The exponential growth of the IT and ITES industry in recent years, especially in the metros and tier-1 cities, has led to a situation where the infrastructure in these places has become overstressed and hence, companies are looking at tier-2 towns more closely. These towns have a few ready-to-use advantages whereas in a few areas, they have to catch up. This article looks at both the strengths and weaknesses of tier-2 towns and analyzes the steps to be taken by the state governments and local town bodies to make them more attractive to the prospective investors with specific reference to the IT and ITES industry.

Tier-1 cities like Delhi, Mumbai, Chennai, Bangalore and Hyderabad, to name a few, are bursting at their seams. Peak hour commuting in these cities has become a nightmare with people taking hours to commute to and fro their offices. The roads are choked with traffic in the absence of innovative Mass Rapid Transport Systems. This has also contributed to increased levels of air and noise pollution. The power resources of these cities are also hardly adequate. For the first time in many years, Mumbai had power cuts during the summer of 2007.

The IT and ITES industry in these cities have grown too fast resulting in many unwanted repercussions. The real estate cost has soared to unbelievably new heights making even the cost calculations of corporates go haywire. High salaries in this industry have resulted in a proliferation of personal vehicles on the road leading to frequent traffic pileups. Even as recruitment needs for this industry are quite high, it is becoming difficult for HR managers to retain good talent due to high attrition levels. The attrition levels are high as there are enough alternative employers to provide better career prospects or the stress levels in the jobs are high leading to early burnouts. These developments coupled with a high wage structure have steeply pushed up the cost of business operations in tier-1 cities.

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