural calamities and
political instability. A disaster management system would further boost the confidence
of the organizations.
2.3. Human Resources – Due to high dependence on manpower, all organizations look for
availability of quality work-force for company operations and support services at reasonable
rates. The firms would expect basic and skilled training and education, connectivity, etc. that
ensure long term availability of workforce. They look for the following characteristics in the
Level of education and cost of hiring
Ability to communicate in English and other foreign languages
Conformance with rules and regulations
Factors related to the social fabric like acceptance to working away from home, change
in life style, etc.
Acceptance of the local residents of settlers from outside the region and their attitude
towards new companies, sharing of civic resource among more people, modernization,
etc are important factors
2.4. Government Support – A stable socio-political environment goes a long way in instilling
confidence in the organizations. Some ways in which it may show positive influence are:
Government policies remaining more or less consistent even upon a change in the entity
at the helm.
Low (or no) violence and peaceful political scenario
Companies would expect the local government to extend a supporting hand to
development of the IT infrastructure.
Tax incentives and financial support to the companies
Statutes to help open SEZs and providing them with regulations that are more in line
with the needs are again something the companies do look for
Fast dispute resolution systems, fast-track single-window clearances and quick query or
Improving the quality of workforce, as well as ensuring sustained availability of the
same in the long run. New professional and non-professional educational and training
institutions would have to be started, and the quality and standard of the existing ones
would have to be improved
3. Present status of Kozhikode and its potential as an IT Destination
Tier-II destinations like Jaipur, Cochin, Bhubhaneshwar, Vishakhapatnam, Chandigarh, etc. are
emerging as investor friendly IT hubs across the country. With the setting up of Technopark and
Infopark at Cochin and Trivandrum respectively, offloading Bangalore and Chennai and with
forums like KINFRA and KSIDC, enabling setting up of industry, the state has proved to be
investor friendly. However, at a national level, there is still a lot to catch up with (Exhibit 1).
Be it the traditional sector of agriculture, the industrial sector or provision of basic services, it is
the ease of information dissemination that would be the main driver of the economy. In an
educated and aware society like Kerela, there is both a domestic need for sophisticated services
such as e-governance, education, e-health, e-commerce, multimedia and other I.T enabled services
and also an ability to cater to similar international needs (Exhibit 2). After Cochin and Trivandrum,
Kozhikode is the third main location in Kerala having the potential to be a favoured IT destination.
3.1. SWOT Analysis of Kozhikode –
IT Infrastructure Primarily an agrarian
Land availability and prices Low level of development
Investor Friendly Influence of politics
Environment Lack of required workforce
Weather and surroundings Unavailability of exit options
Human Resource for professionals
Booming Indian economy Prevalent situation of
Expanding IT capabilities Strikes
Increased no of IT Competition from Cochin
companies and projects & Trivandrum
Need for more cities to be Exodus of work force
developed Changing political scenario
As shown in Exhibit 4, Kozhikode is favoured by most factors like availability of
telecommunication bandwidth, favourable government policies, climatic conditions, good land,
worldwide connectivity, civic amenities, and facilities for development of human resources
necessary for its development as an IT hub. The clean-slate status of the city is both a
weakness as well as an opportunity that can be capitalized on.
3.2. Evaluation of Kozhikode as a potential IT destination - Given the current status of the city
and the policies and facilities available in the state of Kerela, we have evaluated Kozhikode’s
on the factors that IT firms look for while developing an IT hub (Exhibit 5).
4. Recommendations for improvement of basic offering of Kozhikode
Kozhikode is a typical small South Indian city where the IT infrastructure is nonexistent The
government needs to attract companies through tax incentives and other facilitating schemes to
start operations and expand facilities like, IT parks, housing, healthcare institutes, shopping
complexes, recreation centres, ensuring law and order, etc. The recommendations for improvement
are shown in detail in Exhibit 6.
4.1. Civic Services - Currently, the electricity supply is sufficient for the existing demand and the
general population is able to tap ground water through wells (municipal supply of water is not
good). However, supply of water and electricity in the context of exponentially increasing
demand should be adequately planned for. Same applies to the telecommunication network.
4.2. Separate IT City - Being a small city, Kozhikode has ample scope to expand if need arises.
But a clear assessment of the possible magnitude of expansion needs to be done. As in other
places, designing a separate IT city adjacent to the traditional city of Kozhikode may be a
good idea as that would preserve the peaceful demeanour of the city despite the eventual
influx of a large number of people.
4.3. Educational Facilities
Skilled Manpower: The number and quality of educational institutions needs to be
improved. More emphasis needs to be given on starting engineering colleges and
institutes providing IT related training
Collaboration: Training programs needs to be started in existing engineering colleges,
in collaboration with IT companies, so that required skills could be developed in the
new crop of students. At the same time a variety of faculties like, finance, economics
and management, need to be promoted as well to provide various kinds of professionals
to these organizations
Reversal of Outflow: The government also needs to look into a way to attract work
force from outside the state, and stop the outflow of students from Kerala. Starting high
quality institutes comparable to IITs & IIITMs, and opening them for students from all
the states and improving the city infrastructure would be the right options to do so
4.4. Political Support - Understanding between political parties needs to be developed in order to
maintain the same IT policies irrespective of which party is in power. This will boost the
confidence of the major and small players in the current system and they would be willing to
invest. Some SEZs need to be started in the area near the city providing tax incentives, better
infrastructure, faster dispute arbitration, laws to make operations easier for these companies.
5. Location of the IT City
Keeping the geography of Kozhikode in mind, it would be ideal if we could keep the IT city out of
Kozhikode city and at the same time not so far away from the airport, as well as the railway station
and other amenities. Also, the location should not be such that all the traffic routed towards the IT-
city may have to cross the whole city of Kozhikode. Another point that one should keep in mind is
that the location of the IT-city should not hinder the expansion of the city of Kozhikode itself.
The southern region near Beypore Kadalundi & Ferokh is densely populated. Also, the area to the
north of the city has a terrain, making it inappropriate. Keeping all this in mind, the area between
Airport, West Hill and Kappad seems ideal (Exhibit 7). Being more specific, a probable location
should be near Pushpa Theatre, which is not very densely populated and at the same time fits our
criteria (Exhibit 8).
6. Industry Scenario and Selecting the prospective companies
6.1.1. For targeting purposes we classify the IT companies based on:
Needs – Interviews with experienced IT professionals reveals that the basic
requirements of most of the IT companies remain the same. Only in the later stages
of their involvement do issues pertinent to their area of operation come up. So
classification based on needs does not serve our purpose
Size/Scale/Revenue – Based on size the classification of companies stands as shown
in Exhibit 9
6.1.2. Parameters for selection – The following set of parameters have been selected for
evaluating the various industry segments to find the ones fit for being approached:
1) Would attract other companies: Those companies that would be able to attract other
companies to Kozhikode by their sheer presence in the area
2) Would attract workforce: Companies most aspired for by the workforce
3) Development of local IT infrastructure: Companies that may contribute the most
towards the development of local infrastructure
4) Development of work force: The organizations which could be instrumental in
improving the quality of civic infrastructure and human resource
5) Coherence with Kozhikode’s offering: The companies which have their needs in line
with the offering that Kozhikode would put forward after implementing the
improvements suggested in this paper
6) Ease of approach: The companies which would be easy to attract to Kozhikode
6.1.3. Selection of Industry segments – The matrix shown below presents the final evaluation
of the industry segments in Kozhikode’s perspective
Serial Industry Segment Applicable Decision
No Selection Criteria
1 Tier I 1), 2), 3), 4), 5) First industry segment that should be
2 Tier II 2), 3), 5), 6) Should be targeted in the next stage
3 Offshore operations of 2), 5) Difficult to approach, can be left for later.
Global IT majors
4 Pure play BPO 2), 5), 6) Can be targeted with Tier II players
5 Captive BPO units 5), 6) Not worth approaching.
6.2. Proposed Approach
6.2.1. Strategy – A few salient features of the strategy that Mr. Arun should follow are:
Break the development of IT city into three stages
Focus equally on software and electronic design related firms
Start with infrastructure development at a small scale and based on the projected
inflow of companies work towards developing an IT city adjacent to Kozhikode
o Target some big (Tier I) companies and provide them very generous benefits
o Tie-up with them to develop workforce via training & classroom programmes
o Target other Tier I and II companies
o Also target pure play BPO providers
o Expand the infrastructure further
o Develop small public or private owned training institutions to develop
supporting services (IT and non-IT) work force
o Target all the segments discussed above
o Maintain good infrastructure
o Try to bring in big R&D majors
6.2.2. Content – The Campaign and target Audience
The campaign can run in line with the “God’s own country” campaign by Kerala
IT wing of the Kerala Government can club together the three cities of Cochin,
Thiruvanatapuram and Kozhikode to come up with a join campaign for IT development
The channels for communication for this campaign need to be very different from the
6.2.3. Target Audience - The target audience would be the CEOs of existing organizations
and the Entrepreneurs who would like to start an IT organization
6.2.4. Method/ Channel
The table below presents a set of media that can be used for communicating the
message to the target audience.
Advertising Promotion Events/Experiences Public Relations Direct Approach
Print ads Contests Conferences Press Kits Sales
Brochures Games Plan Competitions Speeches/Seminars Direct Meetings
Directories Fairs & trade Causes Political lobbying Incentives
Ad Reprints Low interest Area tours Publication Catalogues
Billboards Tie-ups Identity media Fax/e-mail
Audiovisuals Commercial & In
Press releases and media interviews by politicians and concerned high ranked officials
are very important means of sending forward the message. Apart from this, political
lobbying needs to be done to get special packages for the city of Kozhikode from the
central and state governments.
The most important of them all is direct communication with the top officials of various
IT organizations to attract them to come to Kozhikode. Negotiating deals and packages
for that would be an important element of these meetings and presentations. During
these meeting the quality of presentation and the brochures would have a significant
bearing on the final decision that the company makes. An all costs paid tour of
Kozhikode by a representative of the company being negotiated with would be a good
way of attracting them.
Natural Factors Infrastructure HumanResources Government
Weather IT Infrastructure Trained people Political Scenario
Water Supply Network of Support services Tax Incentives
Geography companies staff Quality of
Land Availability Civic amenities Quality Education
Diseases Protection from Sustained availability Continuing dev.
Natural Calamities natural calamities Cost of hiring programs
Location Support for Characteristics Financial Support
Special Attractions future expansion Education Special Needs
Connectivity English Fluency
Exhibit 1: Requirements of an IT set-up
Overall composite score 3
Health and Education 1
Law & Order 1
Investment attractiveness 5
Exhibit 2: Kerela as a lucrative investment destination (not IT sector specific)
Source: CII sponsored independent study of 18 Indian States, ‘How the States are Doing’
100% Leading IT
Growth in IT Destination
industry by 2012
Employment Products &
Policy Cochin as an
Inflow of International
Foreign Media and
Capital ICT Hub
for growing Technopark,
IT businesses as a leading
Exhibit 3: Objectives of the current IT Policy in Kerela
State-of-the-art international airport for handling international flights with lead-in
lighting system for the first time in India
Flight connectivity with all major cities in the country and the middle-east
Well connected by rail and road
Kozhikode is around 300 km away from Cochin, the landing point of two major
international submarine cables linking to US, Europe and the Far East.
Assured quality of service and significant savings vis-à-vis most other locations in the
All prominent cellular operators provide services in the city
Land availability and low prices
Built up modules of area 85,000 sq.ft -in multiples of 500sq.ft available for allotment
Low prices for commercial property, compared to other locations across the country.
Commercial land price is at approximately Rs 650 to 1000 per Sq ft and commercial
rent is approximately Rs 10 to 15 per sq ft for dry shell
Availability of Lateritic midlands of 1343.50 sq.kms for development
Investor Friendly Environment:
The Kerala State Industrial Development Corporation provides total support and
Weather and surroundings
Pleasant weather throughout the year with heat and humidity during summers and
Surrounded by scenic beauty, with rivers, hills on the east and sea in the west
Literacy rate: 92.24% of the population is educated, with 88.62% literacy rate among
High Human Development Index of the state residents
Large employable human resources as non-agri and non-household workers constitute
86.34% of the population
Availability of trained manpower from a handful of Arts and Science Colleges,
professional colleges and polytechnics and industrial training institutes in and around
Management, engineering and medical graduates available from IIM, an NIT, and a
Mainly an agrarian community- could lead to resistance to change and settlement of
Less development in Kozhikode– need for government’s push
Heavy influence of politics on development in the state
Non-availability of a large pool of skilled forces – lack of access to educational
Unavailability of exit options for professionals combined with limited growth in their
Booming Indian economy
Expanding IT capabilities
Increased no of IT companies and projects
Need for more cities to be developed to de-congest the major IT hubs of Bangalore
Availability of a clean slate- can develop Kozhikode as a centre for specialized
services, products and technologies
Possibility of labour strikes and also formation of IT unions, which could lead to
disruption of services to both domestic and global clients
Competition from home – Cochin and Trivandrum are way ahead of Kozhikode in
o Living standards
o Development in the city
o IT infrastructure already in place
o Availability of manpower and training institutes
Exhibit 4: SWOT analysis of Kozhikode
Factors Effect – Reason At Kozhikode
Weather Ease in settling for people Good
Natural Sources of Water Basic Requirement Very Good
Low degree of exposure to Personal well being Good
Disease & Natural Calamities
Location Low transaction costs, Better Good
Existing IT Infrastructure Inflow of workforce & Bad
availability of work
Network of companies Better facilities, overall Bad
development, exit options
Civic amenities - health, Basic requirements Average
market, water, electricity
Systems for protection from Protection and minimization Average
natural calamities of threats
Possibility of expansion Sustainability Good
Connectivity Ease of operations & cost Good
Availability of trained people Basic requirement Bad
People for support services Basic requirement Good
Quality of workforce Better productivity and Bad
Sustained availability Sustainability Bad
Cost of hiring Competitive edge Good
Characteristics - Education Basic Requirements Very Good
& Fluency in English
Variety of available skills - Basic requirement Bad
designers, programmers, et al
Political Scenario Security, reduction of risks Average
Tax Incentives Cost advantage Good
SEZs – Special regulations Ease of operation Bad
Quick settlement of disputes Ease of operation Bad
Focus on relevant education Sustained workforce supply Good
Development programs Improved infrastructure Average
Financial Support Risk reduction Average
Exhibit 5: Evaluation of Kozhikode’s offering to the IT firms
Existing IT Infrastructure Build technology parks; initiate Govt. backed projects in areas
where they are needed to attract IT companies.
Network of companies Attract some big firms at the start, follow it up with smaller
ones in the next stage
Civic amenities - health, Improvement in the number and quality of markets, hospitals,
market, water, electricity etc. Better functioning of the municipal corporation.
Systems for protection from Earthquake and Tsunami prediction and disaster management
natural calamities plan. Design o houses accordingly
Support for future expansion Real estate infrastructure needs to be revamped. Training
institutes to develop IT professionals for supporting activities
like designing, maintenance, etc.
Connectivity Traditional port needs to be reopened, development as a port
city will improve infrastructure. Connecting the city to more
international destinations through airlines.
People for support services Promoting small training institutes to develop these
professionals. A govt. agency to supervise this.
Quality of workforce Training programs in co-ordination with companies
Sustained availability Quality and number of colleges to be improved.
Variety of available skills - Promoting small training institutes to develop these
designers, programmers, et al professionals. Training programs in co-ordination with
companies. Increase the variety of educational streams.
Political Scenario Policies should remain same, despite change of government
Tax Incentives A hygiene factor now. Give Tax incentives for infrastructure
and human resource development activities by companies.
SEZs – Special regulations Laws separate from the mainland laws
Quick settlement of disputes Quick arbitration of disputes through special bench of jurors.
Focus on relevant education Promoting engineering, finance and management education.
Support training institutions. Starting scholarship programs.
Tie-ups with firms for skill development of young students.
Financial Support Govt. guaranteed finance of projects.
Exhibit 6: Recommendations for improvement of Kozhikode’s basic offering
IT - City
Exhibit 7: Cornering geographical area for the IT-city
The IT – City
Exhibit 8: Probable Location for IT-city
Exhibit 9: Classification of companies based on revenue
3. Telephonic Interviews of some residents of Kozhikode