Bangalore’s meteoric rise to a globally integrated location of modern service industries

reflects the recent trends of economic globalization. This city’s emergence as one of the

hot new tech cities, however, should not obscure the fact that this development was

mainly due to massive foreign investments in IT sectors, leaving Bangalore highly

dependent on powerful global investor and vulnerable to crises in the global politico-

economic environment.

Case Questions With answer

1. Why has India been able to build a thriving software industry? What are the

country’s advantages in this market? What are the country’s disadvantages?

Answer: India has been able to build a thriving software industry. The labor cost in India

is cheaper than other countries. However the Indian government reduced trade barriers

opened the door to new foreign direct investments and modernized the country’s financial

sector. The government‘s economic reforms with the blossoming of the internet have

made the industry a powerful force. Software is rapidly becoming India’s primary export.

The economy of India’s is changed due to the highest contribution of the software

industry. In 2004 India has exported software and related services accounting for over

$17 billion. Software development has triggered growth in an allied industry, business

process outstanding (BPO). Software and BPO industries employ estimated 265000

workers. In 2008 India’s information technology and BPO industry employed 4 million

people, generate $57-$65 billion in export and account for 7% of India’s GDP.

The rapid growth has over whelmed the city’s infrastructure, causing water shortages,

disruptions in power supplies and nightmarish commutes. In 1951 it is a sleepy city of

800000; by 2001 its population had grown to 5.6 million. An estimated 7 million people

today call it home.

2. What is the likely impact on the Indian economy if its software industry continues to

grow?

Answer: India’s labor cost advantage has been eroding. However, salaries of Indian

programmers are rising as much as 15% a year because of heightened demand for their

talents. Software and BPO industries could suffer labor shortages of as much as 500000

workers as soon as 2010. If so, the boom may end and firms may shift software

development and BPO activities to other countries.

3. Given the predicted shortage of qualified workers, what an India do to ensure that

its software and BPO industries remain competitive?

Answer: According to McKinsey and Company’s study the software and BPO industries

could suffer labor shortages of as much as 500000 workers. In this situation the India’s

company begun to outsource low level software maintenance and development work to

china, where programmers are cheaper and other countries where English is widely

spoken.