The New Economics of Outsourcing - Business Week

CEO Guide to Emerging Outsourcing Hubs April 7, 2008, 12:01AM EST text size: TT

The New Economics of Outsourcing

Efforts to send IT work anywhere but Bangalore are taking on added urgency as costs of doing work in India rise and the dollar sinks

by Rachael King

Softtek, a Monterrey (Mexico) provider of IT services, added 30 new clients last year. Most of them had been using Indian firms for at least part of their outsourced IT. But they came to Softtek because they "were looking for something else," says Beni Lopez, CEO of nearshore services for the company, which has operations around the world.

Companies that traditionally rely on India for offshore IT services have been looking for that something beyond India for years, citing such reasons as high employee turnover and unreliable communications. But the search has taken on added urgency recently, especially for U.S. companies, as a weakening dollar has boosted the cost of IT services priced in India's rupee. Over the past five years the dollar has declined about 16% against the rupee. High real estate costs and expectations for tax increases also have diminished India's allure.

As outsourcing to India becomes more expensive, North American companies are more inclined to "nearsource," keeping work in the Western Hemisphere, where they can operate in a closer time zone. In years past a company could save 40% to 50% by hiring Indian firms to handle IT and other services, says Atul Vashistha, chairman at neoIT, a management consulting firm. Should the U.S. dollar continue its descent, that differential would shrink to 10% to 20%, he estimates. "If you're only going to have a 20% savings, clients start to think about time zone," Vashistha says.

Argentina's Time Zone Advantage

Kimberly-Clark (KMB) had time zone in mind when it hired Cognizant Technology Solutions in Buenos Aires to handle tech support for its SAP (SAP) software applications.

Kimberly-Clark was drawn by the available talent and the fact that the company has Argentine operations but also because geographical proximity and similar time zones make collaboration easier. "We picked Buenos Aires for a number of reasons, but we really felt from supporting SAP, it was the right place to be," says Kimberly-Clark Chief Information Officer Ramon Baez. The company also outsources application development and maintenance to Cognizant in Chennai, India.

How much longer the world's companies will have financial incentive to outsource to India is a matter of lively debate. India's "advantage as an offshore location is fast eroding—its attractiveness takes a hit with each passing day," analysts at Forrester Research (FORR) wrote in a January, 2008, report. Forrester catalogued some of the well-known challenges, such as increasing staffing costs, turnover and strained infrastructure (BusinessWeek.com, 12/11/06). Yet, there are newer challenges as well, including the falling dollar and expected tax revisions that may increase the cost of relying on outsourcing providers.

India's Cost Differential Fast Eroding

Contracts are written in dollars, and as much as 60% to 80% of Indian service providers' revenue is in U.S. dollars, but more than half of their costs are incurred in rupees, according to an October report from Forrester. Indian outsourcing powerhouses like Wipro are feeling the squeeze. They've strived to cut costs, and now they're raising prices to keep margins from narrowing further. "We are relentlessly driving for higher pricing for our services and have seen price increases from our customers in the range of 3% to 6%, and our new customers are coming in at around 5% higher than our average," Wipro Chairman Azim Premji said on a conference call with investors on Jan. 18.

Duke University professor Arie Lewin estimates that the benefit of doing business, from a labor-cost point of view, in such locales as Bangalore, India, will disappear for some companies in three to four years. That's due to a combination of dollar depreciation, wage inflation, and other costs. Others say it will take longer. "Costs are escalating, so the level of labor arbitrage isn't as great as it used to be, but that's not to say labor arbitrage is disappearing, nor will it disappear in the next 10 years or so," says Sid Pai, partner and managing director of TPI India, a sourcing advisory firm.

Indeed, while costs are increasing in India, the country is generally less expensive than Latin America and most other locations, especially for companies that don't require high-end software developers. The average annual salary for an IT worker in the U.S. is about $75,000, according to a late 2007 report by Alsbridge, an outsourcing consulting firm. In India it's about $7,779 and in Argentina, it's slightly higher at $9,478. In Brazil, the annual wage jumps to $13,163, and in Mexico it climbs to $17,899. "The bottom line is that there aren't great alternatives with the scale, quality, price structure, and the lack of risk of India," says Stephanie Moore, vice-president at Forrester.

Spreading Out Work In Several Nations

Even Lopez acknowledges that Latin America can't approximate India's scale. Mexico, for instance, has about 500,000 IT workers and graduates an additional 65,000 each year. Last year in India there were more than 1.6 million IT workers employed; an additional 495,000 graduate each year, according to NASSCOM, an IT trade group in India. Instead, Lopez envisions Mexico and the rest of Latin America acting as a complement to India and other offshore locations.

Recognizing that it may not be a good idea to locate all outsourcing in one country, or even a single region, many companies spread work among several sites. On Mar. 31, Royal Dutch Shell announced a $4 billion outsourcing arrangement. The oil company awarded about one-fourth of the total to Electronic Data Systems (EDS), which over five years will handle computing services for 150,000 users in more than 100 countries. The bulk of the work will be done in 4 places, the Netherlands, Britain, Malaysia, and the U.S. While EDS has thousands of workers in India and some of the work could possibly be done there, the company is actually hiring 1,000 workers in Malaysia for this project, an EDS spokesperson says.

Increasingly, companies want a provider that can nimbly shift tasks and labor among its own global network of work centers. "The real question, if you're going to sign onto somebody for five to seven years, is do they have a vision for how they're going to move work around the network," says Kevin Campbell, group chief executive for outsourcing at Accenture (ACN). With more than 40 centers, Accenture has the ability to shift work as market demands change (BusinessWeek, 4/23/07).

Brazil is a Beneficiary

Indian providers, including Tata Consultancy Services (TCS), Wipro, and Infosys Technologies are trying to build similar global networks as well. TCS made the decision to move into Latin America about six years ago and now has 5,571 workers in Mexico, Argentina, Brazil, Chile, Colombia, Ecuador, and Uruguay. TCS serves customers such as General Motors (GM), Goodyear (GT), and Motorola (MOT) from the region.

"Two-thirds of our customers use more than one location," says Gabriel Rozman, executive vice-president for emerging markets at TCS, adding that after the terror attacks of September 11, many U.S. companies realized the risk of outsourcing to only one location. Still, while the U.S. dollar has held fairly steady against the Mexican peso and Argentine peso in the past five years, it's dropped nearly 49% against the Brazilian real and nearly 39% against the Colombian peso. "We're not in great shape with [some] currencies in Latin America either," says Rozman.

The dollar's decline aside, even Brazilian firms are benefiting as companies spread their outsourcing around. "We're seeing increased demand, and it has been accelerating in the past three months," says Alvi Abuaf, president of North America for CPM Braxis. He says that the labor pool of IT workers is about 1 million in Brazil and growing at about 100,000 per year. Like Softtek, CPM Braxis positions itself as a complementary service to India. Adds Abuaf: "Latin America has been overlooked over the past two decades, but companies are realizing there is a viable alternative, and it's more viable today than it was before."

Already, Softtek is moving global delivery centers into smaller Mexican cities in an effort to avoid the competition for talent happening in places like Monterrey and Guadalajara. "The demand for talent is going to get bigger and bigger in the next five to eight years," says Lopez.

For more, see BusinessWeek's slide show.

King is a writer for BusinessWeek.com in San Francisco .

The goat-herd and its built environment

The phenomenon discussed in the TV show in the previous post is an increasing trend, and is worth taking a closer look at from the perspective of the built environment, which has a direct effect on the opportunities for cultural development. If the IT training methodology described in the video is true, it is unprofessional, inappropriate and brings in a 'goat-herding' mentality. The built environment, especially with respect to these IT companies, enhances the potential to bring in this mentality.

The common thread apparent in all these issues is that of a 'group' identity and the severe lack of an individual identity. The biggest testimonial to the 'group' identity is that no matter what the field of study during college was, everyone invariably ends up in IT! People want to embrace change, but change in order to relate to a 'group' rather than get themselves up to speed with the modern world. How is this different from the closed-culture society thats been the traditional Indian social organization? It started with the work performed in the society during the Vedic Age, and is regrouping to a similar format in the current trend. How is this modernization?

If IT companies are indeed pushing people to do things as portrayed in the show, it is clearly not modernization, but rather the practices and policies of goat-herding applied to IT professionals. How does one herd a bunch of goats? Tie their legs together and let them graze the field, and when they become fat enough take them to the slaughter house. Its not as if the goats have a choice, they just do what they are trained to do, get fed well and finally end up on someone's plate.

Consider the scenario in India today. A typical IT professional's daily routine is something like this - wake up, get ready in time to catch a bus, get to the business place, work, take a bus back home, eat, sleep. Nothing outwardly wrong with this scenario, except that this was the same routine to get to school, then get to college and now get to work. Life only changes in terms of the destination based on the current stage of life. Opportunities for cultural interaction are limited to the 'group' encountered each day.

How is the built-environment responsible for this? Unregulated and haphazard development in the residential areas with scant disregard for bye-laws and no semblance of a community concept, companies built way out in the hinterlands and a prevalence of automobile based development - all of them short-term profit decisions to maximize the cash flow for the goat herder who has no regard for the goat's development apart from the one that serves the herder's ultimate goal.

Such a scenario is leading to social isolation and increase in the trend of 'group' identity. More time spent in travel and at the workplace is eroding the quality of life and thus causing the increased trend in negative emotions ruling the roost. The lack of economic opportunity outside this herd and peer pressure created once again by a 'group' identity of a different kind among parents kills off majority of the individual spirits.

Thus, it is not the IT companies that should be blamed for this, but the lack of a vision and lack of planning the urban fabric in Indian cities that is to be blamed. Individual development must be emphasized, and the community must be designed to enhance this emphasis. Migration to cities and single economic sector development must be shunned.

At the end of the day, freedom is not about having lots of money and having loads of intoxicated fun, rather freedom is the ability to make a judicious choice in the usage of one's time without being a prisoner to circumstance. Freedom is the ability to forge an individual identity to enhance one's ability and character. Freedom is the ability to live and forge a livelihood in one's place of choice rather than be forced to migrate. Change must be sought to achieve this sort of freedom, and it is the role of policy and government to provide opportunities for such a change.

The 'Lost Generation'?

The following program is a Tamil talk show that discusses cultural issues arising due to the "IT work culture" in India. While it is unfair to single out IT as the reason and easy to blame westernization for this increased trend, what is significant is that the psyche of the current generation is a tailored fit to exploit the opportunities opened up by the "IT work culture" and westernization. These things have always been around in our society but they have always been instances that were few and far between to leave them aside as a blot rather than a trend.

Today's 'liberated' psyche combined with a misplaced sense of freedom, increased cash flow and access to 'fun' is all responsible for this trend. In previous generations the access to such opportunities were less, and with India being a poorer country money was always a deterrent to such attitudes. The most important trend is the sense of liberation and the idea of freedom without responsibility or restraint.

Generation theory is uncommon in India, but considering various aspects of the Indian society today this current generation could easily be termed the 'Lost Generation'. Misplaced sense of liberation, a confused sense of westernization, confused priorities, a general lack of discipline driven by a feeling of freedom without responsibility and gross under-achievement define the makings of this generation. (An anecdotal statement, but there are tons of examples that could prove it.)

This is not westernization in its real sense. This trend is eerily reminiscent of the 1960's western culture. This generation is very similar to the 'baby boomer generation' raised in the modern technological world. This is the generation that was so 'liberated' that it led to a President having an illegitimate relationship in the Oval Office with a 21 year old unpaid intern, and not feel guilty about it!!!

India still Asia's reluctant tiger - BBC

By Zareer Masani Presenter, BBC Radio 4's Analysis

With its economy growing at more than triple the speed of Britain's, India has become a global leader in information technology and other hi-tech products.

But how has this been possible in a country where poverty is so widespread and where more than a third of people are still illiterate?

In the words of Nobel laureate economist Amartya Sen, "the danger of India moving in the direction of being half California and half sub-Saharan Africa is a real one."

The contrast between hi-tech, silicon enclaves such as Bangalore and the primitive conditions of many Indian villages and urban slums strikes even the most casual tourist.

So is the dramatic rise of Indian IT firms just a Californian bubble in the sub-Saharan deserts of Indian poverty? Not according to Anand Mahindra, managing director of a family business, Mahindra and Mahindra, that has grown into one of India's largest conglomerates, producing everything from tractors to telecommunications.

If you want to make a million Barbie dolls, this is not the place to come Anand Mahindra

"The IT sector was a kicker to growth," he says. "Its impact was psychological. It signalled to the world that India was much more than its old historical stereotypes.

"It suddenly in an exaggerated manner, if you ask me, made the world think that every Indian was smart and could fix their computers.

"But that helped entrepreneurs in India from all industry segments, because it gave them a more receptive environment in which to do business."

The number of Indian IT professionals has leapt from 56,000 in 1991 to a million today. That's still tiny relative to a population of over a billion, but a rare achievement in a global market where IT has traditionally been the preserve of advanced industrial economies.

Reliability costs

But how do hi-tech Indian companies survive and prosper in an environment where even basic infrastructure like transport, power and water is so notoriously unreliable?

Phiroz Vandrevala, executive director of Tata Consultancy Services, India's oldest and largest IT firm, says: "What we've actually done is within our own environments created global circles, oases of excellence.

"So if we build any facility, we create a 24-hour power back-up," he says,"or if you employ x number of people, you actually transport everybody from their home to their place of work."

"But it certainly is a cost to doing business."

While IT firms are cocooned within their oases of excellence, poor infrastructure can be a crippling cost for other sectors, such as large-scale manufacturing.

Anand Mahindra, whom many consider the sub-continent's most thoughtful businessman, warns that India cannot live by IT alone.

"Even Bill Gates when he came to India said, 'IT is not the answer for employment. You're going to have to emulate China and its manufacturing sector, because that's where the jobs are and that's where the multiplier effect is the highest,'" says Mr Mahindra.

"So it was a nice, sobering thought to come from the Messiah of IT himself.

"If you want to make a million Barbie dolls, this is not the place to come. Then you go to China. This is not a widget-making manufacturing economy, and that is largely and possibly only due to our poor infrastructure.

"We simply don't have the power in terms of energy to meet such high capacities. We don't have the port infrastructure and the transportation infrastructure to ship out such a high volume of goods in a reliable and timely manner."

Education, education

So instead of making widgets, Indian manufacturing is currently building on its comparative advantages in engineering-intensive goods, which require versatility, flexibility and innovation.

One example is carmaking, with domestic and foreign firms now investing an estimated $6.6bn in new Indian factories.

But growth in these high-value sectors is also running up against a skills shortage fuelled by lack of what's called social infrastructure - primarily good education.

Although Indian universities churn out three million graduates a year, only 15% of them are suitable employees for blue-chip companies.

That's nowhere near enough for Phiroz Vandrevala of Tata Consultancy Services.

"We have a tremendous amount of availability, but the suitability quotient is slightly low. If you look at about a hundred engineers from different educational institutions, in a company like ours about 20% make the cut," says Mr Vandrevala.

"Every industry is going to have to make significant investments in training for their own skills."

Despite growing investment in education, India still lags way behind its Western competitors. Thirty-five per cent of its population is still illiterate; only 15% of Indian students reach high school, and just 7% graduate.

Change is messy

Privatisations, or at least public-private partnerships, are now widely seen as the way to open up essential infrastructure like education, transport, power and even water to competition and new investment.

But local delivery depends on the quality of local leadership and its willingness to cut back its own powers.

Indian democracy undoubtedly makes structural change a lot slower and more messy than in China, but there is genuine optimism among Indian economists that the system will eventually deliver.

"Our confidence in rapid growth is quite recent, because rapid growth itself is recent, and so for the state to gear up to provide the infrastructure that's appropriate for 8 to 9% growth is taking a while," says Suman Bery, head of a leading Delhi think-tank called the National Council for Advanced Economic Research.

"We're not one of these countries like France or China which does things in advance and pre-emptively.

"The shoe has to pinch before we get round to it.

"Infrastructure strikes me as an issue that will solve itself. It may hold growth back a little bit, but I don't think it's fatal."

BBC Radio 4's Analysis: India: The Reluctant Tiger will be broadcast on Thursday, 28 February, 2008 at 2030 GMT on BBC Radio 4. You can listen to the programme again after it is has been broadcast at Radio 4's listen again page or download the podcast here .

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7267315.stm

Published: 2008/02/27 23:34:41 GMT

© BBC MMVIII

Challenges of urbanisation - The Hindu

The world now lives in cities. According to the United Nations Population Fund (UNFPA) report released recently, the world population has decisively turned urban. About 3.3 billion people live in urban areas and by 2030 that would increase to about 5 billion. This amounts to more than half of the world’s population. The level of urbanisation in India, in comparison, appears much lower. Urban India accounts for about 30 per cent of the total population and its share i s expected to rise to about 40 per cent by 2030. However, the absolute numbers tell quite a different story. At present, the urban population is about 300 million and it is expected to reach 590 million by 2030. Indian cities cannot take comfort from the U.N.’s observation that urbanisation is a positive feature and cities offer the best opportunity to escape poverty. Urban poverty, housing deficit, poor quality of city planning, and weak governance are challenges to be addressed. As of now, the list of unfinished and unattended urban agenda in India is long and daunting.
By 2015, about $90 billion needs to be invested in urban infrastructure excluding metro railway projects. But what would be available, on the basis of 2004 figures and projections, is only $10 billion. The national transport policy stresses the need for large investments in public transportation and the need to establish metropolitan authorities that will integrate different modes of transport and promote sustainable options. This still remains a far cry. In spite of a national slum policy and housing policies being in place, the housing deficit in Indian cities is on the rise. In 2007, the housing shortage was about 24 million units and it is expected to touch 26 million by 2012. About 99 per cent of this deficit pertains to lower income groups. The UNFPA report identifies urban governance as the key challenge in planning for quality cities. This appears to be one of the weaker links in the Indian urban context. The Constitution, through its amendments, has devolved more powers to local bodies, but they are yet to be empowered in full. Their capacity needs to be built and financial powers strengthened before we can expect them to adopt best practices in governance. Such issues are even more pressing in smaller cities, which are expected to take most of the growing urban population. Urbanisation may be inevitable but whether it will turn into a positive force or an environmental and social disaster depends on how quickly we put plans and governance in place.

What in heaven's name....................

Whats happening in Chennai in the name of architecture?




From being the cradle of Indo-Saracenic Architecture, and many other buildings that are elegance personified, this fall from grace hurts. The pictures that follow tell the entire story, better than a thousand words could explain.

The under-achieving real estate market and under-utilized mass transit systems in Indian metros forcing unhealthy sprawl

ABSTRACT

'Kada veedi’ or 'Street of shops' is the traditional middle-class Tamil market-place. Ranganathan Street, Mambalam; Shanmugam Road, Tambaram; Main Road, Pallavaram; Main Road, Chromepet are just some examples that epitomize this concept, not to mention the Pondi Bazaars, Luz Corners and other such commercial centers in the city of Chennai, India.

Small shops lined up along un-motorable roads, providing economic opportunities and goods at low cost mark the making of these markets. At best, these markets can be described as disorganized, underachieving and an obsolete form of business operation. The efficiency of such economies is very low, and, does not help the cause of a city and a nation knocking on the door of development. Significantly, these markets are linked by the metro rail network and occupy prime real estate in close proximity to these metro lines.

The density of the built form is high, which in turn causes a high density of pedestrian traffic, thereby creating the illusion of saturated development. However, the actual built-up area is very low and does not utilize the full potential of the location. Most importantly, the illusion of saturation and the resultant premium price tag has caused new development to move outside the city.

Unfortunately, this new development represents the IT economy and employs a large number of urban dwellers. Companies operate buses from and to the city, and apart from straining the narrow roads and gasoline based fuel resources, the time spent in traveling between home and work directly affects the productivity of the economy and the quality of domestic life for future generations.

This paper studies the development pattern of Chennai, the resultant pattern of land-use, current trends in development and how these effect the environment, the built-environment and quality of life in the city. The paper also proposes a different development pattern based on mass-transit for sustainable development of the city, and the feasibility of such a solution in the context of Chennai. The hope for this solution is that it reduces redundancy in economic investment, development footprint and fossil fuel dependency while increasing quality of life, economic efficiency and addressing a host of issues currently faced by the city.

Keywords: transit based development; urban sprawl; mixed-use community; Chennai; India

INTRODUCTION

A low-rise built-form, unplanned organic morphosis of the built-form and a few misplaced development decisions in the middle of excellent infrastructure (in the form of an ideal road structure, metro network, first class bus network, abundant power supply, highly educated inhabitants and international connectivity) is creating an interesting phenomenon in the city of Chennai. This excellent infrastructure is driving many new investment opportunities into the city, but due to the above mentioned phenomenon caused by the current built form, it is increasingly finding its way out into distant suburban locations.

As a result of the suburbanization of economic investment, the city has been subjected to a splurge in the ownership and use of automobiles and an unhealthy real estate bubble. Development of satellite towns in now imminent and widespread sprawl powered by the expanding Indian economy is almost inevitable. This paper takes a close look at the master plans developed for Chennai, the implementation of the goals identified by it (which have led to this pattern of development), the land-use pattern around one major metro rail station in the city of Chennai - Mambalam, which illustrates the above phenomenon in its full bloom with fragmented, unplanned land use and organic built-form causing the illusion of congestion. Finally, this paper discusses an image of transit based development in the city, the road blocks to achieving that vision and a possible solution to the problem.

City of Chennai

Chennai is India's 4th largest city and the capital of the southern state of Tamil Nadu. It is located on the east coast of India along the shores of the Bay of Bengal. It is the second largest sea-port, 3rd busiest airport (with daily flights to Europe and the rest of Asia), has the largest inter-state bus terminus in India, is part of the golden quadrilateral of India (which is a network of national highways connecting the four major cities of the country) and, accommodates the headquarters of Southern Railway. Three stations serve as entry points to Chennai on the railway network. With a population of 7.5 million including the wider metropolitan area and an overall area of 1180 square kilometers, Chennai is one of the most densely populated cities in the world. The density figure for the city is 24,418 per sq. km. and 5,847 per sq. km. in metropolitan areas. For a benchmark, the density of Manhattan Island is 29,706 per sq. km.!

Infrastructure in Chennai is considered world-class, except for its water supply and drainage systems. Abundant power supply, without much interruption, comes from the Kalpakkam Atomic Power Plant and Neyveli Lignite Power Plant. The main roads form a radial structure with three major arterial roads (Mount Road, Poonamalle High Road and Rajaji Salai). The main chord roads are NH Road, RK Salai and SP Road. With the construction of the ring roads, connectivity between the arterial roads is much improved. The city is served by three metro lines, and a first class bus network. Educational institutions in the city are considered top notch, with the world renowned Indian Institute of Technology, Anna University, Madras Medical College, Madras Veterinary College, MG Ramachandra Medical University and Loyola College serving as premier educational institutions in the country.

Dubbed the 'Detroit of India' for the prevalence of the automobile and automobile spare parts industry, it is home to auto manufacturers Ford, Hyundai, GM and BMW. Other major industries in Chennai include IT, hardware manufacturing, biotechnology, petrochemicals, garments and financial services. The Madras Export Processing Zone, Ambattur Industrial Estate, Siruseri Bio-tech Park, Mahindra Industrial Park and Tidel Park are some of the consolidated industrial zones in the city. It was ranked as the most attractive Indian city for off shoring services per A.T. Kearney's Indian Cities Services Attractiveness Index (2005). With the increasing importance of IT services to Indian GDP, Chennai is seeing an increasing trend towards creating hi-tech corridors for development.

DEVELOPMENT PATTERN OF CHENNAI

Fig 1 illustrates the metropolitan agglomeration of Chennai. The city and the surrounding areas are the 34th largest agglomeration in the world, and the 4th largest in India. The area shaded in red is the city of Chennai, and the orange area depicts the metropolitan boundaries of the city. The yellow lines mark the metro rail network and the pink lines mark the major roads in the city. The green areas indicate a National Park. Chennai is one of the very few cities in the world to house a National Park within its boundaries. Thanks to the Indian Institute of Technology and the Governor's residence being housed within it, the Guindy National Park has remained oblivious to the land movers that have ploughed around the rest of the city.

Apart from the city, population in the metropolitan areas is distributed among the areas shown shaded in cyan. The rest of the region is either sparsely populated or uninhabited. A closer look at the areas shaded in cyan shows the metro network running through them. The clue to this pattern of growth can be found in the first master plan developed for Chennai in 1976. George Town (shown in light pink) was the Central Business District (CBD); Kothvalchavadi near George Town was formerly the central market and all development radiated out of this area. The majority of the jobs were located in the CBD, and all public sector offices were located on Mount Road and NH Road. The majority of the manufacturing industries were located to the north, west and south-west of the CBD. Growth of the city radiated along the mass transit corridors of the west and south-west. The division of land-use between the industrial centers and residential corridors meant the land-use surrounding the metro rail networks, along which the residential corridors developed, is predominantly residential, with small shops lining the main roads of the residential areas. [CMDA]

As a result of the economic liberalization policy of the Indian Government in 1991, the public sector started to contract and the private sector then gathered momentum. With this shift, and with the arrival of IT as a major player in the Indian economy, the focus of the economy shifted from being predominantly based in the secondary manufacturing sector to increasingly being one based in the tertiary services sector. Consequently, land-use and growth patterns have shifted to new areas that were hitherto not developed. The new IT economy needed contiguous office space, abundant power supply and easy accessibility, and of course cheap land to build vast IT complexes on. The current focus is on new developments along Old Mahabalipuram Road, M. M. Nagar and Sriperumbudur. [CMDA] Apart from M. M. Nagar, the other development areas are situated away from the metro rail network.

The main goals of the first master plan were to restrict density and population growth in the city, restrict industrial and commercial developments within the metropolitan area, encouragement of growth along the metro rail transportation corridors and creation of urban nodes at the termini, dispersal of certain activities from the CBD and development of the satellite towns of MM Nagar, Gummidipoondi and Thiruvallur. [CMDA] Of these goals, only the growth along the metro rail corridors, with a predominant growth along the south-west corridor [CMDA] and dispersal of the bus terminus and central market from Kothvalchavadi to Koyambedu, completed in the 90's, were successfully implemented. The concept of satellite towns failed miserably from the start, and if it had not been for Ford and the Mahindra Industrial Park, MM Nagar would have been categorized as a complete failure.

The major criticism of the first master plan is that the implementation was so slow that the issues were very different by the time the projects were completed. For example, Koyambedu bus terminus and central market are so far away from the radial network of roads and completely out of sync with the metro rail network that reaching the area is an ordeal, given the traffic conditions of today. The Inner Ring Road that connects to Koyambedu is only 100' wide, and with all the encroachments and break in continuity in Ashok Nagar, the road is not suited to take in additional truck and bus traffic. The construction of the Chennai By-pass to serve the developments in Koyambedu seems an ad-hoc decision to alleviate modern day traffic issues for an obsolete solution. There is no reference of such a road in the first master plan, while the decision to develop Koyambedu was a direct result of a goal set during the first master plan. [CMDA]

Recent development projects in the city have included the construction of flyovers, the Mass Rapid Transit System (MRTS), construction of the Chennai by-pass, developing the IT Corridor, development of the various technology and industrial parks in MM Nagar, Siruseri, Poonamalle and Sriperumbudur and passing a proposal for an Outer Ring Road. There is also a proposal to construct an underground metro line network to supplement the existing metro rail network.

The MRTS was constructed as an overhead metro rail system, and the 3rd phase of development is currently in progress. The MRTS rail network was constructed along the banks of the Buckingham Canal (erstwhile inland waterway, now a giant open drainage line) due to the lack of contiguous space needed to construct an overhead rail system. In a survey done by this author in 2001, it was found that some of the stations were inaccessible from the main roads. In addition, the stench from the canal and the narrow alleys that lead to the stations are major deterrents for the use of the MRTS system. Also, the lack of inter-modal transfers between different modes of transport has been identified as one of the key issues in the latest draft of the second master plan by CMDA.

Development of residential areas in close proximity to these new technology parks is currently in full swing, which, when populated will create satellite towns around Chennai. [CMDA] Though this is a development which aims to alleviate the traffic issues of people living in the city and working in the suburbs, it shows an eerie similarity to the development of single-use American suburbs in the latter half of the last century. This is urban sprawl at its worst, and as Albert Einstein put it so aptly, "doing the same thing over and over again and expecting different results is nothing but insanity."

The environmental impact of creating this residential development close to the technology parks could affect the ecological balance as far away as Siberia. As shown in Fig 2, a large part of the area between the IT corridor and the south-west corridor of the city is wetlands, and not suited for development in their virgin form. By treating them as urban landfills, the area is being reclaimed for residential development. A large part of the area of Velachery which is now a thriving locality in the city (the majority of its development taking place during the last decade), was developed on identical land in a similar manner. Siberian migratory birds pay an annual visit to the Vedanthangal bird sanctuary near Chennai, predominantly to breed in the marshy wetlands of the area, and this pattern of development could adversely affect their sanctuary.

The perils of suburbanization and ‘Satellite Town’ development

What is referred to in the Master Plans of Chennai as ‘Satellite Town’ is referred to as ‘Edge City’ in ‘New Urbanist’ theory. According to Leinberger, the development pattern that brings such developments to the fore move on to engulf more land, and new development is continually pushed to an ever-expanding fringe to cause ‘Edgeless Cities.’ The reason suburban developments are preferred to existing urban fabric is for want of clear space that is cheap, and hence the ‘more is worse’ is true with such developments. From the perspective of a developer, a suburban location provides short-term profitability. But as more and more development is brought into the area, the idea of cheap land and clear space is long gone, and value of the development flags off. Statistics show that the values of suburban developments in the US peaks between seven and ten years, and the development wagon moves on to different locations, thereby creating a continuous sprawl. [Leinberger]

Developing industrial estates and technology parks in Chennai mimics the single-use suburban developments in America. The graph shown in Fig 3 illustrates the difference in value propagation of developments in single-use suburban locations to that of a mixed-use, urban location with walkable urbanity. [Leinberger] It is very clear that such a development cannot sustain its value over time, and hence, is not a long-term solution. Moreover, situations such as the current housing crisis in America are a detriment to the entire economy, and the drop in value of homes is a significant factor in this crisis. This is not sustainable development, and worse is the fact that such development causes significant damage to the environment.

The built-environment and underutilized resources in the city

As previously stated, Chennai's population density within the city is 24,418 people per sq km. Per the Development Control Rules (rules) for Chennai, building heights were restricted to 20 stories. Up until 2000, the LIC Building with 14 stories was the tallest building in Chennai. With such a low rise built-form and a high density of development, demand for space is high while supply is saturated. Away from the main business districts of Mount Road, NH Road and RK Salai, the development pattern in Chennai is best illustrated by the pictures in Fig 4 and Fig 5.

The area shown in Fig 4 is Mambalam, and as can be clearly seen, the common thread in all of the images shown is organic, unplanned and unregulated growth. One tell-tale image is that of the electric transformer adjacent to a residential building with its window opening into the transformer! The lack of regulation, lack of a localized planning body and failure to enforce development control rules, mainly due to widespread corruption in building plan approvals, has created a built-environment that is haphazard, hazardous, dense and lacking in basic civic amenities, apart from creating increased stress on the city's water supply and drainage lines due to the larger than planned for demand.

The land on which the multi-family dwelling units shown in Fig 4 and Fig 5 below (Fig 5 shows the relatively less developed area of Tambaram Sanatorium) are built on, were previously used to house single family residences with front and back yards. Increased equity, providing for retirement capital (especially with the increase in non-pension paying private sector jobs) coupled with the sociological peculiarity of property inheritance divided ‘equally’ between all children have in turn caused the development of multi-family dwelling units on such plots, which causes further fragmentation in ownership of property in the city.

At the time of the first master plan, India was a predominantly socialistic country with a dominant public sector. Automobile ownership was low (less than 600,000 in 1991 compared to more than 1.6 million in 2005 [CMDA]). The radial pattern of growth for residential development along the transit corridors and development of industrial zones away from the rail network were facilitated by the first master plan. Mambalam was the area that was best connected to the industrial zones by bus. The ‘kada veedi’ being at the centre of the dynamic created by the pedestrian movement between the residence connecting railway station and the work place connecting bus network, created the opportunity for an evening market that sells vegetables, flowers and fruits.

Street hawkers, like the ones shown in Fig 5, are still a significant part of the 'kada veedi' or 'street of shops'. This informal economy has been essential for the development of the country, as identified by the Planning Commission of India. Such economies tend to thrive in pedestrian dominated neighborhoods, and with the increased density of pedestrian traffic, the success of these markets improved as well. As is seen in the images shown in Fig 4 and Fig 5, the organic growth of the economic status of the small vendors mirrors the organic growth of the built-form in the city. This stands testimony to the need for more walkable urbanity and less automobile based sprawl. The concept of 'kada veedi' still holds good, and was recognized in the First Master Plan as the 'Main Road' in every residential locality.

Also, at the time of the First Master Plan due to India’s socialistic past, Urban Land Ceiling Act meant that land ownership was limited; marking the origins of widespread fragmented land ownership. Information Technology was unheard of and the current open-market, technology-driven development was a political impossibility. However, despite the vast change in development drivers, the pattern of growth continues, and land-use surrounding the metro rail networks continues to be predominantly residential and increasingly fragmented in ownership.

The fragmented land ownership pattern causes resultant growth to be organic in nature. Individual owners expand their property based on their specific needs, and the result is what is seen in the photographs in Fig 4 and 5. This pattern is typical in all of the residential areas surrounding the metro network. Mambalam happens to be the busiest and 'most-developed' of all such areas in the city that surround the metro rail station.

In this scenario, it is very difficult for the new generation of IT empires like Infosys to accumulate the space necessary for basing their operation within the urban fabric, and is forced to move out to the greener pastures of the suburbs where they can build the required space without the hassles of going through the political red-tapes. That the increasing automobile based sprawl is causing the metro rail system to be underutilized is reflected by the trend in respective percentage of trips by bus to that by trains, 41.5 to 11.5 in 1970 changing to 45.5 to 9.0 in 1984 and finally 37.9 to 4.1 in 1992. [CMDA] With the ten-fold increase in automobile population mentioned earlier, this trend is set to continue causing the redundancy in public infrastructure.

TRANSIT BASED DEVELOPMENT IN CHENNAI - A RENEWED IMAGE OF MAMBALAM

The answer to this conundrum lies in transit based development. Chennai has the structure and the infrastructure in place to make this transformation in development pattern at a relatively low up-front cost. The time has come for a major overhaul of the mediocre built environment in the city. It is time to do away with all of the unplanned and unhygienic organic growth and make better use of the metro rail network. A mixed-use mid to high rise development with plenty of opportunity for cultural interaction, a cargo processing and garbage recycling unit well connected by the rail network, rain water harvesting and plenty of green space would foster the seeds of sustainable development in the city. Such a model can be implemented through the city in a number of locations.

The idea presented by this concept is not to cannibalize the street hawkers or the 'kada veedi' concept, and even less a crude attempt to alter the social patterns of the area, but is instead a plan which will maximize organized space for the street hawkers and small businesses to thrive in and an honest attempt at making provision for an environment that enhances social exchange. Hence, it becomes an exercise of consolidating and organizing the space and built-form in a manner that capitalizes on the sustainable development potential presented by the existing infrastructure.

"What got you here will not get you there," is a famous book that illustrates why a different approach is needed to climb higher on the ladder to success, and India is at such a juncture in its development at this time. India will need more space and more development to sustain its economic growth rate, but it is imperative that India not travel along the same route taken by America and China in catering to similar needs. This model has not worked and is a strain on the environment in more ways than just automobile based development. Eventually, the strain on the environment would be catastrophic if the three largest nations on the planet were to follow similar patterns of urban development, and end up making the same mistakes.

The image presented above is similar to development plans already undertaken in Canary Wharf in London and Moscow City in Moscow, with a few additions to facilitate true eco-friendly transit based development. With such a development pattern, services and opportunities are decentralized, and the community moves towards self-sufficiency. When goods are transported by train to local cargo processing units, the need for centralized markets is deemed redundant. Efficiency in the operation of the market is increased, and dependence on fossil fuels to power the economy is reduced to a great extent. Sprawl ceases to be a necessity, and the decentralization of economic opportunity to other urban centers along the rail network enables true sustainable development in the country.

Road blocks in achieving transit based development and the role of Indian Railways as a catalytic developer

Consideration of any major development project is not possible without significant roadblocks, especially a radical change such as this one. The principal stumbling block is the ability to accumulate the required land for the development of such a concept. Convincing businesses and politicians to think in terms of a long-term strategy with potential for short-term losses goes against current business principles, and this is especially true in the current political climate of coalition governments. Politicians playing for survival and businesses more worried about their profitability than the sustainable development of the community as a whole are not congenial team players in realizing this vision. The profitability of such a plan would need to be proved before this vision could become a reality. Frequently, in similar projects, this is the role of a catalytic developer. The catalytic developer invests slow capital in the project with the aim of absorbing short-term losses for long-term gains. They typically carry the project until a critical mass is reached, after which the development effort can only move forward.

The Indian Railways own vast tracts of land in close proximity to the railway stations. The railway colonies that are under the scanner in this discussion were developed more than thirty years ago as single family residences, with standard material specifications and are badly in need of redevelopment. By undertaking the redevelopment of the railway colonies as model transit towns, the Indian Railways are in the best position, either as a single entity or through public-private partnerships, to absorb a short-term loss in order to create the ubiquitous benefit sought in the long-term. If transit towns were to become the predominant development pattern, the railways could recuperate the small losses easily. Currently, the operational model of Indian Railways needs a revised strategy due to its financial crunch. Being part of the Central Government, the Railways are forced to subsidize popular passenger services by increasing the price on its freight services. This practice has meant that the trucks are the predominant freight handlers in the country. Such a business model is unsustainable, and it is in the best interests of the country that its railway system functions in good health. If transit towns were to become the predominant development pattern, the Railways benefit the most from it as the trains would be the life-line of the economy. The Railways have identified this approach to be beneficial to them, and are in the process of identifying ways to serve the Special Economic Zones in the country. [Indian Railways]

CONCLUSION

Transit based development provides the city of Chennai a sustainable and relatively cheap alternative to meet its growing needs. Within the structure of the city, and the excellent infrastructure that is the main draw for the city, there are immense possibilities for such a pattern of growth. Not only will this resolve the growth problems of the city, it will help resolve a number of existing issues in the city not limited to traffic congestion, extreme density of population, water supply and drainage issues, pollution and a messy built-form. Hitherto underutilized land and transit resources can be fully utilized, reducing the need for redundant development, and increasing economic efficiency.

REFERENCES

Chennai Metropolitan Development Authority (CMDA), 2005, Draft copy of The Second Master Plan for Chennai, CMDA
Calthorpe, Peter and William Fulton, 2001, Planning for the end of sprawl - The Regional City, Island Press
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Leinberger, Christopher B., 2005, Turning Around Downtown: Twelve Steps to Revitalization, The Brookings Institution

Planning Commission, 2006, Towards Faster and More Inclusive Growth – An Approach to the 11^th Five Year Plan, Government of India

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