Silicon Valley of India

Dear Readers,

As a location for IT outsourcing, Bangalore, India, is still the place to be. "It's far from past its prime," says Eugene Kublanov, a vice president at neoIT Inc., an offshore outsourcing consultancy in San Ramon, Calif. Bangalore still has the best concentration of IT talent in India, beautiful high-tech business parks and good weather, he says.
But the boom in offshore outsourcing is also putting strains on the infrastructure in Bangalore, which faces stiff competition from other cities in India for outsourcing business. The No. 1 complaint about Bangalore is that drivers face hours-long traffic jams on chaotic, inadequate roads. That's followed by complaints about the airport, which badly needs to be upgraded or replaced.
"The infrastructure [in Bangalore] requires a significant amount of investment, or the city won't be able to sustain its growth," Kublanov says.
A neoIT study of the best cities in India for outsourcing ranks Bangalore second, trailing the city of Gurgaon. Pune, Hyderabad and Chennai are nipping at Bangalore's heels, according to the study.
Perhaps the biggest challenge for outsourcing firms in Bangalore is the hyperinflation of IT salaries, which were up 15% in 2004..
For outsourcing firms, "it's becoming very expensive to do business in Bangalore, by India's standards," he says. "Their fees aren't going up 15%, so their margins have to give," which is why Bangalore giants such as Wipro Ltd. and Infosys Technologies Ltd. are starting to set up additional operations elsewhere.