Tuesday, July 11, 2006

Obsession about size.

Infosys occupies more space than probably some of the villages in India. In fact it would not be surprising if all of Infy land was put together it would probably be bigger than some of the small well known towns. In Karnataka alone the company already has circa 400 acres in its possession and it has requested for another 845 acres. The governments of Andhra, Kerala, Rajasthan, and West Bengal have offered 550 acres, 50 acres, 150 acres and 100 acres respectively to Infosys to setup its campus. There are several other smaller campuses in various cities ranging from 10 acres to 50 acres.

I am guessing that Infosys has access to more than 2000 acres (over 8.10 million square meters!) in its balance sheets. Its latest HR head count (as per Mr. Pai’s statement in the media) is circa 58,000 people. That’s a ridiculous ratio of roughly 140 square meters per person. That’s like giving each person a room measuring 12 m x 12 m!! Even if Infosys has half the amount of land that I mention, it still means that there is space of 70 square meters per person. And it will look even more ridiculous when we realize that nearly 1/3rd of Infy employees work out of India.

Ok what’s my point? Well look at it this way. Why can’t Infy spread its campus to the skies? What stops it from growing vertical? Why can’t it use just use 20 acre land and build sky scrapers? World Trade Center twin towers - combined and before their untimely collapse - occupied less than 10 acres of ground space and provided 8.80 mn sq feet of office space. Enough to host more than 15,000 employees. Infosys doesn’t have all its 55,000 employees in one city. In fact all their Bangalore employees can be hosted in a few skyscrapers.

I personally view the trend of developing huge campuses as unhealthy. More so from a corporate point of view – especially during an economic down turn. When the 2001 economic slowdown happened, many large companies in US / UK laid off people – and with their reduced work force they were able to squeeze into lesser number of floors. The empty floors were then rented out to other organizations and therefore excess area was no longer an overhead. Consider that kind of business cycle, with equal severity striking the Indian economy. What would Infy do its huge bulk of unused area? What would be the overheads cost?

Secondly such huge demand for space crates a short term artificial demand for land and thereby the real estate prices shoot up. Such short term volatility in the housing markets can actually hamper the local economy. Think about this, if Infosys had pitched for the land near old central jail in High Grounds area and had built skyscrapers, how attractive would the property around electronic city really be? Like wise if other major IT players had concentrated on growing skywards within the city limits, the fictitious real estate boom in the suburbs of Bangalore would not have taken place.

Let’s look at the collateral damage of having large wide campuses. For one, the government has to spend enormous amounts of money in building expressways and elevated highways in order to cater to the IT industries. Having done that it now has to support the notion that every IT person will be driving his petrol guzzling car, all by himself, on a 50 kms return journey and thereby causing a huge drain on the exchequer. People who tell me that buildings that house more than 300 people at a time have a different culture – should ask themselves this: if other nations and cities can adopt that so-called-different culture, then why can’t Bangalore? Have they not been successful? It would be selfish to grow a company at the cost of nation’s resources. After all every company should have a sense of corporate social responsibility.

The fault lies not just with Infosys (or similar companies) but also with the Government which is all too keen to accept the demands of these companies. The governments should realize that all industries will have a huge downturn and when that comes, the policies they had adopted cannot be remedied. It’s time to buckle their belt and tell all companies that if they can grow vertical – they should grow vertical. The savings so made – infrastructure and collateral – should then be pumped into having world class disaster management facilities that will cater to high rise buildings.


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