Bangalore IT city no more?

Here’s a rude shock for India’s IT City. Bangalore is set to lose that prestigious tag. The chilling warning has come from the Associated Chambers of Commerce and Industry of India (Assocham), which has said that Bangalore will soon lose its IT tag to the likes of Gurgaon and Noida.

Assocham surveyed 800 CXOs of domestic and multinational companies. It has emerged that 30% of Bangalore-based CXOs were keen to shift base to Gurgaon. Noida emerged the second favourite, with 25% aiming to migrate to the region.

Chief minister BS Yeddyurappa has been quick to react, inviting IT honchos for a discussion in a bid to retain corporate investment in Bangalore. Industry biggies, however, are voicing a different opinion.

Infosys Technologies CEO S Gopalakrishnan said: “Based on data, Bangalore continues to be number one. The number of employees working in the industry, total output and exports from the city and the number of multinational companies present in the city, they all show that this is true.”

“Every city or region has some problem or other due to the fast growth of our urban centres. We must address them so that the quality of life of the citizen improves over time in all our urban centres,” he cautioned.

Over the past decade, Bangalore has seen an exponential growth in the number of IT, ITeS, and BPO services making the city their home. This growth rate has witnessed a gradual slowdown in recent times. Industrialists believe it is inevitable for every city to reach a saturation point. “Multinationals are looking at alternatives.

Therefore, Bangalore will definitely be challenged by centres like Gurgaon and Noida. For the moment though, I feel it will still retain the top spot,” said Sameer Dhanranjani, country head, Fidelity National Financial.

The city, however, faces a number of challenges, including infrastructure and rising labour costs.

There is a view that a talent crunch is forcing companies to look for options in North India. “We opened our Gurgaon branch eight months ago. One of the main reasons leading to this decision was the talent pool that has been exhausted in Bangalore, besides the salaries fresh recruits in the northern region are also lower,” said Tina Vinod, marketing lead, ThoughtWorks India. An entry-level software engineer can be hired at 10% lesser salary in Gurgaon.

When it comes to KPOs and BPOs, North India is the preferred destination as the salary levels there are much lower compared to Bangalore. For KPOs, the difference is in the range of 10%-20%, whereas BPO salaries are lower by 15%-25%. “As far as entry-level employees are concerned, it makes more sense to have a presence in places like Gurgaon and Noida. Having said that, Bangalore will remain the destination for research and development — the talent here is unmatched,” said Kamal Sharma, group chief information officer, Mindlance.

Likewise, setting up IT infrastructure in North India also comes in at substantially lower costs for firms, it’s close to 15%. Until recently, Karnataka led the pack, with a significant number of leading engineering colleges. But now, even Tier-II cities like Jaipur are bridging the gap. The region alone has close to 54 engineering institutes, as compared to 33 in Bangalore.

“Karnataka no longer has the advantage it had a few years back. In the last three to four years, cities like Jaipur and Gurgaon have caught up with Bangalore and are putting up a tough fight,” said Sharma.

Despite this, there is no denying the fact that Bangalore still rules the roost when it comes to the IT and the biotechnology sector. PK Unnikrishnan, registrar and administration officer, Institute of Bioinformatics and Applied Biotechnology, said: “Bangalore is known for the environment it provides to the IT and the BT sector.

In fact, it is way ahead of other cities as far as the biotechnology industry is concerned. There is the Vision Group on Biotechnology, which works closely with the government of Karnataka. I feel the negativity surrounding Bangalore is unjust.” The advantage Gurgaon has is its proximity to the capital, thus making its infrastructure slightly better.

The government, too, seems to echo Unnikrishnan’s views. Citing instances such as the growth of IT clusters in the US — Bay Area and Silicon Valley — MN Vidyashankar, principal secretary (e-governance department) and principal secretary (IT, BT and S&T), said: “These clusters have thrived because of the eco-system in these places. It is not the presence or absence of a particular input or facility. The differentiator is the presence of the entire eco-system, which gives the required ambiance and comfort to start-ups, which is available here. Bangalore is the Silicon Valley in the country.”