Wednesday, July 28, 2004

Indian IT Cos Look Beyond Bangalore

City’s poor infrastructure, increasing wage pressure raise concern
Indian IT Cos Look Beyond Bangalore
Financial Express

BANGALORE: With MNC IT companies still pouring into Bangalore, their Indian counterparts have started talking of moving out. Bangalore-based software companies including Wipro, iGate and MphasiS are looking towards cities like Chennai, Hyderabad and even Hubli, to expand operations.

Wipro chairman Azim Premji recently blamed the city’s infrastructure as well as the increasing wage pressure and for this trend. He said, “Bangalore has become high on attrition; wage pressure is more compared to other cities. The city’s infrastructure has not improved in the last five years and we are not sure about next five years either.”

Making it very clear that Wipro would look elsewhere for future expansion, he said “We will grow in other cities of India, where quality engineers are available, attrition rate is lower and the places are less polluted than Bangalore.”

However, industry sources point out that the bigger reason for companies to move to other destinations is competition - for talent - from the over 200 MNCs present in Bangalore who lure away people with higher salaries.

“Wage pressure in Bangalore is high, compared to other cities. It is easily 25 per cent higher and is growing,” said TG Ramesh, head - BPO operations, iGate. “As far as iGate is concerned, we are looking at expanding our operations in Chennai and Hyderabad,” he said.

Agreeing with him is Mphasis president, Anant R Koppar, who said, “Bangalore is attracting a lot of MNCs. It is difficult for Indian companies to match the salaries that the MNCs offer.”

Some MNCs have been recruiting in large numbers, offering 150 per cent jump in salaries at the junior and middle levels and up to 300 per cent hikes at senior levels.

To add to the woes of smaller Indian companies, the first quarter has seen 34 new foriegn equity companies setting up operations in Bangalore, according to STPI-Director, BV Naidu.

VCs too insist on a Bangalore office. “Most Silicon valley companies are funded by VCs. One pre-condition that the VCs insist is to have a development centre in Bangalore because of the availability of skills,” said Mr Naidu. “Over a decade, Bangalore has formed a cluster of skills. If a company is working on VLSI design, enterprise application, embedded systems, communications software, etc, you will find the skills easily in one place. This is not true with other cities,” he said.

While Indian IT service companies do their core operations from Bangalore, MNCs present in Bangalore are those which outsource development activity to get a cost advantage. “These companies pay more in order to attract the talent. Unlike Indian companies, they don’t give stock options,” said Anand Sudarshan, CEO, NetKraft. “Compared to cities like Chennai or Hyderabad attrition is easily 20 per cent higher in Bangalore,” he said.

For the time being, it looks as if Bangalore’s loss would be a gain for destinations like Chen-nai, Pune or Hyderabad.


At Thursday, July 29, 2004 at 5:58:00 AM GMT+5:30, Anonymous Anonymous said...

Neighbouring state TN has seized this opportunity and has cut stamp duty and registration charges by a whopping 50% for IT companies while Karnataka is doing raising taxes...

Siddharamiah/Dharam have to be ousted before much damage is done.


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