Envisioning the future in Bangalore

BALAJI PARTHASARATHY

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ADDRESSING the Bangalore Municipal Corporation in 1962, Jawaharlal Nehru remarked that ‘Bangalore… is a picture of India of the future, more specifically because of the science, technology and industries in the public sector here…’ Nehru’s words were fitting, not least because independent India’s first public sector enterprise (PSE), Indian Telephone Industries (ITI), was established in Bangalore in 1948.1 Half a century after Nehru uttered those words, the idea of Bangalore as representing the future has endured.

In recent years, the city has been described by terms such as ‘India’s Silicon Valley’ to suggest that it is leading the country into a world of information and communication technologies (ICTs) that lie at the heart of a third industrial revolution. However, while science and technology, especially ICTs, persists as the lietmotif in these visions, the handmaiden to the future is no longer the PSE occupying the ‘commanding heights of the economy’; instead, it is internationally mobile capital. This essay will trace the trajectory of this shift and its implications for the emergence of Bangalore as a node within the global informational economy.

Over the half-century, technological changes have accompanied the institutional shifts. When ITI was established in Krishnarajapuram, on the eastern edge of the city, the underlying technology for the communication equipment it manufactured was electromechanical. Since then, the technology has shifted toward digital electronics, as reliable, general purpose hardware became more powerful and affordable. However, it is the functional versatility that software gives programmable hardware which has led to the technological convergence of previously distinct information processing and communications devices, such as computers and telephone switches/exchanges, and the application of ICTs in domains ranging from agriculture to medicine. Consequently, it is software that imparts the revolutionary character to contemporary ICTs and it has become widely traded commodity since the 1970s.

Trade in software is also driven by the labour-intensive nature of its production. The inability of North America, Europe and Japan to find enough skilled labour at home to meet domestic demand has triggered the globalization of production, especially to countries with the appropriate skills at relatively low costs. India was among the countries that capitalized on these pressures. According to the National Association of Software and Service Companies (NASSCOM), the revenues of the Indian software industry grew from US$ 81 million in 1985-86 to US$ 44.1 billion in 2008-09. With more than three-fourths of those revenues coming from exports, India became the world’s largest exporter of ICT services. About a third of these exports came from Karnataka, mostly from the vicinity of Bangalore. In addition to the quantitative expansion, the industry has also undergone qualitative shifts: from being a provider of low wage, even if high skill services, to a source of innovation. By 2008-09, a fifth of the exports came from software products and engineering services.

 

Until the mid-1980s, however, the highlight of the Indian computing industry was forcing the wholly-owned local subsidiary of IBM, then the world’s largest computing firm, to cease operations after it refused to comply with foreign investment regulations. Another highlight was the failure of the Hyderabad-based PSE, Electronics Corporation of India, to develop a commercially viable computer despite a domestic monopoly. Similarly, India’s ramshackle telecommunication infrastructure was, thanks in part to the obsolete technologies and manufacturing capabilities in ITI, a monopoly producer of communication equipment.

In the 1980s, cautious efforts were made to liberalize the policy regime and move away from the Nehruvian model of a PSE driven import substitution-led industrialization (ISI) model. As part of this effort, the government took the initiative to improve communications technologies by establishing the Centre for Development of Telematics (C-DoT) in 1984. Based in Bangalore and in New Delhi, C-DoT was to develop state-of-the-art digital telephone exchanges suited for Indian conditions. C-DoT developed many small exchanges, such as the 128 Rural Automatic Exchange (RAX), as steps towards achieving its mandate of developing a 40,000 line Main Automatic Exchange.

 

In what marked the beginning of the end for ITI’s monopoly, C-DoT liberally licensed its technologies to entrepreneurs. Stifled by political and bureaucratic interference, which made it difficult to either import technology quickly enough, or to develop commercially viable options in-house, ITI also became a C-DoT licensee. C-DoT was not just a new source of technology: in another sign of change, ITI began to manufacture C-DoT’s products in 1986 in Electronics City (EC), to the south of Bangalore.2 C-DoT preferred a facility that was away from the main plant so that it could influence the way its products were manufactured.

New policies for the software industry were more explicit in rejecting ISI and the ideology of self-reliance.3 Reinforcing such conscious policies were certain serendipitous benefits conferred by the policies of earlier years. One such benefit was the availability of a high skill, relatively low cost, English speaking labour force that, in a slow growing economy, suffered from underemployment if not unemployment, thus offering a ready resource for the industry. Despite the conscious policy changes and the serendipitous benefits, until the 1990s, exports involved little more than ‘bodyshopping’ or the provision of inexpensive on-site (i.e. at customer locations overseas) labour on an hourly basis, for low value-added software services.

 

To encourage a shift to the provision of more value added services, the Government of India (GoI) established the Software Technology Parks (STPs). The first STP was established in 1990 in Bangalore, and there are now over 40 across the country. Serving as export zones, the STPs provide vital data communication infrastructure using which firms could offer offshore services, i.e. service provision from India, instead of having to work at customer sites overseas. Shortly after the establishment of the first STP came the economic policy shift in 1991 that included trade liberalization, openness to foreign investment and a new industrial policy to remove entry barriers to firms. The shift to offshore services in a more liberal economic environment in the 1990s marked the beginning of a new relationship between the Indian software industry and global markets.

Specifically, firms capitalized on the policy changes and the new infrastructure to pioneer a Global Offshore Delivery Model using offshore development centres (ODCs) in the 1990s. The ODCs replicated the infrastructure, technologies, and quality processes of the customer workplace, and brought professionals under one roof, instead of having them scattered at customer sites across the world. As a result, firms could handle a range of tasks, including the more value-added segments of software development. This, in turn, forced them to develop broader technical and managerial skills that made them more globally competitive.

 

The increasingly liberal economic climate also witnessed an influx of multinational corporations (MNCs), including the return of IBM, to establish their ODCs. Within India, ODCs began sprouting in regions with skilled labour and data communications facilities, both of which were available in Bangalore. In the 1980s, the early trickle MNCs to India and prominent domestic firms, such as Infosys, located in Bangalore. They were initially attracted by the concentration of skilled labour in the public sector in the region. This labour pool was subsequently replenished by the products of the engineering colleges of the states of Karnataka, and adjoining Andhra Pradesh, Maharashtra and Tamil Nadu, which collectively account for two-thirds of the nation’s engineering graduates. As establishing the first STP in Bangalore provided the infrastructure to reinforce the skill advantages the region already possessed, Bangalore became central to the expansion plans of domestic firms, and the first choice within India for the large number of MNCs wanting to establish ODCs in the country.

 

Thus, Bangalore became the dominant centre of production for the software industry, and invited comparisons with Silicon Valley. But the moniker concealed more than it revealed. On one hand, after a presence of nearly half a century in the ICT industry as a profitable entity in a protected economy, ITI suffered its first losses in 1994-95. Unable to compete with new entrants in an increasingly open market, the PSE shed 30% of its employees in Bangalore between 1988-89 and 1994-95 as they were ill-equipped for the demands of the new technologies for communication equipment. Indeed, the tragic irony of this decline was that 75% of the cost of digital exchanges, ITI’s main product line, was software – which was providing the basis for an emergent global industry in the neighbourhood.

The comparison with Silicon Valley was also not apt if it was meant to signify technological innovation as evident in Santa Clara county, notwithstanding the growth in the number of firms in Bangalore, and the organizational innovation in the form of ODCs. Significant innovation came only in the following decade when, despite the dotcom bust and the cyclical downturn in the global economy in 2001-2002, the Indian software industry continued to grow. This growth can be understood in terms of the efforts by firms worldwide to control costs by outsourcing, not just software but everything from high value added R&D services at one end of the skill spectrum to business processes such as voice based customer support centres (call centres) at the other.

Central to the growth of R&D services in India is the ability to design embedded systems.4 The Indian embedded systems industry is centred on Bangalore, and just one indicator of this phenomenon was the formation of the Bangalore based India Semiconductor Association (ISA) in October 2004 to meet the specific needs of the emerging sub-sector. The ISA is distinct from the New Delhi based NASSCOM, which caters to a more broadly defined software and services industry.

 

Although the data indicates that embedded systems design did not take off in India until the late-1990s, the origins of the industry can be traced to the pool of IC designers employed by Bangalore based PSEs.5 It was this pool of skills that Texas Instruments (TI) drew on when it became the first MNC to establish itself in Bangalore in 1984. The subsequent evolution of the ODC provides an insight into the emergence of embedded systems production in India. Despite the availability of skills, TI did not immediately plunge into design. Instead, the Bangalore centre started off doing maintenance and application work and it was not until the early 1990s that TI developed a design strategy in India. A design centre for digital signal processors (DSPs), TI’s main line of business, was established in 1995, and the first commercial DSP developed in India was launched in 1998. Since then the centre has developed many new DSPs and obtained numerous patents.

 

With the growing complexity of embedded systems and the rapid proliferation in their use, chip vendors such as TI do not develop their products in isolation. Thus, while TI retains DSP development, in 2004 it had more than 600 independent DSP partners globally from whom it either sought design services or intellectual property (IP). Forty nine of its partners were Indian, thirty one of which were Bangalore based. While TI’s partners in India include firms that offer contract design services, which is not unlike providing software services, there is another category of partners that was nonexistent in the 1990s. This category includes start-ups that generate IP in niche areas and derive revenue from license fees or recurring royalty payments.

Start-ups include such firms as Bangalore based Ittiam Systems, which was named the most preferred global supplier of DSP based IP by the international DSP Professionals Survey of 2004. The emergence of a firm like Ittiam is not merely because of new market opportunities. It is also the availability of the right kind of people which is encouraging entrepreneurs to take risks. Thus, the founders of Ittiam are former TI employees who ventured on their own. In many cases, the entrepreneurs are returning home not only because of shrinking opportunities elsewhere, but also because they see India as a place for innovation.

For instance, following the slump in demand for software in 2001, NASSCOM estimates that approximately 35,000 professionals returned to India, mostly from the US, after years of exposure to global technology markets. The lack of such experience previously inhibited homegrown start-ups and the interest of venture capitalists. If the trade press is to be believed, the pendulum has since swung to the point where venture capitalists insist on an ‘India plan’ from firms seeking funding.

 

As other Indian cities also made claims to be a part of an India plan, the Government of Karnataka (GoK) wanted to ensure that Bangalore did not become less attractive to foreign capital and a globally networked professional workforce. Karnataka was the first Indian state to have its own information technology policy, which it announced in 1997. A key outcome was the establishment of the International Institute of Information Technology in Bangalore (IIIT-B), in partnership with industry, to offer postgraduate programmes in information technology. Along with the century old Indian Institute of Science, IIIT-B has become a critical source for researchers and research inputs for the industry. The GoK also announced a Semiconductor Policy in 2010 which, besides fiscal incentives for the industry, also included a Rs 10 crore grant to IIIT-B to establish a research centre for the industry.

 

A more controversial measure was the formation, by former Chief Minister S.M. Krishna, of the Bangalore Agenda Task Force (BATF) in 1999 to provide advice on improving urban infrastructure and the quality of life to international standards through public private partnerships. The leadership and vision for this task force drew from the ICT industry, in an explicit acknowledgement of its contribution to the local economy. Although the BATF lost its influence after a change in government, its effort to open up easier access to land and infrastructure for the corporate sector suggested that what was good for global capital must be good for Bangalore.

In any case, internationalized spaces of production, and of consumption and social reproduction, such as shopping malls or international schools, stand out in Bangalore. In partnership with the design and real estate industry, these spaces mimic international architectural norms and forms by, for instance, using climate controlled concrete structures with glass facades to obliterate vernacular identity based on brick, granite and clay tiles.

These icons of global ties also stand out in the urban fabric, as production takes place in large, visibly guarded, inward-looking campuses with manicured landscapes. The campuses are often located inside state-established export enclaves, perhaps best exemplified by the International Technology Park Bangalore (ITPB) in the Export Promotion Industrial Park (EPIP).6 Similarly, private residential neighbourhoods are formed within gated communities to which access is controlled in a manner alien to the colonies of PSEs or the layouts of the Bangalore Development Authority.

The adoption of homogenizing spatial codes, that impose formal restrictions on behaviour, establishes social distance from a surrounding urban environment which, by contrast, tolerates a plurality of voices, emanating from various socio-economic groups, and practices that span a formal-informal continuum. The social distance, in turn, is emblematic of an ICT industry that depends on export markets for its valorization.

 

However, there are signs that the industry can no longer afford to be selective in its engagement with the local. There is growing policy awareness that, despite the growth of the software exports, the country has been slow to unleash the development potential of ICTs to raise productivity in various economic sectors and help emancipate the millions who are socially disenfranchised. To this end, the government has initiated policy measures to boost the domestic demand and supply of software.7 

These policy initiatives have resulted in many public projects, especially for government services. The interest of the private sector, especially MNCs facing saturated home markets, also converged on the opportunities that these policy initiatives attempted to create. Thus, firms such as GE, Hewlett Packard, Microsoft, Motorola and Siemens established research centres in Bangalore to develop innovative products for the hitherto ignored poor and the illiterate, or those at the ‘bottom of the pyramid’ (BoP). Interest in accessing the BoP goes beyond serving an untapped market. Indeed, a segment of innovation and product development introduced to meet the needs of the BoP market has helped some firms to identify new markets in the affluent world. The examples include an affordable x-ray system with outstanding diagnostic precision developed by GE, or low cost cell phones, with longer battery life, that assume illiterate users, developed by Motorola.

 

Over the last 60 years, the growth of Bangalore has been imagined by the ideology of a technocratic elite making projections into time, about a state-led march into the future, and space, in terms of conquering distant markets. However, issues of economic viability and social relevance have heightened the immediacy of the here and the now in a manner ignored thus far. The outcome of this shift will determine whether Bangalore will continue to grow as a dystopic collection of enclaves, or as a unified whole that is able to harness the revolutionary potential of ICTs to erase social boundaries and create a technological utopia that Nehru and other founders of the country dreamed of.

 

Footnotes:

1. By 2000, besides ITI (which was under the Department of Telecommunications), the public sector included Bharat Earth Movers Limited, Bharat Electronics Limited and Hindustan Aeronautics Limited under the Ministry of Defence, Bharat Heavy Electricals Limited and Hindustan Machine Tools under the Ministry of Heavy Industry and Public Enterprises. Nine of 49 Defence Research and Development Organization’s laboratories were in Bangalore. These included the Aeronautical Development Agency, Centre for Air Borne Systems, Centre for Artificial Intelligence and Robotics, Centre for Aeronautical Systems Studies and Analysis, Defence Avionics Research Establishment, Defence Bio-Engineering and Electro Medical Laboratory, Gas Turbine Research Establishment, Electronics and Radar Development Establishment, and the Microwave Tube R&D Centre. A location of the Centre for Development of Advanced Computing under the Department of Information Technology, and the Centre for Development of Telematics of the Department of Telecommunications is in the city. Bangalore is home to the Council of Scientific and Industrial Research’s National Aerospace Laboratories and the Centre for Mathematical Modelling and Computer Simulation. Finally, the Indian Space Research Organization, of the Department of Space, is also located in Bangalore.

2. EC was established in 1977 by the Karnataka State Electronics Development Corporation (KEONICS), a Government of Karnataka agency, to attract export-oriented firms in the electronics industry. It was developed on 136 hectares of land made available by another state agency, the Karnataka Industrial Area Development Board (KIADB). Phase II of EC, on 114 hectares, was developed in the late 1990s and, subsequently, a third phase was also developed on an additional 98 hectares. As home to Infosys and IIIT-B (see later), and as a location for campuses of firms such as Hewlett Packard, Siemens and Wipro, EC is now a prominent hub for the ICT industry in Bangalore.

3. Two key initiatives of the 1980s were the Computer Policy of November 1984, and the Computer Software Export, Development and Training Policy of December 1986. The 1984 policy recognized software as an ‘industry’, and made software exports a priority. The 1986 policy aimed at increasing India’s share of world software production. Industry was to be independent, with the government stepping in to provide only promotional and infrastructure support.

4. An embedded system is any computer that is a component in larger systems. In these systems, which can range from consumer goods to transport equipment to industrial process control systems, embedded systems not only take over what mechanical and dedicated electronic components used to do, but they increasingly connect to the Internet. It is the ability to digitally capture and simulate various mechanical or other functions that makes the globalization of research and development (R&D) in various domains technologically feasible. Thus, for instance, automobile firms such as General Motors and Mercedes-Benz have established R&D facilities in Bangalore. Embedded systems design is about adapting software abstractions to meet real-time constraints, power requirements and safety considerations in various domains while interacting with the physical world through sensors and actuators. Designing embedded systems often requires engineers who are classically trained in the domain of application rather than commodity programmers.

5. This was in part due to the timing of legislation enacted by the GoI to encourage work on embedded systems. In addition to training a pool of skilled labour at PSEs, the GoI passed the Semiconductor Integrated Circuits Layout-Design Act 2000, which provides for the registration and protection of the design and layouts of integrated circuits (ICs) for a 10-year period. While software patents are not permitted in India, the GoI issued an ordinance to modify the Patent Act ‘to provide for patents when software has technical applications in industry in combination with hardware,’ i.e. embedded systems, effective 1 January 2005.

6. In 1984, the GoK acquired 159 hectares of land for an export zone in Whitefield, east of Krishnarajapuram. When the GoI proposed EPIP in 1994, KIADB acquired another 114 hectares. ITPB offers an ‘international business lifestyle second to none’ in a 28 hectare campus that is a ‘self-contained city …set amidst a refreshing and aesthetically appealing lush landscape.’ ITPB is a partnership between Ascendas of Singapore, the Tatas, and the KIADB (which provided land as equity). The park is now home to 145 firms and 24,000 employees.

7. For instance, the National Task Force on IT and Software Development was established in 1998 to recommend ways of transforming India into an ‘IT superpower’. The Task Force recommended improving telecommunications infrastructure and expanding IT usage to ensure ‘IT for all by 2008’. The Broadband Policy was approved in 2004 to ensure broadband services for enhancing quality of life through applications such tele-education and tele-medicine. On the demand side, the National e-Governance Plan was approved on 18 May 2006 to deliver government services in an efficient and transparent manner, at affordable costs, through common service delivery outlets. In Karnataka too, the state IT policy called for the reduction of poverty and unemployment using technology. Specific initiatives included projects such as Bhoomi to digitize all the records of Rights, Tenancy and Crops of agricultural land in the state.

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