Karnataka has leveraged the prowess of its IT industry to emerge as the leading ITES-BPO destination in India, as it outscores other states on some key parameters that potential investors look at before setting up shop.

A Nasscom-KPMG study on 'Choosing a location for offshore operations in India,' released by the National Association of Software and Services Companies on Wednesday at its sixth annual ITES-BPO Strategy Summit in Bangalore, said that Karnataka is well placed to bag the pride of place in the BPO sweepstakes.

The study covers 13 'clusters' across 10 states in India included Ahmedabad-Gandhinagar, Bangalore, Chandigarh-Mohali, Chennai, Hyderabad-Secunderabad, Visakhapatnam, Jaipur, Kochi, Thiruvananthapuram, Kolkata, Mumbai-Navi Mumbai-Thane, Pune, and New Delhi-Gurgaon-Noida. The survey analyses the potential of these centres as BPO destinations.

• India's top 15 BPO companies
• India and Outsourcing: Complete Coverage

The 10 states -- Karnataka, Andhra Pradesh, Maharashtra, Gujarat, West Bengal, Punjab, Rajashtan, Kerala, Tamil Nadu, and the National Capital Region (including Hayarana) currently account for approximately 85 per cent of the country's IT / ITES exports.

Commenting on the study, Kiran Karnik, President, Nasscom, said, "The objective of the study is two-pronged: first, to have readily available, relevant and reliable information with respect to location choice within India for potential investors / customers and, second, to help the industry and the local government understand what drove ITES location preferences and hence guide efforts to improve attractiveness for ITES."

The framework used for assessment included human resources (number of graduates, average salary for ITES, attrition rate, etc), infrastructure (availability and cost of facilities / utilities, quality of life), ITES focus (number of companies and nature of ITES work, policy support and positioning), support group presence (local industry associations, knowledge forum, etc) and the physical features (geographic location).

On Karnataka's attractiveness, Karnik said, "The Nasscom-KPMG report highlights that Karnataka is currently ranked attractive on all parameters in assessing a BPO location. In terms of future attractiveness, the outlook is positive but the government and the industry needs to address infrastructure and human resource challenges."

As per the study, Karnataka's current attractiveness on above parameters is highlighted as under:

• With over 77 global firms having established R&D centers in Karnataka, the state is ranked amongst the seven leading states in India for its human development capabilities.
• Karnataka's educational institutions produce around 28 per cent of the country's IT professionals and there are more than 20,000 people employed in the ITES-BPO sector. The establishment of the Board for IT Education Standards with B-SAT tests has led to a greater focus and dissemination of IT & ITES education within the state.
• The entire state of Karnataka is networked via optic fibre cables.
• Most of Bangalore's ITES industry is related to financial services, tech support and insurance claims processing. Many companies are leveraging Bangalore for higher value-added BPO activity.
• The state has taken a number of proactive steps to encourage the ITES industry which is reflected in the Millennium IT policy that offers incentives like, sales tax exemptions for 10 years, entry tax exemption on computer hardware, computer peripherals and other capital goods.

"With more and more captive and third party service providers moving their high-end support services to Karnataka, the state is expected to emerge as the leading BPO center in India by 2006. Clearly, the big opportunity for India is to build on this," added Karnik.

However, to further strengthen the ITES-BPO industry in Karnataka, NASSCOM recommends:

• Improving Infrastructure: Infrastructure development is needed for roads, highways, mass-transit systems, power, water, housing, upgrading the international and national airport, hotels, convention centers, international flight connectivity etc. The current infrastructure in Bangalore is unable to cope with the rapid growth of the ITS/ ITES-BPO sector.
• Developing Tier-II cities: The state government has made the initial steps to set up STPs at Mangalore, Hubli and Mysore. The state government can consider policy incentives to attract more companies to expand to these cities. This would require that the government puts in place a program to attract not only IT companies, but support service companies like telecom providers, training companies, infrastructure providers, etc.
• Development of the physical and intellectual (human resource) infrastructure in these cities is key to their attractiveness for the IT industry
• Direct international bandwidth to be made available from Bangalore in order to reduce costs on account of inter-city connectivity charges.
• To set up a certification agency that shall prescribe certain tests to ascertain candidates' skills in different areas. BITES to administer the test through qualified HR companies.
• Energising education: With the rapid growth of the industry in Karnataka, there is a need to increase the quality and quantity of skilled manpower in the state. This requires the educational institutions to work closely with the industry to constantly upgrade curriculum, introduce short-term courses on specific skill development, faculty training programs. There is also an urgent need to introduce more technical institutes like IIIT in different cities of the state.