Conventional business wisdom regards most government officials and bureaucrats as obstacles who get in the way of market forces. But a politician and his lieutenant get much of the credit for making the Indian city of Hyderabad a major global center of business process outsourcing (BPO) -- the booming practice whereby companies farm out tasks such as call-center operations, billing and claims processing.
As the chief minister of the Indian state of Andhra Pradesh, N. Chandrababu Naidu has pushed hard to modernize the largely rural region of 76 million people through information technology and business-style government practices. About a year and a half ago, Naidu -- the equivalent of a U.S. governor -- established an agency specifically charged with nurturing the BPO industry. He named one of his special secretaries, Randeep Sudan, as its "CEO."
Their efforts have resulted in a curious blend of socialism and capitalism in Andhra Pradesh (AP). Even as state officials continue a significant rice subsidy for the poor and invest public land in office park developments, they have pared back labor regulations to lure businesses. But the blend of free market reforms and government interventions is paying off in the form of a fast-growing BPO industry. Revenue for BPO firms in the state soared more than 300% in the nine months ended December 2002, to $247 million. The industry employs about 15,000 workers in Andhra Pradesh, mostly in Hyderabad.
Naidu’s leadership has earned him a high media profile. He was named "South Asian of the Year" by Time Asia and one of 50 Asian leaders at the forefront of change by Business Week magazine. What’s more, the performance of both Naidu and Sudan was praised in a study last August by Nasscom, an Indian trade group representing information technology companies and BPO providers -- which are also known as IT-enabled services (ITES) companies. Nasscom ranked Hyderabad as the top destination among nine Indian cities for ITES companies, with the city taking first place in the sub-category of "policy initiatives."
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