25 years of outsourcing...
As Bangalore notches up 25 years of outsourcing, it's worth examining the factors that have made the city such a strong first choice for many businesses, says Saritha Rai.
Bangalore, the backbone of India's £40bn outsourcing industry, is notorious for a regimented early closing time for nightlife, horrendous traffic, frequent power outages and a host of other tribulations.
Yet 25 years after outsourcing started in the city, it is now the technology hub of the East, sitting at the top of every company's list of offshore destinations for outsourcing and investment. Here are seven reasons why Bangalore enjoys its exalted position.
- 1. Diversity
After more than two decades of being the face of India's outsourcing industry, Bangalore has matured as an outsourcing hotspot. It offers technology companies a Silicon Valley-like combination of talent, partnership opportunities and a vast network of consultants and vendors. Moving on from early cut-price, volume-based work, the city now delivers all kinds of technology services in diverse areas.
- 2. Talent
The city's draw is its talented, technologically savvy workforce who can provide quick ramp-ups, and at operating costs that are a fraction of those abroad. The only rider is that manpower is not limitless.
As skills become expensive and attrition becomes a major annoyance, companies like Bangalore-headquartered Infosys Technologies are drawing talent from India's rural areas. Infosys CEO Kris Gopalakrishnan revealed recently that 40 per cent of the company's new hires are from non-urban areas.
- 3. Legacy
"Like some other very famous places, Bangalore has its own legacy," says Shyam Banerji, former head of Texas Instruments' software development operations in India who now heads up his own tech start-up. Texas Instruments was the first multinational to move some operations to Bangalore in 1984, marking the start of an outsourcing boom.
The city has become a benchmark outsourcing destination and is now shifting again to become a source for innovation, says Banerji. "Legacy is a difficult thing to overlook in multinational corporation boardrooms even when cheaper options become practical," he says.
- 4. Ecosystem
For many companies looking to offshore, brand Bangalore is a safe bet because of its proven reputation, says Sandeep Dhar, CEO of Tesco Hindustan. Testament to its standing are the rising number of foreign companies setting up captive units following early leaders such as Accenture, Cisco, Google, IBM, Intel and Yahoo!, which have their critical operations based in the city. The biggest of these are expanding their Bangalore operations because of the ecosystem.
- 5. Geography
Bangalore benefits from its location. The city is strategically positioned and has increasingly direct air connections to international locations spanning the East and the West. As Cisco's chief globalisation officer, Bangalore-based Wim Elfrink, puts it, the city is within a five-hour flight to 70 per cent of the world's population.
- 6. Mood
The city has fine weather all year round, a cosmopolitan environment and a vast network of international schools and quality housing. "All those factors makes it attractive to multinational firms' employees who come for short visits or long-term stays, a norm almost of any outsourcing deal today," says Ajay Kela, formerly COO and managing director of outsourcing firm Symphony Services, who now heads a philanthropic foundation set up by Symphony.
Bangalore is the city of choice for expatriates in India. Bangalore may lie in 140th spot in the global rankings and presents no challenge to the best in the world, but it remains a magnet for foreign executives.
- 7. New development
After repeated criticisms for failing to act on urban problems, the local government is finally recognising that traffic congestion and unreliable power supply in Bangalore are making life miserable for residents, not to mention investors.
So, a number of projects are underway, including a metro rail service that will start later this year, a high-speed rail link to the city's new international airports, and ring roads and elevated expressways.
A huge integrated suburb is under development in northern Bangalore, offering space to IT companies and also providing housing. Not a cure-all for the city's ills perhaps but certainly a start.
Bangalore has a reputation that even President Obama - who has never been anywhere close to the city - cannot ignore. Obama, who has often exhorted Americans to fear competition from Bangalore and Beijing, may just overcome his phobia if he visits the city when he starts an official tour of India in November.