BANGALORE: A TECH HUB THEN AND NOW
From India’s IT capital to a globally leading technology hub, India’s Silicon Valley has evolved from an outsourcing hub to a vibrant ecosystem for tech ventures.
Bangalore hosts the largest number of high-growth companies in India. It ranks fourth amongst Asian cities according to a Financial Times ranking of High Growth Companies in the Asia Pacific. Bangalore bagged $17bn worth of startup funding during 2019-21, far exceeding New Delhi's $2bn, despite the latter's flourishing startup scene. Karnataka has attracted the second largest share of FDI (Foreign Direct Investment) after Mumbai from October 2019 to December 2021.
Traditionally referred to as India's Silicon Valley and startup capital, Bangalore has several factors working in its favour to make it a tech hub.
Birth of a Tech Hub
While India was once a largely agricultural and manufacturing hub known for cheap labour and low-cost land, its independence in 1947 marked a turning point in the country’s economic trajectory. Bangalore was promoted as a modern industrial city and grew into a hub for public sector industries, particularly tech-intensive industries like aerospace, telecommunications, and space and defence – with substantial government investment. Giant Public Sector Units (PSUs) like Hindustan Aeronautics Limited (HAL), Bharat Electronics Ltd (BEL), the National Aerospace Laboratories, Bharat Heavy Electronics, and Indian Telephone Industries (ITI), rooted their headquarters in Bangalore.
In 1984, the new computer and software policies ushered in the liberalization of hardware and software imports and exports. This encouraged IT (Information Technology) companies like Wipro and Infosys to shift to Bangalore and hire Indian programmers. These IT companies laid the city's tech foundations. Infosys shifted its headquarters from Pune to Bangalore in the early 1980s, encouraging other IT companies to shift to Bangalore and creating thousands of jobs.Indian educational institutions were offering good courses in computer engineering, and the country was creating computer professionals on par with the rest of the world.
In 1985, Texas Instruments Inc. became the first MNC to set up a development centre in Bangalore, spearheading the city’s global foray. Following the '90s economic liberalization, India’s software exports rapidly grew. Drawn by an English-speaking, well-educated workforce available at substantially lower wages, companies bulk-hired millions of workers. The resulting concentration of technical and scientific manpower led to the biotechnology boom in the 1990s and the city's IT revolution in the early 2000s. Its climate, infrastructure and availability of human resources led many multinational corporations to follow suit and set up headquarters in the city. From being known as the Garden City, a pensioner’s paradise, Bangalore transformed into an IT hub. The IT and biotechnology companies set up Research and Development (R&D) centres, encouraged by the easily available R&D workforce.
From 2010 onwards, the city evolved from a back-office and outsourcing hub and moved up the value chain as global R&D moved there. The German business software company SAP, which established its centre in Bangalore in 1998, says there is a bit of Bangalore in every SAP product in the world. Multinationals like Microsoft, IBM (International Business Machines), Cisco, Oracle, and Intel have their centres here.
A Global Edge
The infrastructure and talent developed by the IT industry have now made Bangalore a hub for entrepreneurs and startups. In addition to global logistics giants like Amazon and Uber and IT companies like Accenture and Cognizant, Bangalore-based unicorns like Swiggy and Flipkart reflect its flourishing startup ecosystem.
Bangalore now accompanies cities like London in the global list of high-growth startup hubs. In 2015, it was listed among the 20 cities in the world having the best startup ecosystems. In 2021, Bangalore nabbed more venture capital funding than Shanghai for the first time.
A combination of factors has made the city a hub for tech businesses.
Education and R&D Institutions. Bangalore is home to numerous education and R&D institutions, which significantly support the tech ecosystem and the city's entrepreneurial and workforce talent. These institutes offer mentorship, expertise, and R&D facilities and sometimes adopt or purchase new products and services offered by tech startups. Institutes like the Indian Institute of Science (IISc), Indian Institute of Management- Bangalore (IIMB), Institute of Bioinformatics and Applied Biotechnology (IBAB) and National Centre for Biological Sciences (NCBS) offer Technology Business Incubators (TBIs), especially for their students.
Government Regulations. Government support is a major factor: Karnataka was the first to have an Information Technology Policy in 1997, heralding the IT boom. With the more recent startup focus, the state launched the 'Karnataka Startup Policy' to stimulate the growth of technology startups and make their registering smoother and quicker.
Capable Workforce. A product of the flourishing IT sector, institutional support, and abundant MNCs, Bangalore’s skilled and highly educated workforce supplies plenty of engineers, software professionals, and “techies” compared to other metropolitan cities like Mumbai. According to a report by Nasscomm and consulting firm Zinnov, Bangalore has a quarter of India's digital talent.
Startup Success Stories.VCs are increasingly getting attracted to inject funds into the city, encouraged by the success of its existing startups and unicorns like Ola and Flipkart. For instance,Ola, after shifting its base from Mumbai to Bangalore, scaled up to reach international markets like the UK and Australia and also received $3.8bn worth of funding from Indian and foreign investors. The success of these unicorns buoys investor and employer confidence and encourages companies to employ and train thousands. Furthermore, former employees or founders of larger companies invest in younger startups, such as Flipkart’s co-founder, bringing a wealth of experience. This has also attracted foreign investors like Japanese multinational conglomerate SoftBank, which has invested $100bn through its Vision Fund into Indian tech startups, focusing on Bangalore.
Conducive Environment.The pleasant weather is favourable to business. Bangalore is not vulnerable to natural disasters like floods (unlike Mumbai) or earthquakes. Further, the cost of living is reasonable, contributing to the city's talent pull.
Top Tech Domains of Bangalore
Bangalore is leading in several technology domains, ranging from aerospace, electronics, and biotechnology to emerging technology like artificial intelligence.
Information Technology. Bangalore accounts for about 40% of India's IT exports. Whether software and app development or cloud computing, the city is known as the IT hub for good reason. Major IT companies in Bangalore include Wipro, Infosys, IBM, Oracle, Cisco, Mindtree, Capgemini, HCL(Hindustan Computers Limited), Intel, Microland, Microsoft, Intuit, Amazon, and Adobe. Bangalore has several Special Economic Zones (SEZs) and software or IT parks. Most SEZs are built for IT and Information Technology Enabled Services (ITES) companies. The Ministry of Electronics and Information Technology set up the Software Technology Parks of India (STPI), which has been a backbone for Karnataka's software and hardware industry for the last three decades.Electronic City in Bangalore is one of India’s largest IT parks, focusing on software development, IT services, and electronics manufacturing. It boasts state-of-the-art infrastructure, research facilities, and incubation centres and hosts numerous tech companies and MNCs.
Aerospace.Bangalore's aerospace industry includes multinational giants, public sector stalwarts and innovative startups with established engineering offices and manufacturing facilities.Some of the top aerospace companies in the city include Boeing, HAL, Airbus, Collins Aerospace, Rolls Royce, and Asteria Aerospace. Additionally, the city is home to the Indian Space Research Organization (ISRO), which is pursuing multidisciplinary R&D programmes for its major verticals — space transportation, space infrastructure, space applications, ground systems, and human space exploration.
Biotechnology.Bangalore is home to two major biotechnology clusters – groups of institutions that work together to offer resources like expertise, R&D facilities, advice on products and marketing, and incubation. One is the Centre for Cellular and Molecular Platforms (C-Camp), which provides biologists mentorship and access to technology platforms for their research. Another cluster is located in Electronic City, near Biocon, a globally renowned biotech company. This sophisticated ecosystem in the city has nurtured several biotech and life sciences startups.
Electronics.Since public sector giants like ITI, Bharat Electronics Limited (BEL), and Hindustan Machine Tools (HMT) set up key manufacturing units in Bangalore decades ago, it has continued to be a nucleus for India’s electronics. For instance, BEL contributes a significant portion of the semiconductors and television tubes produced in India, and its Bangalore units account for about 60 per cent of the country’s telecommunications equipment produced.Bangalore attracts leading players in the chip industry because of its established record in the electronics domain. Texas Instruments set up a software export unit for computer-aided design and manufacture. Asea, a Swedish giant, has set up a unit manufacturing sophisticated electronic weighing machines and microprocessors. Major private manufacturers like Hewlett Packard (HP), the American computer titan, have set up a plant in Bangalore.Scientific research institutes like IISc, the Electronics and Radar Development Establishment, and the Aeronautical Development Establishment have also contributed to the sector’s growth in the city.
Artificial Intelligence (AI) and Analytics. Bangalore is among the top five cities globally for AI, ranked fifth, according to a Harvard Business Review (HBR) study. The study also found that the city has the second-largest AI talent pool in the world. Other cities topping the list were San Francisco, New York, and Boston. The city's rich IT ecosystem mushroomed into AI as the global multinationals that had established GCCs (global capability centres) began offering AI, analytics, and data science services. The strong AI leadership contributed to AI startups attracting major investment from global tech titans, with founders, investors, and angel investors funding some of them.According to a 2019 study tracking funding for AI and data analytics startups in India, the highest increase in year-on-year analytics revenues for an Indian city was in Bangalore, which witnessed an increase of 37%. U.S.-Bangalore AI startups, including Automation Anywhere and Noodle.AI, bagged significant funding.
Assessment
Bangalore's skilled workforce, supporting institutions, experienced senior professionals or founders, established IT companies and conducive environment combine to make a thriving ecosystem for tech companies. This, in turn, attracts further investment in the city's startups and supportive government measures,
fuelling
further innovation and successful ventures,
and
encouraging the cycle.
The city’s strong foundation in established technology sectors like IT, electronics, aerospace, and biotechnology has provided a ready platform for its foray into more recent technologies like AI and data analytics, making it a leading funding destination and breeding ground for these new technologies.
