Silicon Valley of the East

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Abstract:

Bangalore, once a quiet summer retreat for British officers and their families in the South Indian state of Karnataka, has become the technology capital of India. Popularly known as the "Silicon Valley of the East," Bangalore is home to subsidiaries of Intel, Novell, Philips, Siemens, Sony, and Texas Instruments. Skilled English-speaking workers, low wages, a relaxed atmosphere, and government support are among the factors that have lured foreign companies and prompted Newsweek to name Bangalore as one of the 10 "Hot New Tech Cities," despite its limitations in communications, power generation, and other infrastructure.

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Silicon Valley of the East

Bangalore's Boom

Bangalore, once a quiet summer retreat for British officers and their families in the South Indian state of Karnataka, has become the technology capital of India.

Popularly known as the "Silicon Valley of the East," Bangalore is home to subsidiaries of Intel, Novell, Philips, Siemens, Sony, and Texas Instruments. Many of Bangalore's numerous computer professionals choose to return to India after stints with multinational companies abroad, bringing the likes of IBM and Oracle with them. Skilled English-speaking workers, low wages, a relaxed atmosphere, and government support are among the factors that have lured foreign companies and prompted Newsweek to name Bangalore as one of the ten "Hot NewTech Cities," despite its limitations in communications, power generation, and other infrastructure.

Indian software-export sales are expected to reach nearly US$3 billion this year, and almost a third of the revenue has come from Bangalore. The industry has been growing at a compound rate of 50 percent for the last five years and employs nearly 200,000 people. The world's leading multinational corporations (MNCs) have flocked to India after realizing that Indian programmers will work for a fraction of what Western workers demand to resolve the Y2K bug and adapt programs to euro conversion rates. According to Sanjeev Chawla, the vice president of River Run Software Group, operating in India costs about one-sixth to one-fifth of the cost in the United States and 30 to 40 percent less than in Southeast Asian countries. Indian programmers are famous in the industry for being fluent in English and for possessing superior mathematical and technical skills. Consequently, many Western companies have begun to outsource information technology (IT) projects to offshore Indian companies.

Bangalore attracts foreign companies with its low wages and a progressive atmosphere, along with an IT-oriented labor force. The sharply rising salaries for Indians (US$3,500 for an entry-level software programmer, rising to US$23,700 ten years later) are high by Indian standards. Much like its counterpart in California, India's "Silicon Valley" has a young, laid-back ambiance. Employees work hard, but they also play hard, thanks to the numerous discos, pubs, and restaurants that have emerged throughout the city. Both the multinational and domestic companies have realized that they must improve working conditions and facilities to retain employees in an industry where employee turnover and job migration are common afflictions. Consequently, companies provide more perks, such as zero-interest home loans, health centers, and world class facilities. The Indian government has also implemented policies that have aided Indian cities including Bangalore in the expansion and development of the IT industry. Since 1991, liberalization has removed many barriers to foreign investment. India's "license raj" ended in the early 1990s, making it easier for companies to innovate and to explore new areas of the IT industry. As the Indian economy became more open, trade restrictions were eased; as a result, international trade, foreign investment, and the presence of MNCs began to increase. More recently, the Indian government has recognized the software industry as a major area of growth and has implemented income-tax exemptions on profits from software exports. …