Bangalore outsourcers tries to decongest with new townships

Indian outsourcers are looking at smaller towns where they can set up their facilities to access new staff pools, as well as cut costs

The Karnataka state government is trying to slow growth in Bangalore by encouraging new investors to set up their facilities in new townships.

The concept of satellite towns is not new to Bangalore. While companies moved to these satellite towns because of the relatively cheap real estate, they did not provide housing there. As a result, employees had to commute from their homes in Bangalore to townships like Electronic City.

Karnataka will now insist that companies establishing facilities in the new townships should also provide housing for their employees, said M.N. Vidyashankar, secretary for information technology in the state government. The township at Bidadi will be self-contained with schools, malls, and a direct link to an international airport under construction, he added.

Besides the new townships, the government is also trying to reduce migration from the hinterland into Bangalore by trying to route new investments in IT, call centers, and business process outsourcing (BPO) facilities to other towns in Karnataka like Belgaum, Hubli, Bellary, and Mysore. The government has acquired land in some of these towns to be developed in partnership with the private sector.

To get access to new staff pools, as well as to cut costs, Indian outsourcers are looking at smaller towns where they can set up their new facilities, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International Inc. (TPI) in Houston. Some outsourcing companies like Infosys already have operations in towns around Bangalore, like Mysore and Mangalore.

Some of these small towns are centers for education, and hence good places to hire staff, Pai said. The only drawback so far has been poor connectivity by road and air, which the government should try to solve, he added

With a population of over 6.5 million, the Indian city of Bangalore is reeling from too much growth at too fast a pace. The city houses the services delivery centers of top Indian outsourcers like Infosys Technologies and Wipro, and multinational companies like IBM, Dell, and Oracle.

The traffic jams, high cost of housing, and shortage of staff in the city has not, however, slowed down new entrants to the city. In August, the state of Karnataka, of which Bangalore is the capital, cleared 52 new investments in the area of IT, said Vidyashankar.

IT, call center, and BPO facilities in Bangalore employ 480,000 direct staff, apart from providing indirect employment to over 3 million other people, according to Vidyashankar. These sectors contribute to 36 percent of the state's GDP (gross domestic product), which is expected to increase to 50 percent of GDP by 2011, he added.