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Chennai has emerged as the most attractive destination for offshoring services, closely followed by Hyderabad, a recent survey by US based A T Kerarney has revealed.

Releasing the company's Indian city services 'Attractiveness Index' for 2005, Marcy Beitle, vice-president, A T Kearney, told a press conference that Kolkota was emerging as a credible alternative to cities, with more companies setting up offshore services industries there.

Bangalore, which occupied the top slot in the previous years, had been pushed down due to lack of infrastructure, she said.

The support of present and past governments to the IT industry had made it possible for Chennai to become a favourite destination, she said.

The cities had been benchmarked as attractive, based on three major categories - financial costs, people's skills and business environment, she said.

India had focused on the development of information technology and IT infrastructure during the past decade and the country today offered the most mature supply base for offshore work across services and verticals, she said.

Chennai stole a march over other cities as the cost of living was low and the city has abundant supply of skilled labour, she said.

In fact, Chennai's cost of living was very close to Tier II cities of India and the lowest among metropolitan cities, she said.

Academia draws investment to Chennai

Tt is not just Dayanidhi Maran's charm which is drawing international companies to Chennai. There is a goldmine of engineering graduates that the state churns out every year — 80,000 at last count — which is beckoning the gold hunters.

Major international telecom companies like Nokia, Ericsson, and Alcatel have already set up research and development centres here. The latest to join the bandwagon is networking giant Cisco's Scientific-Atlanta which will set up a research and development facility at Tidel Park in Chennai.

Chennai's ascent on the R&D scale started with the French telecom player Alcatel, which partnered with Centre for Development of Telematics to set up its global research and development centre here for broadband wireless products in March 2005. This joint initiative is estimated to employ 1,000 engineers to work on Wimax based technology.

Following closely behind was the Finnish mobile handset maker, Nokia, which announced its manufacturing base near Chennai at Sriperumbudur for an investment of $150 million.

Last month, Swedish telecom equipment maker, Ericsson inaugurated its first research and development centre in India at Chennai. The 100-person facility will focus on developing applications for the pre-paid and multimedia segments. Work on the global prepaid segment would also be partially transferred to the Chennai centre from Sweden, says Mats Granryd, managing director, Ericsson India.

If you thought the driver for all this is industry, some interesting industry-academia linkages are also in place. Indian Institute of Technology Madras in partnership with corporates is setting up an industry research park of 1.4 million sq ft in Taramani. Its first phase of 400,000 sq ft park is expected to be completed by end of 2006.

Says Ananth, director, IIT Madras, "The focus of the research park will be information technology, telecom and biotech."

The IIT alumni is expected to be a primary contributor to the park. That can only mean more companies heading to this southern city for R&D work.