“The Garden City”, Fashion Capital of India”, “The Pub City of India”, “The Fruit Market of South India”, “Floriculture Capital”, “Pensioners Paradise”, “Stone City”, “Silicon Valley of India,” “Cyber City”… Yes, you might have guessed about the city I am talking about. Its none other than Bangalore, India’s fifth largest city, a home to well over 6 million people, and a base for over 1,00,000 industries.
Following the liberalization era, which began in 1991, Karnataka has made significant contributions in making India one of the big emerging markets. With liberalization no longer a buzzword today, the international market and its competitiveness have given a new dimension to the economy and, today, more than at any other time, industries and particularly Information Technology is on the upswing. Mega investments started pouring into the State and Karnataka became the emerging economic capital of the century.
Out of the 10,000 industries that Bangalore boasts of, Information Technology industry is the one which has made the city the fastest growing one in Asia. Out of an annual average growth rate of 58% in IT, Bangalore alone contributes about 40%. In recent years, Karnataka has emerged as the Computer Capital and the centre for high-tech industries, especially in the area of the computer hardware, software, electronics, instrumentation and telecommunication.
The critical mass of IT companies in Bangalore strongly influences other IT firms in setting up their operations regularly. The engine behind the growth of the IT industry has been software exports. This industry has been software exports. This industry has been growing at an annual rate of 70% since 1988. There are no signs of abatement in that growth rate. There is an abundance of software programmers and skilled management personnel from all over the country concentrated in this city; and this would attract more international companies to form tie-ups. Bangalore, the capital city, has over 302 software units including 50 MNCs, which account for a software export of over Rs. 37000 million, amounting to 32 percent of national exports. In fact, World Bank Survey-vendors in the USA, have ranked India as the No 1 choice for sourcing of software. In the IT hardware sector 20 percent of national electronic production originates from the state.
The ability to meet the needs of all categories of manpower for business and industry has made Bangalore the preferred choice. It is able to attract high caliber technical and managerial talent, because Bangalore provides extremely attractive and pleasant living conditions. It is not as if the fate of Bangalore is left purely to the winds of destiny. The state government inducted a full-fledged secretariat for Information Technology in May last year. The secretarial mission is to implement the state’s IT policy which was formulated in early 1997. This happens to be the first IT policy by any state in the country. The IT secretariat will constantly be evolving schemes to clear all hypes and retain its place in the IVY league.
Moreover, the state government is committed to improve the infrastructure and constantly work to provide better facilities for companies who already have set up their base here and for those who are likely to invest here. For instance, the state in association with Software Technology Parks of India, has embarked an ambitious plan to throw infrastructure at any IT company that wants to enter Karnataka or expand its existing operations. Work is already afoot to add 13 new earth stations to speckle the state.
The impact on the globally competing firm irrespective of whether it is an International firm or an Indian firm remains to be seen. Undoubtedly, Karnataka is there to lead. Karnataka’s strengths in the Information Technology arena include presence of English speaking population, availability of Western educated management personnel, vast pool of engineering and scientific manpower and knowledge of workers outdated software technology. Time difference advantage with countries like the United States is a supporting factor.
The Karnataka Government has noticed the potential of software as a an engine of industrial growth employment and valuable foreign exchange earner and has come up with a number of incentives to encourage exports. Software Technology Parks (STP) have been set up in various cities including Bangalore. The STP’s providing physical infrastructure, a centralized computing facility along with multiple dedicated satellite links to companies operating within the premises of the STP. KITVEN fund is an example where government is encouraging homegrown entrepreneurs with venture capital assistance to create a niche for themselves. International Technology Park Limited is yet another initiative by the Government of Karnataka and the Government of Singapore that gives infrastructure meeting the global standards. Software export profits are not taxed thereby making it attractive to investors.
Bangalore is in a very comfortable position in the IT arena because it could offer a wide spectrum of software services ranging from data processing to designing of sophisticated software systems. Based on the software export growth in India, offshore programming ventures will continue to remain profitable for the next couple of years.
The strength in hardware is in design and integration of computers rather than manufacture of components. Since the import duty on hardware components is relatively high, most big firms have formed strategic alliances with international companies like Hewlett-Packard and Acer. Hence investing in PC manufacturing is not expected produce immediate profits. However, the LAN and the peripheral markets are growing by leaps and bounds and could be good investment areas for companies, who are looking at investing in overseas IT manufacturing. Computer chip manufacturing is totally absent. Bangalore has carved a niche for itself in IC design with 18 firms specializing in VLS. Some of the biggest PC and hardware vendors like Digital-Compaq, and HP have already set up manufacturing facilities and trading offices in Bangalore. While PC’s still dominate the hardware market, LAN server sales are growing at a fantastic rate. The major customers for LAN’s are the public sector units and the nationalized banks.
Now the government has become a major customer for the IT industry to encourage the growth of the domestic software and hardware industry. The customer base for hardware is split equally between the government and the private sector firms. The customer base transcends the type of industry. Embracing information technology is still slow in many government agencies, especially at the regional level. Though these agencies invest in computers, they do not use computers for anything else other than word processing. Many government agencies cannot hire computer professionals due to employment freezes.
However, the crucial advantage for Karnataka will be ability to leapfrog over many intermediate technologies and use the latest. The highs cost of hardware forces programmers to develop cost-effective and efficient programs that get the best out of the machines. Adaptability is an essential part of Indian culture, hence, there should not be any cultural factors that could inhibit the growth of information technology. Large platform usage is restricted to big firms in the public sector and the private sector.
The hardware market in India was estimated at $1 billion in 1994. Sales of PC’s were just 180,000 which is a mere 1% of the total sales in the world. However, this figure is expected to touch the 1 million mark by the end of this century. Approximately 600,000 PC’s are in use all over the country with nearly 20% of them connected in LANs. Most networking is in the Unix and Netware segments. The Unix segment serves primarily the CAD/CAM and database users.
The biggest beneficiary of the socialist polices followed by today’s government has been the country’s education system. Tuition fees in majority of premier engineering, medical and management institutions do not exceed $500 annually. The premier engineering institution, the Indian Institute of Technology (IIT), which is considered on par with institutions, like the Massachusetts Institute of Technology, charges less than $100 per year in tuition fees. This has led to quality education available to wide range of people irrespective of their financial background.
Computer education has been introduced from the stage of primary schooling and is made compulsory in certain standards. The computer science professionals can be divided into two categories-engineers and programmers. Engineers have to go through a four-years stint in the any of the states approximately 96 engineering colleges before they are certified. Entry to these colleges is very rigorous based on competitive exams. It is estimated that about 15,000 computer science and electronics majors graduate from these engineering colleges every year.
Software programmers are certified in the thousands of software training institutes that have sprung up all over the state. Most institutes require only a high school diploma for students to enroll. It is estimated that over 200,000 people take classes in these institutes to get certified in software languages and packages.
Of course, there is much happening in terms of development but one fact for sure is that there has to be a lot to be done by people and the government, in terms of contribution and commitment, if they have to see a tomorrow that can make them proud. With its judicious mix of academics, government, and industry, one can imagine the importance of this city towards the growth of IT industry in India.
Posted on: 08/17/02
Source: http://www.indiaprofile.com/businessandindustry/bangalore.htm
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