Bangalore Remains The Outsourcing Capital Of The World

BANGALORE, India — This city is infamous for its crumbling infrastructure, but so far it has retained its reputation as the outsourcing capital of the world for software development.

Multinational companies continue to flock here despite the general consensus that Bangalore is becoming less hospitable with each passing day. Congestion, soaring livings costs, pockmarked roads and an unreliable power grid plague this city of 6.5 million inhabitants. And all are getting worse despite the public outcry.

The local government's unwillingness or inability to act is adding to the frustration. Still, Bangalore's attractions apparently continue to outnumber its problems.

"Bangalore is a complete brand by itself when it comes to outsourcing," said Gautam Sinha, CEO of TVA Infotech Pvt. Ltd., a search firm here. "Most decision makers in U.S. firms are likely to know of Bangalore only as a possible location in India for outsourcing and offshoring."

Compared to other Indian cities which compete with Bangalore for software development work, salaries here average 15 percent higher, Sinha said. "No matter how bad the infrastructure is here, salaries are the highest in India," he added. He estimated that 175,000 of India's 500,000 software engineers work here, giving overseas companies the chance to quickly ramp up operations.

Indian companies like Wipro Technologies and Infosys Technologies, which have been complaining about Bangalore's sagging infrastructure, nevertheless continue to seek more land for expansion. Still, some feel more comfortable elsewhere.

"It was a pleasant city in the past. Now the infrastructure, traffic and dusty conditions are problems," said Vic Kulkarni, president and CEO of EDA vendor Sequence Design Inc. The company has a development center near more livable New Delhi, where he said staff attrition rates are lower.

Intellectual property provider Hellosoft Inc. has a development center in Hyderabad, selecting that city over Bangalore because it felt it could retain staff longer, said Rama Rao Sreeramaneni, general manager of Hellosoft's Indian operations.

Similarly, Pune in west central India is also in the outsourcing race, but Bangalore executives said Hyderabad and Pune are viable alternatives only if the staff requirements are small.

Another 206 new software and back-office services firms have either started operations or registered to do so in Bangalore during 2004-05, of which more than 120 were overseas companies, according to statistics released by the regional government.

Authorities here said that despite lingering worries about its overloaded transport system, exports from the city grossed over $6 billion, about a third of India's total services exports. While there was a slowdown during the U.S. presidential elections, the number of firms coming into the city has once again gone up to 1,520.

"The campaign against Bangalore has fallen flat. The infrastructure of the city, though it is under stress, is being developed continuously," said Jawaid Akhtar, director of information technology for Karnataka.

Planned investments by companies that came into Bangalore during 2004-2005 is about $600 million, he said.

By default, then, Bangalore remains the outsourcing capital of the software world. Given the steady flow of overseas technology companies here, it won't relinguish that title anytime soon.