IT is India's Silicon Valley: 1,700 information technology (IT) companies, with a turnover of Rs 3,800 crore, an employee strength of 130,000. All of which flowered on its own, in less than a decade, with the state government performing a dormant role, watching the growth more as a spectator rather than as a partner, except for an odd incentive or land grant for a software technology park.
And then Nara Chandrababu Naidu decided that he would make Hyderabad India's IT capital, overtaking Bangalore with a sudden brutal surge of speed. In two years, through a high-octane marketing thrust, he has managed to get the global IT industry to actively consider Andhra's capital city as an alternative to Bangalore. And when he got Bill Gates to agree to set up a software development centre for Microsoft in Hyderabad, alarm bells rang across the border in Karnataka. Add to that Pune and Chennai's hunger for IT investment, and a stern warning from Ratan Tata that Bangalore's days of glory could soon draw to an end, and the prospect of flight of capital from the state has jolted the state government out of its slumber. Bangalore is fighting back.
Says Sabeer Bhatia, founder of the enormously successful free Internet-based mail service, Hotmail, who grew up in Bangalore: "The biggest impediment is a licence for everything. In the US, we took one business licence for my company which soon had its presence in 230 countries and 23 million subscribers. I think Bangalore is slipping because of poor infrastructure and Naidu's aggressive marketing."
But Ram N. Agarwal, president, Manufacturers Association for Information Technology, feels that the smaller the role of government, the better IT growth. "This industry does not require incentives, but speed in decision making, flexibility of operations, flexible labour laws, and good working conditions for women. Karnataka's high on UGLI—Uncertainty in policy, Government role, Licence, Inspectors. The quality of the package is important, and it must be marketed effectively. You need to go to the people and not react only when people come to you. The government must remove the bottlenecks and work to compete with whosoever."
The Karnataka government has now unveiled an impressive package of initiatives to soothe the IT industry's frayed tempers, and attract new investments. Private companies will be permitted to set up software technology parks. Eight projects with investment totalling Rs 2,000 crore have already been approved. Around 280 acres have been acquired for the expansion of Bangalore's Electronic City; another 500 acres will be earmarked for a novel IT township, complete with residential complex for professionals. An exclusive software venture capital fund is being launched to help small and medium start-up companies.
The beginning of November will see a major conference, Bangalore IT.com, to showcase the city as the ideal IT hub, and an international seminar on Global Village, sponsored by UNIDO, with speakers like Kenichi Ohmae, president of Mckinsey Japan and Prof. Raj Reddy, dean, School of Computer Science, MIT. The Centre for Entrepreneurship in IT will train people keen on setting up IT enterprises. And to bring IT closer to people, touch-screen kiosks are planned for Bangalore phone booths, from where people can book flight tickets or pay water and electricity bills. Roadshows are coming up at San Jose in Silicon Valley, and Osaka, Japan.
Says Sanjoy Das Gupta, secretary, information technology: "We have most of the big names here. We want them to expand to new centres outside Bangalore. At the residential township we propose to set up next to the Electronic City, we plan to demonstrate model governance in an urban conglomerate. This township will have its own mayor and other functionaries, all chosen from among IT professionals." Of course, the Karnataka government is hamstrung by the lack of a proactive hardselling CM. While the computer-savvy Naidu has utilised every interaction with industrialists to make a pitch for Hyderabad, Karnataka chief minister J.H. Patel has revealed his ignorance of IT jargon in front of key software players. At a meeting with the IT task force set up by the PM, Patel asked his chief secretary B.K. Bhattacharya the difference between software and hardware. But at meetings with the media, Patel has bragged of how Bangalore has only to compete with Nice in France, Tokyo and Fukuoka in Japan, and Dallas for a place among the world's top five software development cities by 2010.
Besides the new initiatives, the government is using the tags of MNCs which have set up shop in Bangalore to draw new companies to the $208 million International Technology Park (ITP), a joint venture between the Tatas, a Singapore consortium, and the Karnataka Government.
Says Goh Kok Huat, CEO, ITP, Bangalore: "In the last six to nine months, we have almost completed the package. We are in the final touch-up stage as far as the office and production complex is concerned. We have begun work on the residential complex and the first 50 units will be ready by March. We have 21 companies, but the interesting thing is that out of this, more than half are MNCs, and about half of them could be considered as new investments in the last eight months in Bangalore." But an occupancy figure of 95 per cent or more will depend on how well the US economy is doing. Also, how quickly the Japanese as well as the South Asian economies would recover
The other factor that Huat and other key executives in the sector cite is infrastructure. Says Huat: "Over the next few years, if Bangalore can improve its infrastructure, that would give a strong boost to investments." So does Nandan M. Nilekani, deputy managing director, Infosys Technologies: "The road and power conditions leave much to be desired. English medium schooling is more difficult to obtain, and housing more expensive compared to other cities." Nilekani says higher velocity of business, lower corruption, better infrastructure like schools, roads, power, housing, elimination of pollution and other traffic hazards and better crime control ought to form the core of government initiatives.
For Srini Rajam, managing director, Texas Instruments (India), the first MNC to establish a product development centre in Bang-alore, frequent international flights from Bangalore are a must to foster growth. "The first challenge for us is to grow in terms of leadership. The initiatives of the government are good, but it has some way to go. Anything that can reduce the hardships of travel is welcome." Texas Instruments, which commenced operations with 17 engineers in 1986, today employs 300-odd professionals. Turnover has risen from Rs 3.97 crore in 1988-89 to Rs 45 crore in 1997-98.
The shrill calls of IT industry leaders have moved the government to initiate measures outside the purview of the industries department. Says N. Vishwanathan, principal secretary to the government, department of commerce and industry: "We are serious about retaining our pre-eminent position. We have reduced the interest rates on loans sanctioned for IT companies. And, we have set up a single-window agency which gives approvals for licences promptly. To reduce the time taken for getting approvals from various agencies, we have designated Karnataka Udyog Mitra as a nodal agency to secure clearances from organisations like the commercial tax department and the electricity board. This organisation will follow up on each proposal on the behalf of entrepreneurs."
The government will take steps to improve the infrastructure, too, says Vishwanathan. "Funds worth Rs 125 crore raised by Bangalore City Corporation through bonds will be used for upgradation and maintenance of all roads. The entire money will be spent in a period of one year."
With some augmentation by the government, the industry is confident of taking the export figure to Rs 3,500 crore in 1998-98 and Rs 5,000 crore by the turn of the century. More ambitious targets being Rs 10,000 to Rs 12,000 crore by 2002-2003, if the government implements all these initiatives without a snag. Should these figures turn to reality, the bar graph for IT companies would be a record of sorts for any Indian industry. And Bangalore would remain the First City of Software.
