Why is Chennai trailing Bengaluru as a destination for IT jobs and startups?

What is holding Chennai back from being an attractive destination for startups and IT jobs? Can remote work help Chennai catch up?

Ashok*, a first generation graduate hailing from Kanyakumari district in Tamil Nadu, secured a job at a leading IT firm over a decade ago in Chennai. With the state capital being a dream destination for many from rural Tamil Nadu, he landed in Chennai with plenty of hopes and dreams. 

As years passed, he gained experience but also realised that the pay scale for his role was much lower than what a professional with the same level of experience would get in Bengaluru and other metro cities. With nearly 12.5 years of experience, Ashok now works in a start-up IT firm as a consultant in Bengaluru. “I earn nearly 60 percent more than what I could earn in Chennai,” he says. 

These claims are validated by a 2021 study conducted by Randstad Insights. Chennai placed seventh among the eight tier-1 cities across India in terms of annual salary trends for mid-level (6 to 14 years) and senior level (15 and more than 15 years) job roles across various industries. Chennai placed third when it comes to junior-level (0-5) jobs but sees a steep drop with more experience. 

chennai salary survey table
Chennai fared poorly in terms of pay for mid and senior levels jobs. Pic: Randstad Insights

So what explains the gulf in pay for jobs based in Chennai? Do those working in IT and those starting up prefer other cities over Chennai? To explore the reasons, Citizen Matters spoke with an array of professionals and here is what they had to say.

Limited scope for growth in Chennai-based jobs

A Data Scientist who sought anonymity, said, “Though it is one of the most happening fields with high demand for skilled employees, there are not many opportunities in Chennai. My first job was in Bengaluru. When I was looking for openings to shift after some three years of entering the field, there were not as many companies that had an opening for my role in Chennai. Besides, unless I shift from one organisation to another at regular intervals, I would not be able to get a good hike both in terms of designation and pay scale.”

On the difference in pay scale, he said, “Even those companies in Chennai that had limited openings, offered a sum of Rs 14 to 15 lakhs per annum (LPA), while I could easily get Rs 20 to 25 LPA in Bengaluru. In fact, only one company in Chennai was able to match the pay offered by firms in Bengaluru. Though Chennai is close to home, my natural choice was to opt for Bengaluru because I would have more opportunities here down the line.”

While Chennai has more service-based companies, Bengaluru has both product-based and service-based companies. It also has a number of startups which pay much more than an established company located in Chennai. “If I want to move around and explore both the sectors, Bengaluru would again be my first choice,” he added.

Karthik*, who also has nearly 10 years of experience, recently shifted from Chennai to Bengaluru. He is now in a Managerial role at a leading IT firm. In addition to the pay scale difference, what attracted him to the IT capital was the global nature of the jobs available. 

“While an organisation like Ernst & Young would have their India chapter (EY India) office in Chennai, the global chapter office functions out of Bengaluru. A few senior level roles that are exclusive to those global chapters would be available only in Bengaluru”, he said. 

Read more: How COVID landed the MSME sector in Chennai in deep waters

Chennai’s failure to launch after IT boom

Others attributed talent looking outside of Chennai to a stagnation of growth in the IT sector in the city. “Chennai saw a bloom in the IT field much earlier than Bengaluru but it has remained stagnant since. Those companies that were established in Chennai back in the 1990s failed to expand in a big way. Rather they started operations in other cities like Bengaluru and Hyderabad,” said a recruiter seeking anonymity, citing this as one of the reasons for Chennai not having many high-paying companies.

There is also a difference in pay scale offered by service and product based companies. Sudharshan, a Product Manager with nearly 13 years of experience, said, Service based organisations will have to take a cut out of your pay. Before onboarding a multinational client, they should have an offshore development centre with sufficient seating capacity, technical  infrastructure and resources. They will first hire the candidates and pay from their pockets until they get a client, whereas this is not the case with product based companies.” 

Lack of well developed startup ecosystem in Chennai

Explaining the conundrums of startups in Tamil Nadu and particularly in Chennai, Pandian*, a startup founder, said that the ‘idea’, which could either be an innovation or infusion of existing ideas, is the key to startups. “If I approach a person to fund my idea in Chennai, they would first ask me to start a company, register it, put some capital, build basic infrastructure, show financial projections and only then would they listen to my pitch. If I had that money to set up a company, I would not need an investor in the first place,” he said. 

“There are not many Venture Capitalists in Chennai. Even those who are ready to invest, would sanction the amounts in parts, ask for higher equity stake, involve in decision making, ask for frequent reviews and micro-manage at every step, while other investors would have personal agenda of tax-free investments. This practice would only kill innovations,” he added.

Besides, the existing ecosystem in Bengaluru has branded investors which increases the value of your start-up. “The investor is not only investing money into my startup but is also a tool of propaganda. Someone would invest in my startup simply because a branded investor has stakes in it,” he said, adding that the cities like Chennai are not yet mature enough to cultivate a start-up ecosystem.

A well-established startup ecosystem replete with opportunities for networking, meeting investors, attracting talented employees is one that Chennai sorely misses. “ When I wanted to start my own venture, I didn’t spend too much time thinking about where I wanted to set it up. The decision to move to Bengaluru was a no-brainer. The chances to secure funding, hire the right people and meet many like-minded founders makes Bengaluru a very attractive place for this. Chennai has some way to go before new founders feel confident enough that they won’t miss out on these opportunities by staying back”, says Vineeth*, a startup founder based in Bengaluru. 

Read more: Can Chennai’s economy bounce back after COVID-19?

Talent pool wary of move to Chennai for jobs

Seeking anonymity a recruiter Citizen Matters spoke with said that the basic pay was determined primarily based on cost of living in a city, competition for a particular role in a particular city and the level of competitors in the industry.

However, she noted that the floating population of Chennai was mostly intrastate and the floating population of Bengaluru remains to be interstate. While the number of opportunities is only one factor among the many, Chennai’s climatic conditions, fears of a cultural shock and language barrier top the list of reasons as to why candidates from other states prefer Bengaluru over Chennai.

An IT professional, who is a native of Assam and now works in Bengaluru said, “I would be an odd person out in Chennai. My English is broken but I can manage with Hindi in Bengaluru or Hyderabad. In Chennai, even the auto annas and grocery shop guys speak better English than me but they do not know Hindi. Besides, Chennai is very hot in summer and I tend to get skin allergies. Also, none would stare at me for the way I dress in Bengaluru.”

Aisha, a Data Analyst from West Bengal who now works in Bengaluru said, “Night life has always been a dream for me ever since I was a child. Being restricted to go out during nights as a girl, I can now afford to enjoy a night life and that is possible in Bengaluru.” 

Though John’s educational background does not coincide with his professional profile as a data analyst in Bengaluru, he said that the companies in Bengaluru are not very rigid about qualifications during recruitment. “The company I work for just wanted someone with good problem-solving skills and it is an innate nature of individuals. You are hired for who you are and not for what you know. However, I found the recruitment process very conservative in Chennai,” he said.

An uphill battle for women 

Across different sectors and cities, one thing remained constant – the experience of women. A 28-year-old woman, who sought anonymity, said that the ratio between male and female workers remained more or less the same at entry level roles. However, when they reach mid-level roles, many women are hamstrung in their progress due to the industry’s failure to accommodate women who are married and have children.

“One year of maternity leave not only takes a toll on our physical and mental health, but also sets us back in our professional life. I would have missed a promotion and a hike in addition to my incentives in that one year. It would take another three years to gain that promotion and hike. In the meantime, with a child to take care of, I would not be able to upskill. So, I would naturally tend to move from skill based work like developer to other sectors like testing. This would further push me down the ladder,” said *Chandini who is now a Manager in a leading product-based firm. She added that she earns at least 40 percent less than a male coworker in the same cadre of hers regardless of which city she is based in.

While switching jobs at regular intervals would pay off well in terms of pay hikes, most women Citizen Matters talked to said they were unable to switch as frequently as their male counterparts. This also led to a drastic pay scale difference between men and women. 

COVID-19 and beyond

While Chennai finds itself playing catch-up with other cities, the pandemic could prove to be a leveller. 

With the outbreak of COVID-19 and the subsequent lockdown, work from home models took over. Even after the lockdown restrictions were relaxed, many companies continue to opt for hybrid working models. 

“Both the employer and the employee understood how much they could save from working from their respective base locations. Even the organisations that said it was impossible, understood that 50 to 75 percent of the workforce could be operated remotely. Even the most conservative customers, predominantly from Banking, Financial Services and Insurance who have been running the same system for over four or five decades, were open to upgrading their infrastructure so that they could run their business while ppl were working from home. This has increased the competition in the field irrespective of the job location and thus bridges the pay scale difference,” said Sudharshan. 

This would help Chennai-based companies improve their talent pool and target employees who could work from home as the model makes work location agnostic. 

Similarly, the growth in SaaS (Software as a Service) companies in the city also provides the possibility for Chennai to carve its own share in the start-up pie. 

Through the efforts of agencies such as Tamil Nadu Startup And Innovation Mission (TANSIM) a more vibrant ecosystem could be fostered with the agencies vision to support founders, cultivate connections with funders, create jobs and strengthen the presence of Chennai on the map.

As for how the city is perceived by prospective founders and employees, a concerted effort to bust myths about the city and to create a welcoming and inclusive atmosphere would go a long way in changing how Chennai is viewed.

(*Names changed on request)

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  1. Navaneethan says:

    Interesting article. Not clear why you mentioned the point about women – are Chennai and Bangalore different in this regard? Seems like this would happen to women no matter where they are in the country.

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