BackHow Telangana is building brand Hyderabad
Behind Hyderabad's bounce-back as a technology destination is its IT, industries and municipal administration minister, K.T. Rama Rao
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Hyderabad: The Deccan city of Hyderabad was almost written off as an investment destination when K. Chandrashekar Rao swept to power in Telangana in June 2014.
The new state was just born after four years of tumultuous struggle. The agitation, spearheaded by Rao, witnessed prolonged demonstrations and shutdown calls, blocked train and road services through the region, largely disrupting public life.
Rao’s diatribe against the settled population hailing from Andhra and Rayalaseema regions of erstwhile Andhra Pradesh, it was pointed out, would drive away multinationals that seek talent based on merit, without regard for one’s ancestral background.
It was feared that Hyderabad, Telangana’s economic powerhouse, would die a slow death if KCR, as Rao is known, ignored the city that had already fallen behind other Indian metros, thanks to a prolonged agitation for statehood. Many thus dismissed KCR & Co.’s assurances of turning around Hyderabad, whose brand image had taken a bad hit during the years of agitation.
Precisely 23 months after the state’s formation, three of the world’s top technology companies decided to set up base in Hyderabad—choosing it over other cities such as Bengaluru, Delhi National Capital Region (NCR) and Mumbai. Taxi aggregator Uber Technologies Inc., the world’s most valued start-up, opened its first service centre in Asia in Hyderabad in February.
Apple Inc. was the latest jewel in Hyderabad’s crown when it established its first development centre in India in the city, joining other high-profile tech companies from America’s West Coast that made Hyderabad their home.
Salesforce.com Inc., one of the world’s top cloud computing companies, will open its first centre of excellence in Hyderabad on 7 June.
Before Apple and Salesforce.com, search giant Google Inc. and online retailer Amazon.com Inc. announced that they would have their biggest campuses outside home base US, in Hyderabad. Amazon has already commenced construction of a campus, as big as three million sq.ft, which is set to open by 2019.
Together with Microsoft Corp. and Facebook Inc., which had offices in the city before 2014, five of the world’s top technology companies have started or are in the process of setting up a significant presence in the city.
“The state formation happened after a period of turbulence. The very first task was to set the record straight," said Jayesh Ranjan, information technology secretary of Telangana government, in an interview. The government met industry leaders promising physical safety of their employees, projected a pro-business attitude and showcased Hyderabad’s innovative environment.
The toning down of the rhetoric by Rao’s Telangana Rashtra Samithi (TRS) helped in assuaging the concerns of information technology (IT) sector.
In fact, investors were cautious and adopted a wait-and-watch mode during the initial months after the country’s youngest state took birth.
“People were not sure how the new government will function, how things will actually improve. The party had not been in power in the past. So people were waiting to see how they will perform," said Vasudevan Iyer, director of Hyderabad market for real estate consultancy Knight Frank India Pvt. Ltd. “When the state split happened there was a lot of ambiguity among people and stakeholders, but then the way the government in Hyderabad actually performed is commendable."
Behind Hyderabad’s bounce-back as a technology destination is its IT, industries and municipal administration minister, K.T. Rama Rao (known as KTR), a smooth-talking, charismatic former marketing professional who returned from the US to join his father’s party in 2004. KTR is the son of KCR.
After some initial follies, the father-son duo began nurturing Hyderabad, assuaging concerns, promoting the city as an attractive investment destination, and wooing global companies and start-ups alike. It helped that KTR has related portfolios of IT and industries (to draw investments) and municipal administration (to rebuild brand Hyderabad and address infrastructure issues).
Bengaluru, the IT and start-up capital of the country that had an early mover advantage, was Hyderabad’s biggest competitor.
KTR and his team quickly realized that they could not beat Bengaluru easily at its game of software exporting. They went to the drawing table and identified opportunities where they could “drive the bus", Ranjan said.
Data analytics, cloud technology, internet of things (IoT), gaming and animation, start-ups, data centers—areas that no one city in India can yet lay a claim to—were identified in the process.
The team also watched carefully for Bengaluru’s follies.
So, when Karnataka taxmen went after e-commerce firms in 2014, threatening to halt their businesses, Telangana officials went knocking on Amazon’s door. Amazon had already signed the dotted line to set up its campus in Bengaluru. But in the backdrop of tax troubles in Karnataka, Telangana officials promised a conducive regulatory environment to Amazon, wooing the company to the state.
Of course, they also presented Hyderabad as an attractive (and cheaper) alternative destination to Bengaluru whose infrastructure was already bursting at its seams. Apart from the office space, Amazon also set up its then biggest Indian warehouse spread across 280,000 sq.ft in Telangana. Flipkart soon followed, opening its biggest warehouse, spanning 220,000 sq. ft, near Hyderabad.
That was also how they wooed back Google, which had decided to set up its campus near Bengaluru. Google had initially planned to set up its campus in Hyderabad—the company was even allotted land in Hyderabad way back in 2007—but reconsidered its plan after the land it was allocated ran into legal issues. With successive governments unable to solve the legal tangle, Google decided to move to Bengaluru, only to realize the city’s inadequacies. The Telangana government moved in quickly at this point by allocating site from its land bank and issuing quick clearances to Google.
At the same time, the government is attractively packaging the state as a destination for new-age technology companies. While governments across the world are grappling with disruption to their traditional industries by taxi aggregators and home lodging sites such as Airbnb, the Telangana government is assuring start-ups of rolling in conducive regulatory policies to ensure their business model can operate in the state.
Uber was in the eye of the storm over a rape incident in Delhi by one of its drivers when it announced its plan to establish its first centre of excellence in Asia in Hyderabad to provide round-the-clock specialized support for “critical incidents that require immediate attention". Taxi aggregators such as Uber, Ola and TaxiForSure were under government scrutiny on whether they should be regulated when Uber said it will invest $50 million in the city.
The biggest factor that sealed the deal in Telangana’s favour was the government’s offer to “work closely" with Uber to develop a new regulatory framework. Telangana’s transportation department evolved a framework to allow new-age online services like Ola and Uber to operate without any ambiguity.
The state’s IT department, on its part, is continually making sure that issues related to new-age tech companies are addressed amicably.
When the Telangana government recently considered a ban on surge pricing, on the lines of the Delhi government, on Ola and Uber, the state’s IT department intervened on their behalf to point out the economic rationale behind surge pricing. The state’s transport department relented.
Of course, the city’s biggest advantage is a readily available talent pool of engineers graduating from the likes of IIT, IIIT and BITS-Pilani, among other engineering schools around the city.
“With a pool of quality talent, state-of-the art infrastructure and a progressive government, the state was a natural choice for us to set up our largest campus in India here," David Zapolsky, senior vice-president and general counsel (legal) of Amazon, said in a statement in March, while breaking ground for the facility.
Hyderabad’s lower real estate costs coupled with, what is often lauded as, the city’s excellent infrastructure work in its favour compared with other metros such as Bengaluru, Mumbai, Chennai and Delhi NCR.
Last July, Ikea, the world’s largest furniture retailer, zeroed in on Hyderabad to purchase 13 acres of prime property at IT hub, Hitec City. Hyderabad was chosen over other cities such as Bengaluru, Mumbai and Delhi NCR for the company’s India debut.
“The difference between Bengaluru and Hyderabad is that Hyderabad offers twice the infrastructure of Bengaluru at half the cost," said Ranjan.
KTR was quick to figure out the dynamics playing out in the global IT sphere. Even traditionally closeted companies such as Microsoft were embracing innovation and start-ups in a way never seen before, and the 39-year-old minister knew he needed to pitch the city as an innovation hub to make companies take Telangana seriously.
He sewed an arrangement between three of the biggest educational institutes in the city, Indian School of Business, Nalsar University of Law and International Institute of Information Technology (IIIT)-Hyderabad, to start a swanky incubator, T-Hub, close to the campuses of the big IT firms.
The incubator drew the likes of Microsoft chief executive officer (CEO) Satya Nadella and Infosys CEO Vishal Sikka to talk about innovation with the start-ups.
“For everybody (services companies and product development firms) the local innovation ecosystem is a key part of their consideration. Even if you want to attract a larger company, making sure there is an active thriving start-up ecosystem is a key part of that whole message," Ramesh Loganathan, a recent president of local industry body, Hyderabad Software Enterprises Association, said. “It resonated well because some of the larger companies are looking at the city because we have projected a very strong R&D innovation start-up focus. They like to be operating in that environment."
Sometimes it was just plain luck.
Telangana wasn’t even on the radar of plane maker Boeing Co. when a government delegation led by minister Rama Rao met the company’s executives in Washington DC during a tour last year.
Rama Rao and his team briefed Boeing about the state’s new industrial policy and how an aerospace ecosystem already exists in Hyderabad in the form of Indian government’s defence manufacturing installations and units of Tata Advanced Systems Ltd (TASL), which has tie-ups with Sikorsky Aircraft Corp, Lockheed Martin Corp., RUAG Aviation AG and Pilatus Aircraft Ltd.
After a series of meetings, Boeing finally zeroed in on Hyderabad to make fuselage for Apache helicopters in collaboration with TASL. The company is expected to break ground in June, Ranjan said.
Telangana is also among the states being considered by plane maker Airbus Group SE to set up a final assembly line for Panther helicopter it plans to make in India in collaboration with Mahindra Defence Systems Ltd. The company plans to make India a global hub for Panther helicopter production.
“Airbus Group is evaluating Telangana and Andhra Pradesh among several other Indian states to select a site for setting up a final assembly line for the Panther helicopter in case we were to be awarded the Naval Utility Helicopter programme," an Airbus spokesperson said in an emailed statement.
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