Rifts open in India's Silicon
Valley By Sudha
Ramachandran
BANGALORE - It's the billion-dollar
question that is on the minds of many Bangaloreans today
- will information technology be "Bangalored" from
India's Silicon City? The mood among several IT
companies indicates that there could be a shift in new
operations from Bangalore to other Indian cities.
Last week Azim Premji, chairman of the
Bangalore-based software giant Wipro, announced that his
company was seeking to expand its operations outside
Bangalore, as the city's "infrastructure problem is
serious". While clarifying that Wipro was "not moving
out of Bangalore", Premji maintained that "to sustain
and grow, we need to go to places where there are
opportunities - both manpower and infrastructure". He
said Wipro would invest in other Indian cities such
as Kolkata, Hyderabad, Chennai, Delhi, Kochi and Pune.
The once-sleepy city of Bangalore, which was
known as a "pensioner's paradise", is regarded today as
"India's Silicon Valley" - a technology hub that
contributes 36% of India's total software exports.
Recently a local government official announced that
Bangalore has overtaken the original Silicon Valley in
California as the world's largest employer of techies -
a claim that ruffled feathers in California. But even as
Bangalore brags about its achievements to the world,
Indian IT companies based in Bangalore are clearly no
longer impressed with what the city has to offer them.
Drawing attention to the fact that
infrastructure had deteriorated in and around Bangalore,
the Wipro chief said: "Our attrition levels, especially
in the IT-enabled and BPO [business process outsourcing]
services, have been rising year-on-year and demand for
higher wages increasing. We do not see the situation
improving in the near future. Hence our decision to look
beyond Bangalore for expansion and growth.
"We
are starting our operations in Kolkata from next month.
We will start with taking new accounts as well as
shifting some existing accounts to this center," Premji
said. "We are going to be setting up centers outside
Bangalore rapidly as we go along. The key reasons
include increased commuting time and high attrition.
Qualified engineers and graduates are coming up in other
cities and states. We will take our business wherever
there is opportunity for our employees. The reality is
that there is opportunity outside Karnataka and outside
Bangalore. We have to be present where talent is
available and infrastructure is superior."
Premji's
announcement should not come as a surprise. After all, he
fired a warning shot last year when he lashed out
at the government for failing to tackle the infrastructure needs
of the city. He at that time drew attention to the
frequent power cuts and the poor state of roads. Premji had
said that Wipro was thinking of expanding IT-enabled
services and BPO operations in Bangalore
but that was now "completely ruled out".
Wipro is
not alone in its exasperation with the city's crumbling
infrastructure and poor governance. Although Infosys,
the Indian software company that propelled Bangalore
to the status it enjoys today, has not been as vocal
as rival Wipro in its criticism of the city, it too
is looking beyond Bangalore for expansion. The state government
is yet to allocate the 120 hectares (300 acres) of land it
had sought for the setting up of its largest campus.
"A Rs1 trillion [US$25.5 billion] project
cannot be put on hold indefinitely," said Infosys
director and chief financial officer Mohandas. Bangalore
could lose this project too.
Several IT
companies agree with the issues that Wipro has raised.
In a city where time is money, getting caught in a
traffic jam means money down the drain. Bangalore's 5.5
million residents who spend hours commuting on potholed
and dug-up roads, and suffer acute water and power
shortages, fully empathize with Wipro's frustration.
Bangalore's infrastructure failed to
show improvement under former chief minister S M Krishna.
This incidentally was the state of affairs under a
government that was accused of having given far too much
attention to Bangalore and IT. In fact, the Congress
party's poor showing in the recent elections to the
Karnataka State Assembly were attributed to his
excessive attention to Bangalore at the cost of rural
Karnataka. If this is the kind of infrastructure support
received when a government was supposed to be paying
attention to this city, what is to be expected from the
present government, which is openly hostile to Bangalore
and IT? is a question that many IT companies are asking
now.
The new coalition government in the
state is pro-farmer and has taken several steps to
distance itself from Bangalore and the IT sector.
Neither Bangalore's infrastructure nor the IT sector was
mentioned in the recent state budget. The few
bureaucrats who were widely regarded as honest and
efficient in the city administration have been shunted
out. And the government is unfazed by the flight of
capital. Karnataka Deputy Chief Minister and Finance
Minister Siddaramaiah dismissed the Wipro chief's
statement as "a mere threat" and claimed that facilities
provided to IT investors in Karnataka "are the best" in
the country.
A recent study by KPMG Advisory Services Private Ltd
and the National Association of Software and Service
Companies found that Karnataka's attractiveness to
IT-enabled services and BPO operations lies in the fact
that it houses the research and development facilities
facilities of more than 80 global firms and is
ranked among the seven leading states in India for
technical skills for its workforce. As the director of
Software Technology Parks of India, B V Naidu, pointed out,
"Over a decade, Bangalore has formed a cluster of
skills. If a company is working on VLSI design,
enterprise application, embedded systems, communications
software, etc, you will find the skills easily in one
place. This is not true with other cities."
However, Bangalore will lose this edge if its infrastructure
remains unwelcoming. The study points out that
while Karnataka is an attractive destination for IT and
BPO companies, it still needs to improve its infrastructure
(roads, national airport, hotels, and convention
centers), develop Tier 2 cities, provide
direct international bandwidth, and energize education.
Some IT industry watchers maintain that while poor infrastructure
is getting on the nerves of IT companies in
Bangalore, the issue really is one of costs. Multinational
IT companies still prefer Bangalore - its
pleasant climate and cosmopolitan culture are big attractions. There
are more than 200 multinational IT companies
in Bangalore and they lure talent with higher salaries.
Mphasis president Anant Koppar admits that it "is
difficult for Indian companies to match the salaries that
the MNCs [multinational corporations] offer". So the bigger reason for IT
companies moving out might be competition for talent.
Indian IT companies moan that Bangalore is not
cost-effective. Chennai, Kochi, Pune and even Hubli seem
more attractive destinations for expansion. Chennai, for
instance, figures on the investment plans of leading
Indian IT companies including Infosys, Tata Consultancy
Services (TCS), HCL Technologies as well as
multinational IT giants such as Cognizant, Covansys,
Ford Information Technology, Xansa, Verizon and iSoft.
Chennai is said to be cheaper by a
huge margin than Bangalore. The workforce there is
seen as reliable and stable, unlike in Bangalore, where
there is a huge floating population. This appears to
have weighed in favor of Chennai when the
Mumbai-headquartered TCS decided to set up its largest
development center in that city.
In spite of all its problems, Bangalore is still
able to draw in investment in the IT sector. But this is
unlikely to last, especially as other cities fall over
themselves to welcome IT companies exasperated with
Bangalore. The state government, meanwhile, is busy
suffocating its golden goose.
Sudha
Ramachandran is an independent researcher/writer
based in Bangalore, India. She has a doctoral degree
from the School of International Studies, Jawaharlal
Nehru University, in New Delhi. Her areas of interest
include terrorism, confict zones and gender and
conflict. Formerly an assistant editor at Deccan Herald
(Bangalore), she now teaches at the Asian College of
Journalism, Chennai.
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