Bangalore – a rising offshore outsourcing star

After India gained its independence from the British Empire in 1947, Bangalore, already the centre for colonial rule in southern India, developed into a huge manufacturing hub, attracting trade and labour from across India and, eventually, the world.

The city, synonymous with the technical and IT industries, is often referred to as the "Silicon Valley of India", thanks to the establishment and success of many businesses in the city following the liberalisation of India's economy – and the city now accounts for 35 per cent of the country's software exports.

And this IT hub is one of the shining stars in the outsourcing market, attracting thousands of offshore projects to its walls every year. Per capita income in the city manages to compete with Europe and the US, with the numbers of the affluent middle-class increasing at around 27 per cent each year, according to India Daily.

And salaries are around 15 per cent higher in the city compared to other Indian cities, despite its allegedly poor infrastructure and city planning.

"Bangalore is a complete brand by itself when it comes to outsourcing," Gautam Sinha, chief executive of TVA Infotech, a search engine firm, told EETimes. "Most decision makers in US firms are likely to know of Bangalore only as a possible location in India for outsourcing and offshoring."

"No matter how bad the infrastructure is here, salaries are the highest in India," added Mr Sinha, who estimated that 175,000 of India's 500,000 software engineers worked in the city in 2005.

The city is a key target for businesses looking to offshore their outsourcing to India, especially those working in the IT industry, although there are other surrounding cities and nearby towns which are starting to benefit from the influx of workers to Bangalore.

And companies looking for alternative emerging outsourcing hotspots could look at Bucharest, Buenos Aires, or even Moscow, Prague or Sao Paulo.

But Bangalore is still holding the light and marching at the head of the line for outsourcing, with the support of India's IT outsourcing machine rolling it along, churning out $17.7 billion in software and IT services exports in 2005, easily thrashing the likes of China ($3.6 billion) or Russia ($1 billion).

And Bangalore has the advantage of sustaining cheap labour and high turnout rates, as well as being an established base. "You keep following the money, but how often are you going to move people around?" Linda Cohen, vice-president of sourcing research at consulting firm Gartner, told Business Week. And she means that companies looking to offshore their outsourcing would do best to pick one place. And even with wobbling infrastructure, Bangalore is still the top of the outsourcing pops.