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Last Updated: Friday, 26 January 2007, 02:52 GMT
The rise of the Bangalore Tigers
By Steve Schifferes
Economics reporter, BBC News, Bangalore

WIPRO HQ
Wipro is a global IT services company taking on the world

When Srini Rajam told his friends in 2001 that he was quitting his job as the managing director of Texas Instruments India, they were very concerned.

Why would he want to give up a good salary and a comfortable pension?

But Srini Rajam was a man with a mission.

He wanted to prove that Indian companies could compete globally, not just in IT services, but in developing software for consumer electronics products.

It was not an auspicious time to start an IT company, in India or anywhere else.

GLOBALISATION SERIES
Garuda shopping mall, Bangalore
A series on India's world class IT outsourcing industry
Monday: Boomtown Bangalore
Next month: Detroit's decline

The dotcom bubble had just burst, and finding start-up venture capital, especially in India's cautious market, was tough.

He named his new firm "I Think Therefore I Am" (Ittiam), after a phrase by the famous French philosopher Descartes.

But in just a few years, Mr Rajam's company has succeeded beyond even his expectations.

"We were lucky to start at the bottom of the dotcom boom," he told BBC News.

"We had nowhere to go but up, and it was cheaper to recruit people."

Owning the technology

Now big consumer products companies like Sony and Toshiba are beating a path to his door, desperate to buy his superior digital signalling technology to give them an edge in such products as portable media players, camcorders, and video phones.

venture capital in India
Mr Rajam and his engineers now have 100 major customers worldwide, holds 31 patents, and employ 200 people in India, the US, Britain, and Taiwan.

And Ittiam get royalty payments of several dollars per unit every time their clients sell a product containing their software.

Mr Rajam's company didn't have the luxury of guessing wrong about what the next big thing in consumer products would be.

Indians are argumentative by nature - that makes them better at software development
Professor N.D. Siddharthan, Delhi University

His company can only afford to develop two or three products at a time, and each one has to be a winner.

But so far his bets have been spot-on.

And his next project?

Improved digital CCTV cameras which can scan thousands of hours of images by computer without human intervention to tackle crime and disorder.

According to Rishi Sahai, managing director of venture capital advisers Indusview, there has now been a sea change in attitudes to venture capital investment in India, with a flood of foreign investors looking for opportunities not just in software and IT, but also in real estate, retailing and telecommunications.

The entrepreneurial spirit

Mr Rajam is an example of the new spirit of entrepreneurialism that seems to have migrated from America's Silicon Valley to Bangalore in the last decade.

revenues of IT firms

And it is not just Ittiam that is challenging the global leaders at their own game.

Bangalore's IT industry has produced two Indian companies that are global leaders in outsourcing, Wipro and Infosys.

They first got a foothold in the global corporate market for IT services by helping global multinationals reprogram their computers to avoid the threat of the millennium bug.

They got another boost after 9/11, when many multinational businesses realised how critical their IT systems were, and moved to establish back-up systems in other locations around the world.

employment in IT firms

Their competitive advantage is based on their global delivery models, which promise their clients both lower cost and a guarantee of a higher level of service for the increasingly complex back-office IT functions.

Now household names like Virgin, BT and HSBC are running their IT networks from Bangalore, with mission-critical services like airline booking systems, telephone network routing, and banking transactions serviced by Indian IT companies.

The Western world loves liberalisation, provided it doesn't affect them
Azem Premji, chairman, Wipro
In the last four years, these Indian Tigers (also including TCS, headquartered in Bombay) have increased their share of the global outsourcing market from 0.5% to 7%, while the share of the Big Six Western consulting firms (Accenture, ACS, CSC, EDS, HP and IBM) fell from 71% to 46%, according to consultants TPI.

With their profits and revenues doubling every two years, they are attracting investors, and are now worth more on the stock market than any of their global rivals except IBM.

The huge number of people they hire each year - 25,000 each - and the high salaries they pay, have transformed the economy of Bangalore.

The poster child of globalisation

Infosys is the fastest growing of the three Bangalore tigers, and the one that has most clearly embraced the model of globalisation.

INFOSYS
Nandan Nilekani CEO Infosys
Chief executive: Nandan Nilekani
Headquarter: Bangalore
Employees: 69,000
Employees abroad: 16,000
Revenues: $2.1bn
market value: $32bn
Source: Company
employees as of 31.12.06; revenues as of 31.3.06
market value as of 22.1.07

It has no clients in India, and only does outsourcing work for global firms.

Infosys was the first Indian company to list on the Nasdaq hi-tech US stock market, when it floated some of its shares for $70m in 1999.

Now it is worth $32bn, and many of its executives who received share options are multi-millionaires - a fact that is admired not denigrated in Bangalore.

Touring its gleaming 80-acre campus in Bangalore, with its spectacular modernist architecture, basketball courts, and golf course, it is easy to imagine that you are in Palo Alto, California.

The chief executive of Infosys is active at international globalisation forums, such as the World Economic Forum currently taking place in Davos, Switzerland.

He told the BBC that in the long run everyone gains from globalisation.

From vegetable oil to hi-tech

Bangalore's other IT tiger, Wipro, has a rather different history.

WIPRO
Azim Premji, CEO Wipro
Chief executive: Azim Premji
Headquarter: Bangalore
Employees: 61,000
Employees abroad: 11,000
Revenues: $2.2bn
market value: $25bn
Source: Company
employees as of 31.12.06; revenues as of 31.3.06
market value as of 22.1.07

Wipro had its origins as a food company, selling vegetable oil - and its chief executive, Azim Premji, abandoned business school at Stanford in the US when his father died and he had to take over the family firm.

The company tried diversifying in many areas, including soap and computers, before settling on IT services as its main money-maker.

It has grown its business over the years by buying up other companies, and recently went on a buying spree in Europe and the US.

Like many other big Indian companies, it is still family-owned, and despite floating some shares on the stock market, it is still owned by Mr Premji, making him one of India's richest men.

The soft-spoken Mr Premji told the BBC that he recognised that there were genuine concerns in Europe about whether outsourcing would cost jobs.

"The Western world loves liberalisation, provided it doesn't affect them. That's the case all over the world. Liberalisation is a great word if it doesn't affect you."

The Jewel in the Crown

Tata Consultancy Services
TCS CEO  Ramadorai
Chief executive: S Ramadorai
part of Tata Group
Headquarter: Mumbai
Employees: 83,000
Employees abroad: 20,000
Revenues: $3bn
Market value: $25bn
Source: Company
employees as of 31.12.06; revenues as of 31.3.06
market value as of 22.1.07

TCS, the oldest IT software company and still the largest, is part of one of India's biggest industrial groups, Tata Holdings, which includes steel mills, car factories and shipbuilding, and is the only one not based in Bangalore.

TCS is strong in IT solutions for manufacturing industry and domestic businesses as well as outsourcing, and hopes to sell R&D - research and development - manufacturing services to Western companies.

Its profits have helped strengthen the Tata group's finances, enabling them to mount their current bid for UK-based Corus Steel.

Moving abroad

The Bangalore Tigers are also trying to diversify their client base, which still consists of predominately American multinationals, by making a push into Europe, where they believe their services will prove particularly attractive to financial services firms in the UK.

Wipro has already taken over managing many of the back office functions of Aviva insurance, which trades under the Norwich Union brand in the UK.

And TCS has moved its European insurance outsourcing operations to the UK by taking over Pearl Assurance's Peterborough IT centre and its 1000 staff.

TAKING OVER PEARL ASSURANCE
Diligenta
1bn Indian IT investment

As global companies, the Bangalore tigers are also setting up "near shoring" offices in Eastern Europe to be closer to their clients, especially when languages other than English are involved..

And they are also setting up offshore development centres in China, whom they all fear will be their greatest competitive threat in the future.

One of India's leading experts believes that, in software development at least, India will retain its global edge.

"Indians are argumentative by nature," Professor N.D. Siddharthan of Delhi University told the BBC.

"That makes them better at creative industries like software development."


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