Indian City Rides Tech Euphoria

High tech is king. Traffic is impossible. Real estate is soaring. The future seems a little closer than it does anywhere else.

If you ignore the occasional wandering cow, this low-slung city feels a lot like Silicon Valley in the late 1990s, when everyone was getting rich by inventing dot-coms and no one saw any reason they wouldn’t be able to do so forever.

Bangalore’s ascent is fueled by outsourcing. When a software programmer in San Jose or Seattle loses his job, this is often where it ends up. If you’ve gotten a call about switching your long-distance plan or a query about why you haven’t paid your credit card bill, there’s a good chance that call came from Bangalore.

Like all booms, this one feels frantic and oddly fragile. The outsourcing industry is growing 30% a year, but a U.S. backlash could put on the brakes. In mid-May, Indian voters rose up in revolt against politicians who favored high tech, throwing almost all of them out in favor of pro- rural legislators. The stock market tumbled 16% in two days.

But no one appears very worried that Bangalore will replay Silicon Valley’s crash as well as its ascent. American corporations will always want to cut costs, the thinking goes, which means they’ll send increasing amounts of business here.

Anyway, the Indians have their minds on other things, like the size of their paychecks.

“I’d be willing to work for half this rate in Bhopal, where my family is, but there aren’t any jobs there,” says software engineer Rohit Johri. “This place is a gold mine. It’s good for India too. Unemployed people get into trouble. They go into politics or crime.”

Employed people, meanwhile, go into stores with fistfuls of rupees.

“Shopping in India used to be an ordeal,” says the 28-year-old Johri. “Something as simple as a wristwatch would take three months. A scooter would take a year, a telephone two years. Those were luxuries.”

Scooters, including Johri’s Kinetic Honda, now clog the streets. There’s a mobile phone shop on every block, often next to swank stores devoted to upscale lifestyles. One big emporium is called simply that, Lifestyle.

The boom in Bangalore is influencing more than fashions; it’s reshaping India’s political geography. The message of the May elections was that the hundreds of millions of Indians who were not involved in the outsourcing industry felt they were being neglected. They didn’t want to end the party, they wanted to join it.

Bangalore displays little of the overt poverty of New Delhi or Bombay, but it’s full of clashes between the old India and the new. Tommy Hilfiger shirts in the new Forum mall sell for $50. That’s more than a month’s income for many rural Indians but affordable to a programmer making $11,000 a year or even a call center employee who makes $4,000 but can spend freely because he lives with his parents.

A billboard touting Sun Microsystems Inc.’s ability to “take you places you’ve never been before” looms over peasants who, until recently, didn’t appear to be going anywhere. Now, thanks to the needs of Sun and hundreds of other technology companies, their lives are getting a bit better too.

All these growing tech companies need new office space, much of which is still built by laborers in the traditional labor-intensive manner. The employees need places to live -- every second billboard is for a new apartment complex. (“Go on,” one ad urges. “Choose your dream home.”) There’s a big demand for security guards to patrol these properties, and for drivers to transport people between them.

One of the most basic jobs here is driving a three-wheeled minicab. A driver named Srinivasan says he rents his vehicle for 150 rupees a day, about $3. With fares of 10 or 20 rupees, he makes $100 a month.

“Everyone’s earning so much money here, except me,” Srinivasan says. “But even I’m earning a little.”

S. Gopalakrishnan, chief operating officer of the second-largest Indian tech firm, Infosys Technologies, says there is a “trickle-down effect. It’s pulling people up.”

A decade ago, there were an estimated 100 million members of the Indian middle class. “Now there are 300 million, and they’re buying things like crazy,” Gopalakrishnan says.

National figures bear him out. New-car registrations rose 75% in 2003. Cellphone sales jumped to 25 million last year from 2 million in 2001. Sales of TV sets have quadrupled since 1996.

But like many boom towns, Bangalore’s very success is choking it. The city is growing faster than the government can improve the infrastructure. The population is up 40% over the last decade to 6.5 million. It’s now the fifth-biggest city in India.

Gridlock is perpetual. About 1.5 million vehicles are on streets designed to handle a tenth that number. Sidewalks are in poor repair, with regular gaps that cause the unwary to stumble or plunge. Power outages are so frequent that the local paper publishes a daily list of which neighborhoods are due to be hit.

All this is quite a rude shift for a city that used to be so sleepy it was known as the Pensioner’s Paradise. Afternoons were spent at the racetrack, one of the finest in India, and strolling the lovely gardens. The biggest industry was administering the local bureaucracy. “Government Work is God’s Work” was carved in stone on the imposing Raj-era state legislature building.

A more accurate version now would be “The U.S.’ Work is Bangalore’s Work.” Infosys took 18 years to achieve $100 million in revenue but, powered by surging U.S. demand, only five more years to hit $1 billion. When that achievement was recorded this spring, the company celebrated by giving all 25,000 employees raises of at least 10%.

“People say, ‘I’m dreaming about the day I’m going to buy my first Beemer,’ ” says Joseph Alenchery, a senior associate at Infosys, using the slang for BMW cars. “Ten years ago, they wouldn’t have known what a Beemer was, much less conceived of affording one.”

Infosys develops software for such clients as Trader Joe’s, Gap Inc., Cisco Systems Inc. and Gateway Inc. from a rambling complex on the outskirts of town that has the flavor of a college campus, something both more relaxed and grander than mere industry. Thirty-six buildings -- the newest a multimedia center in the shape of a pyramid -- sprawl over a property so large that the programmers use bicycles to get around.

There’s a resort-quality swimming pool, library, recreation center, gym, golf course and a store where those working late can stock up on necessities. The grounds are lavishly green, in sharp contrast to the parched land on the other side of the fence. Out there is traditional India: shabby buildings, people cooking on open fires, crowds of people standing around, doing nothing.

Every local entrepreneur wants to develop the next Infosys, or at least start something that it might acquire. “So many guys get a little shack, put five computers in it and say, ‘Hey, we’re an outsourcing company,’ ” says Nitesh Kripalani, a veteran of several firms.

Some start-ups will go bust, but others will get bought. Transworks, the outsourcing arm of the Aditya Birla conglomerate, wants to double in size by next spring. It’s just announced it’s on the prowl, willing to pay up to $15 million for a call center that has 100 to 500 employees.

Experienced employees recognize their value and trade up. India has 40 million unemployed, but the Bangalore papers are fat with help-wanted ads that are tinged with desperation.

“Talk and walk laughing all the way to the bank,” promises Vigent Info Solutions, a staffing agency looking for 400 workers immediately. ICICI OneSource, which calls its call-center workers “customer jockeys,” is selling itself as “the one place that takes your dreams and turns them into reality. And lets you have fun along the way.”

Mphasis, a call-center firm that has tripled in size in the last two years, is offering a bounty of about two weeks’ salary to anyone who brings in a new employee. Bhaskar Menon, the company’s president, laments that demand for employees is so high that other firms regularly try to poach his staff. “Anyone with a pay slip can get 100% more money overnight,” he says.

Mphasis, like other call-center firms, won’t reveal the names of its clients. That secrecy lends the industry a slightly dubious quality and underlines how all this growth is dependent on political winds on the other side of the world.

Last winter it seemed that stagnant job growth in the U.S. might suddenly kill Bangalore’s good times. As public and political outrage against outsourcing mounted, measures to curtail it were introduced in state legislatures and in Congress. When employment finally began to rise in the spring, largely defusing the controversy, no one -- aside from the Bush administration -- was happier than the executives here.

Critics of outsourcing argue that it’s a one-way street. When U.S. companies lay off workers in favor of Indians, they say, it’s not only unpatriotic but bad for the U.S. economy. An unemployed worker can’t afford to buy much.

Bangalore, however, is full of evidence that outsourcing directly benefits the U.S. The city’s well-paid workers are taking their wages and giving them right back to U.S. as well as European companies.

The traditional shopping strip is along Mahatma Gandhi Road. The stores are single-story affairs, slightly dusty, a place where you know what you want when you come in, buy it and leave.

Bangalore Central, a six-floor mall that opened in May, is only a block away but a couple of centuries distant. People don’t just shop here, a sign proclaims, “they get shop-ertained.” There’s a spot to park kids, an in-house deejay who spins music for sale and a sleek cafe to refresh the weary.

This is India’s first “seamless” mall, which means there are no walls between stores, making it more akin to a department store. Many of the 300 brands are imports: Lacoste, Reebok, Levi’s, Wrangler, Jockey, Polo and Dolce & Gabbana.

The style is imported hip. John Miller touts one of its shirts as having a “he-closes-the-deal look.” Another clothing company, Theme, offers a $125 suit in its “offshore” line. Traditional Indian dress is relegated to a small “Ethnic Wear” section.

Eight more malls are in development in Bangalore. Longtime residents, though they might decry the lousy traffic and the pollution it spawns, see the benefits of all this new consumerism.

“For bathing, we used to have to heat water on a wood stove,” says M.G. Raghuram, who runs a small machine-component shop. “The maintenance of the house and even cooking has become easier. There are so many electric gadgets.”

But the price of a home to park those gadgets has been surging. Last December, Raghuram bought a pleasant three-bedroom house about half an hour from the city center. He paid 4 million rupees, about $87,000, which seemed like quite a bit when he remembered that his parents bought a big house in the late 1950s for $350.

Real estate agents are already telling him he could sell his new house for 6 million rupees. “It’s crazy,” he says. “Real estate in Bangalore is like the stock market.”

As for the actual stock market, that’s also behaving in unprecedented ways. “Quite a few people speculate,” says Raghuram. “The awareness that one could become rich overnight was never there before.”

That desire for instant wealth killed Silicon Valley’s boom. In India, high tech is threatened most directly by its perceived arrogance. The recent elections neatly demonstrated that threat in a way no one anticipated.

The Bharatiya Janata Party, which had ruled for the last four years, was expected to coast to another victory on the strength of a vibrant economy. “India Shining” was the campaign rallying cry, and it seemed no less than the truth. Not only Bangalore but Hyderabad, Pune, Bombay, Chennai and even Kolkata have turned themselves into high-tech centers.

The slogan backfired. The voters didn’t see technology as the savior of India but as a spoiled child who demands all the attention.

“It’s a bit of a danger to raise expectations. They rise faster than reality,” concedes Kiran Karnik, president of the National Assn. of Software and Service Companies.

“The truth is, Karnik says, “we’ve not done much for this country. We’ve been looking outside, not inside.” Software engineers have focused on products that can serve the U.S. customer better, not help the beleaguered Indian farmer.

But Karnik also defends the software industry as “a convenient scapegoat for the neglect of the poor.” The entire industry, he notes, is only 800,000 people in a country of 1 billion.

The failure of “India Shining” doesn’t mean the country’s fortunes haven’t been improving, or that the poor weren’t benefiting. It just means that more people want more.

Consider the negotiations that Uma Mukherjee, a recent retiree to Bangalore, has been having with her gardener. He used to earn 3,000 rupees a month -- about $65. Then he announced he was quitting unless he got 4,000.

“A few years ago,” Mukherjee says, “the gardeners were only getting a thousand rupees a month.”

They’re not the only ones asking for a raise. “A big house is very difficult to maintain now,” Mukherjee says. “You can’t get anyone to clean or help you maintain it. Instead, they want to open a shop, or work in a restaurant or on a construction site.”

The pace of that new construction, and the customers for those shops and restaurants, will depend on the continued success of outsourcing. India will have to do it better and cheaper than anyone else, which is by no means assured.

The Philippines is touting itself as a place more attuned to American ways than India, and therefore a better place to find call-center employees who will be talking to Americans all day. And the specter of China is always looming.

At the moment, however, the boom seems close to eternal. Employment in the Indian tech industry is expected to grow 150% in the next five years.

One of those new jobs is destined for the younger brother of Johri, the software engineer. Rajat has been working 14-hour days in Bhopal doing marketing for a local telecom firm. At a Bangalore call center, his hours will be shorter.

“It’s a good job, a good working environment,” Rajat, 27, says by cellphone from Bhopal.

Even working the night shift -- required at most call centers, because India’s night is the U.S.’ day -- has its advantages. He’ll be able to avoid the worst of the traffic.

But mostly, Rajat says, it comes down to this: “I’ll make good money.”