Tech kingdom: Firms such as Infosys give Bangalore its global recognition

Living the American dream: Minus picket fences, in Garden City

BANGALORE 2

If no one told you so, you'd have trouble believing that Regent Park is in Bangalore, not San Jose. Two-storey town houses built with sloping roof and manicured lawns dot either side of wide, tree-lined streets. Kids are playing catch against a setting sun and neighbours, some of them just back from work, have stopped for a quick chat. Inside this high-security, gated complex, you hear none of the city's noisy traffic or inhale any of its noxious fumes. This is a piece of Americana recreated in the heart of Bangalore's tech nerve centre, Whitefield. "These communities offer security and a getaway from the madness that is Bangalore," quips Arjun Kalyanpur, a resident and radiologist, who returned from the us four years ago and set up a one-man teleradiology practice that today employs 90 people and has plans of moving into a nearby tech park.

Kalyanpur and Regent Park symbolise the information technology boom that over the last 10 years has transformed Bangalore from a sleepy, retiree-city into the epicentre of global offshoring. There are more than 2,000 companies registered with the Software Technology Park of India (STPI), and dozens more open shop every month. Over the last five months alone, 147 companies have opened in the city, including Target, Fidelity, RSA Securities and Financial Objects. The city pulls in Rs 37,600 crore in export earnings every year from it alone-that's 37 per cent of the industry exports. An estimated 2.1 lakh people work in the industry, making it the first port of call for any foreign company wanting to set up an India back office.

But truth be told, Bangalore never expected, much less prepared, to be India's Silicon Valley. Even as its IT industry (followed by biotechnology) continued to expand at a breakneck pace, the city's infrastructure stood still. More cars and motorbikes poured on to the roads, but the roads themselves remained as narrow as before; fancy new residential and commercial complexes got built, but the city's power generation capacity wasn't increased. With the result, Bangalore today is in a shambles. There's water shortage, power goes off routinely, roads are choked, and pollution levels are soaring. To make matters worse, real estate is almost as expensive as in the US. Add high employee turnover to it, and there's enough reason for some foreign tech companies to shutter their Bangalore back offices. Apple, Sykes, Pervasive Computing and BelAir are some of those. "We have invested heavily in India and Bangalore, but it is becoming increasingly difficult to do business here with the degenerating infrastructure," complains Martin Prinz, Jt. Managing Director, sap Labs, which employs more than 2,000 engineers at its campus in Whitefield.

Woe is Bangalore?

The city may face competition from other Indian cities, but other global cities, possibly not. All the reasons that made Bangalore attractive in the first place, still remain. For instance, there are 50 engineering colleges churning out nearly 20,000 engineers every year. If anything, there might be even more reason to offshore to Bangalore. "Of our 100-odd members, 70 per cent are present in Bangalore. Because of the clustering effect, Bangalore still has a distinct advantage," says Poornima Shenoy, President, Indian Semiconductors Association. Adds M.P. Shyam, a well-travelled banker whose family business spans retail to education: "Infrastructure has undoubtedly been a cause for concern, but not many people point out the positive side of the picture. Five years ago, you couldn't have caught a direct flight to Frankfurt. Today you can," he says.

Bumper-to-bumper: A Bangalorean's nightmare

One of the reasons Apple cited for closing its Bangalore development centre was the high cost of doing business in the city. But talk to ceos of companies that have operations in Bangalore and other cities of the world, and they'll tell you that India's Silicon Valley offers vastly more value for money. Take, for instance, Partha Sarkar, CEO, Hinduja TMT, a leading IT and ITEs player that has a third of its 6,000 employees working in Manila. He doesn't deny the fact that Bangalore has its issues, but at the same time he notes that it is still very cost competitive. "Our Manila and Mauritius operations are 15 per cent and 20 per cent more expensive, respectively, than Bangalore. We have offices there only to meet our customer requirements," says Sarkar. In other words, for any new company looking to enhance productivity and reduce costs, it is imperative to look at Bangalore.

Building boom: Demand for space has sent realty prices skyrocketing

Up and running: The flyover near the airport opened two years behind schedule, but hasn't eased traffic congestion

That's a view echoed by Chandran Shankaran, CEO, Zyme Solutions, a provider of high-end ITEs solutions. The company considered a number of cities within and outside India before deciding to headquarter in Bangalore. What tilted the balance in favour of Bangalore? The fact that it offered a deeper pool of management talent and better access to support services such as third parties who do certifications, audits, quality, and security. "All this talk of Bangalore losing its competitive edge is not true. Entry-level staff costs 10-15 per cent of what it does in the us, senior manager costs 50 per cent less," says Shankaran. Only real estate cost is, he notes, almost on par. But there is clearly a cost advantage if one gets to a reasonable scale-something that Apple, with just 30 people in the development centre, failed to do. "Reports of Bangalore's death may not only be premature, but wildly exaggerated," says K. Jairaj, Bangalore City Corporation Commissioner, who's just returned from a two-year stint with the World Bank in Washington, D.C.

Then, there's this whole thing about Brand Bangalore. "I don't have to explain about Bangalore when I pitch to clients. That is something hard for its global and local competitors to replicate," says Prakash Bhalerao, a serial entrepreneur, all of whose companies tend to have a Bangalore link, including the latest, Verismo Networks. Venkat Kedlaya of the Bangalore Chamber of Industry & Commerce (BCIC) and who also runs his own it company called Convergent Communications, says that the city offers the best work-life balance of all Indian cities. A relatively small city, Bangalore's cosmopolitan culture means it has a vibrant nightlife, which plays out in its 120 or so pubs every evening, and not just over the weekends.

Interview with H.D. Kumaaraswaamy, Chief Minister/Karnataka "We Are Implementing Projects With Deadlines"

Amidst a hectic assembly session, Karnataka Chief Minister H.D. Kumaaraswaamy took time off to meet with BT's Venkatesha Babu. Excerpts from the interview: Are you surprised that Bangalore is at #2 despite the negative publicity it has been receiving? Yes, surprised that Bangalore is not actually #1. Having said that, let me use the platform of Business Today to thank all investors, CEOs and professionals who have reposed confidence in the state and more so in Bangalore. It is true that there were some problems, especially on the infrastructure front. Bangalore had grown fast and due to that there were issues, which my government is trying to address. Infrastructure has definitely been a sore point. What's your government doing on that front? Whether it is the new international airport, Metro rail, roads, water, or power, we have ensured there is traction on the ground. The new international airport will be completed by April 2008. Work on the Rs 6,000-crore Metro has already started and will be ready by 2011. We have spent Rs 500 crore on improving efficiency of power distribution in Bangalore. Reliability factor of power supply is 99.01 per cent. I don't think any other major city can assure that. We have already spent Rs 40 crore to improve roads in Bangalore and we intend to spend an additional Rs 260 crore over the next three years. To improve traffic management and (road) discipline, we are putting up 200 cameras in various parts of the city, and that I believe will be a first for India. Rs 3,384 crore is being spent on the Cauvery fourth stage project to improve water supply. Five new satellite towns are being set up to decongest the city. These are not just promises, but projects with deadlines, and I am personally monitoring them. What about Mysore? We are preparing a master plan with a 30-year projection for this city. Under the urban renewal scheme, both Bangalore and Mysore will get Rs 1,000 crore. We intend to put this to good use.

That said, Bangalore has real infrastructure issues to deal with. Its city development plan, submitted under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), was returned for modifications, but Chief Minister H.D. Kumaaraswaamy is promising to step on the pedal even otherwise. He says his government plans to spend Rs 260 crore on roads over the next three years, get the new international airport up and running by 2008, and the Metro by 2011. "Our aim is to make Bangalore a model city on par with the best in the world," he told BT (see We Are Implementing...).

Way to go: Biotech companies such as Biocon represent the other successful industry in Bangalore

Even Bangalore's most vocal critics agree that things are slowly improving. "We have seen a few visible signs of improvement in Bangalore's infrastructure over the last few months and the present state government seems to be making a concerted effort to make things better," says N.R. Narayana Murthy, Chairman, Infosys Technologies. In the same breath, he points out that Bangalore has a long way to go before it can be compared to other global business hubs. "However, a combination of the city's climate, large talented workforce and its strong educational presence offer a compelling reason to set up shop in Bangalore," he says. Murthy should know. About 24 years ago, he moved a software start up from Pune to Bangalore, and look where it has got him.