Last updated on: September 18, 2014 14:13 IST

Tier II cities are most preferred destinations for setting up IT hubs, says a study.

Photograph: Courtesy, Technopark

As a growing number of outsourcing companies are looking at tier II and III cities for expansion, Ahmedabad, Jaipur, Kochi and Kolkata figure among the most favoured destinations by IT-BPM players.

According to a report on the emerging delivery locations in India by IT-ITeS industry body Nasscom and global property consultant Cushman & Wakefield (C&W), these cities are offering better opportunities in terms of business environment, talent, infrastructure and cost differential.

Image: Ahmedabad city. Photograph: courtesy, Manjil Purohit/Wikimedia Commons

"Ahmedabad has significantly improved their value proposition for IT-BPM services delivery over last five years and emerged as front runners next only to Tier I cities or 'Leader' locations which continue to be the preferred choices for IT-BPM industry," Nasscom said in a statement quoting the report.

The 'leader' locations, however have also seen, a shift towards expansion into peripheral locations as emerging alternate delivery locations, it added.

Jaipur is also favoured destination followed by Bhubaneswar, Coimbatore, Trivandrum and Visakhapatnam as the second choices while Chandigarh and Indore are promising locations, the report said.

The report said Ahmedabad showcases strong infrastructure with good air connectivity, significant growth in IT Grade A office stock, upcoming metro rail project and location advantage of being on the Delhi-Mumbai corridor.

Image: The Startup Village is a facility in Kerala and is a public-private partnership model technology incubator.

Kochi presents a distinct cost differential with operational cost savings up to 25 per cent along with enabling IT infrastructure like presence of submarine communication cables ensuring high speed internet connectivity with export revenues tripling in last five years.

Image: Howrah Bridge.

Kolkata excels in business performance with employee headcount and number of engineering students doubling in the last five years.

Explaining the rational behind the changing preference for locations, the report added over the last couple of years, the transformations in delivery models have altered location strategy of IT-BPM organisations.

Image: Rajpath Road, Bhubaneshwar. Photograph: Courtesy, Coolduds 12/Wikimedia Commons

Bhubaneshwar is also an emerging IT hub where most players are keen to set up shops.

The city has skilled workforce and the state government has a dynamic approach for facilitating investments.

Image: Coimbatore city. Photograph: Courtesy, Hiroo/Wikimedia Commons

Cities like Coimbatore also have a robust infrastructure to support IT sector.

There is an increased focus on non-linear growth, serving new customer segments, verticals and geographic markets, attracting domain knowledge and emergence of digital technologies has led to shifts in global delivery models, it said.

"With changing client needs and the growth in broadband penetration, the latest trend that we are witnessing is that more and more companies are entering tier II & III towns," Nasscom President R Chandrasekaran said.

NASSCOM and the industry will work with the government to improve infrastructure in these cities and support ministries to achieve the dream of an inclusive Digital India, he added.

Photograph: Courtesy, Technopark

Considered the IT hub of Kerala state, Trivandrum has all the attributes of becoming an ideal IT destination.

Business friendly environment and trained workforce present in the city has attracted prominent companies to set up IT centres in the city.

Image: Visakhapatnam city. Photograph: Courtesy, Wikimedia Commons

The Andhra Pradesh government in keen to develop Visakhapatnam (Vizag) as an ideal destination for IT. There are plans to develop IT parks and IT zones under Public Private Partnership (PPP) model. These factors will surely attract more IT players.

Image: Chandigarh city. Photograph: : Courtesy, Chandigarh Tourism

Chandigarh also has all the required infrastructure for setting up an IT hub. The city is financially attractive along with skilled manpower and is business-freindly too.