November 7, 2005

Rival Tech Towns May Outrun India’s Bangalore

By Narayanan Madhavan

BANGALORE -- There's a punchline going around in India's high-tech capital: Bangalore may be Bangalored.

"Bangalored," a word invented in the United States to describe those whose jobs were lost because their work was outsourced to low-cost India, could well apply to the city, whose rivals are wooing investors as it chokes on its own growth.

An infrastructure crunch threatens Bangalore's prospects and those problems were compounded in October when a influential politician raised doubts about government support for industry in the form of cheap land and subsidies.

Monsoon flooding added to the city's overcast mood.

As red carpets soaked up water at Bangalore's annual industry conference, places ranging from the desert state of Rajasthan to beach haven Goa pitched stalls, wooing investors, not tourists.

"Suddenly with all the noise, the investor says: 'I am going to check out the other cities'," said V. Ravichandar, a business consultant and former member of a government infrastructure panel. "You can't rest on old glory."

A talented pool of workers, especially for microchip design, is still a big advantage for Bangalore, a city of 6.5 million people which has more than 1,500 technology firms.

But experts say lower-end software coding or back-office work could easily go to other Indian cities.

Ajit Isaac, head of Adecco PeopleOne, the Indian arm of Swiss Adecco, the world's largest staffing group, said he had seen three investors in the past quarter choose other cities over Bangalore.

Bangalore's woes could hurt India as a whole, he added.

"It is a showpiece. Once you let it go down, the magnet of attracting investment could become weaker," Isaac said.


China, Russia and the Philippines are important rivals for India in attracting technology or back-office investors.

Although firms like Intel and Motorola have put Bangalore on the world tech map, a host of rival Indian cities are lining up their own incentives such as cheaper land and subsidies.

Coinciding with the flagship city's troubles, the local Karnataka state's BangaloreIT.in conference kicked off last week with "Beyond Bangalore" as one of its themes.

The aim -- to position Bangalore as a gateway to other states and cities.

Things had looked up for Bangalore earlier this year when construction started in July for a $313 million international airport due for completion in 2008.

But a spat last month between N.R. Narayana Murthy, chairman of Infosys Technologies, and former prime minister H.D. Deve Gowda resulted in a jolt to investor mood.

Murthy called for "people's councils" in which citizens groups would work with officials to boost civic amenities in Bangalore. That angered Gowda, whose party shares power in the local coalition and who has been critical of the IT industry because he says its expansion hurts agriculture.

Inaugurating the BangaloreIT.in conference, Gowda said he favored the IT industry, but called for jobs for farmers who would lose their land to help urban growth.

The political leader had earlier questioned the financial viability of a $900 million Bangalore metro rail project which is awaiting approval from the federal cabinet.


A jobs-for-land deal involving farmers would be difficult to implement for the Bangalore IT firms that account for a third of India's $17.2 billion software industry, employing 1 million people.

English language, graduate education and merit-based rewards are considered vital by industry officials.

"The recent bashing of industry by the political establishment doesn't inspire confidence," Ravichandar said.

Genpact, a leading back-office firm spun off by General Electric Co, and Progeon, a subsidiary of Nasdaq-listed Infosys, are already in Rajasthan's capital, Jaipur.

Even small towns like the textile center of Coimbatore is attracting big companies like Cognizant Technology. Wipro has already branched out to communist-ruled Kolkata (Calcutta) and bought huge chunks of land near Delhi.

Bangalore's big rival, Hyderabad, scored a big win last month when Wipro, India's third-largest software exporter, signed an agreement with the state of Andhra Pradesh to acquire 100 acres of land in the city.

"It is not as if people are running to Hyderabad. But businessmen do weigh their pros and cons," said K. Ratna Prabha, information technology secretary of Andhra Pradesh.

"We have been able to address all issues including infrastructure. We are an ideal investment destination."