Bangalore, the silicon valley of India, has witnessed a spectacular transition in its economic growth and image from being known as the "Pensioners Paradise," to becoming the country's most attractive IT destination. Bangalore strengths include a large base of education and research institutions, telecom connectivity, quality of life, better state policy, availability of good office space, positive perception among investors and its wonderful weather! Bangalore still ranks Number One (amongst the metros) within the ITES space take-up (over 3 million square feet in the last six months alone!) The city has leveraged the prowess of its IT industry to emerge as the leading ITES-BPO destination in India.
IT Bangalore may not, however, continue to grow at its usual pace after the Devegowda-Narayan Murthy episode. The story, however, does not end with Bangalore. The ITES/BPO industry in India is experiencing its third wave of growth. In the first phase, the industry was dominated by captive centers of large multinationals such as GE, American Express and Swiss Air, who set up operations in India. In the second phase, the growth attracted numerous entrepreneurs (in many cases, employees of multinationals who quit their jobs to set up their own ITES ventures). The third phase is geographically dispersed with new locations emerging on the horizon.
The trend has been largely driven by four factors:
The need for Business Continuity planning, to preempt the exposure to a particular city, which has forced most companies to diversify to alternate locations.
Improvement in key infrastructure areas like power, telecom bandwidth and real estate in newer locations
The desire by state governments to attract investments, which has resulted in attractive policy environments and incentives being offered
The need for ITES companies to lower operating costs especially employee costs and attrition.
Emergence of tier II and Tier III Cities as alternative "Silicon Valleys" in India
Mumbai, Delhi, and Bangalore are deemed as tier I cities. Till few years back these three cities were the first choice for most of the overseas companies. But, as the prices soared here, and the human resources became scanty, these companies moved on towards the tier II cities. In this category we include Hyderabad, Pune, and Chennai. But even these are proving to be somewhat unsuitable for the entrepreneurs. Consequently, the inclination of Indian and overseas companies is now getting towards tier III cities. Among the tier III cities Chandigarh is being given a huge importance. Chandigarh has become IT companies' first choice among the tier III cities in the country. The foremost reason for this is the high availability of a talented workforce and premium quality of life in the city. Ahmedabad closely follows on the heels of Chandigarh.
There is a clear indication that the other states are seriously working towards grabbing a share in the booming India ITES sector. Bangalore's success has set a great example for the other states to follow. This has also initiated a healthy competition between the states and locations known as tier II and tier III cities such as, Kolkata, Chandigarh, Jaipur, Ahemdabad, and more recently, Kochi.
Since long, India's software and outsourcing services have been focussed athwart a few hubs, encumbering their intensification to pockets of incredible growth in a nation of 1.06 billion people. Detractors said this growth was not stirring the lives of people across the rest of the country. The spread of IT and ITES to less important towns will change that, as this revolution reaches out to the 300 million-strong middle class, one of the world's most prominent budding markets. This will generate thousands of new jobs, new education opportunities and probably make local governments more tech- savoir-faire. All this advance is a pointer to the next stage of India's information technology and IT enabled services bang.
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