Jean Heuschen, the managing director of GE's John F. Welch Technology Centre in Bangalore, never tires of talking about his baby. The plush three-storey building is just four months old, but it already houses 600 scientists and engineers.

Frenetic construction is going on at the adjacent sites. "Over here is phase II," Heuschen gestures. "This is phase III, and over there is phase IV. That's where the prime minister landed last week. And we have bought the rest of the land from here to that boundary wall, for future expansion."

The MNC's initial idea was to set up a small plastics research centre in Bangalore but that kept expanding. Now, the plan is to invest $100 million by 2002 in a multi-disciplinary centre which will have 2,500 scientists and engineers (including 500 Ph.Ds). The GE centre is special because of the diversity of the research it handles. In terms of size though, it will soon be overtaken by development centres being set up by other MNCs and some Indian companies.

The Technoscape

Bangalore has moved beyond software services. Now firms working on cutting-edge technologies dot the city.

You have heard Bangalore being called India's IT city - but over the past couple of years, it is steadily moving into a different orbit altogether. Three to four years from now, it will be home to several development centres, each housing 3,000-5,000 people working on latest technologies, for markets worldwide.

It will also give birth to a steady stream of hi-tech start-ups involved in product development - rather than exporting software labour - something that was conspicuously absent in the city till recently. And, finally, it's entering a new era where technology and science institutes, development centres, and start-ups partner together to form a potent technology cluster. Says Balaji Parthasarathy, assistant professor at the Indian Institute of Information Technology: "Bangalore is only now showing some characteristics which made Silicon Valley."

Bangalore has often been compared with technology clusters like Silicon Valley, Boston Route 128, Cambridge and Hsinchin.

So far though, these places were in a different league. Companies in these clusters worked on cutting-edge technology products. Bangalore firms grew up on a diet of bodyshopping and services, with some solutions and consulting thrown in for dessert. Even now, the average Bangalore firm feeds heavily on services but, somewhere around 1998, things began to change and Bangalore moved up the evolutionary scale.

Bangalore averaged $300 million a year in terms of technology investments. Last year, it got close to $1 billion. In 1999, the government cleared big projects worth Rs 3,500 crore. In 2000, that figure went up to Rs 13,000 crore.

And now for the icing on the cake. Every MNC and Indian company worth its salt has chalked up massive development plans for its centres in Bangalore. Between 30-40 companies will, over the next few years, cumulatively invest over Rs 10,000 crore on mega-development centres which will together add 20,000-30,000 jobs - hi-tech work, not just services jobs.

Check out the real estate statistics to get an idea of the activity taking place. In all of 1999, 400,000 sq ft of land was leased to companies. In 2000, 400,000 sq ft was leased every quarter. Apart from development centres, huge technology parks are being set up. Reliance is investing Rs 1,600 crore to build a technology park. It has bought 75 acres already. And the second stage of the International Technology Park Ltd (ITPL) is coming up with an investment of Rs 160 crore and is expected to be ready by 2002.
  
Interesting as the big projects are, the start-up activity is even more exciting. Venture capital firm Walden International estimates that 35% of the over $1-billion cumulative risk capital which came into India in the last three years went to Bangalore. Mumbai received less - about 30%. And Walden's assessment is that Bangalore will receive 50% of the risk capital in the next few years. Industry observers expect VCs to invest about $10 billion in the country over the next three years. So, Bangalore could be looking at $5 billion.
  
The qualitative change is as striking as the scale of investments. Firms in the garden city, even those operating on global scales, rarely worked on contemporary technologies. Even when they did, they worked generally on small components of the full product. These days, it's common to find companies working on contemporary technologies - Bluetooth, 3G, MPEG, DSL and so on - and handling full product development. "It was unimaginable even two years ago," says Mohan Kumar, vice-president, Global Software Group (Asia-Pacific), Motorola, who till recently was heading its development centre in the city.

Smaller companies, who have avoided the play-safe approach of larger firms, are responsible for some of these changes. The start-ups in Bangalore now take greater risks and try to develop technology. Some even begin with an intellectual property (IP) roadmap, something unheard of a couple of years ago. "A few start-ups are even willing to live or die by their IP," says Vijay Angadi, managing director, ICF ventures.

Bangalore still has some way to travel before it can match the global technology clusters in terms of scale of operations. Silicon Valley, for example, has 4,000 technology firms with a combined turnover of $200 billion, compared to Bangalore's 900-odd companies and a few billion dollars. However, it's clear that the city is finally graduating to the next level. Let's look at how it is getting there.

Big Players Create Critical Mass

Uday Shukla, country manager (exports), IBM, has an unusual background for a software firm executive. He has a Ph.D from the Indian Institute of Science (IISc), where he worked on algorithms for missile avionics, and has put in long stints at Hindustan Aeronautics Ltd and the Centre for Development of Telematics (C-DOT). Now, he heads a team of 2,800 engineers working on VLSI design, e-business and telecom solutions. Shukla spends most of his time thinking about how to get more people. In three years, his team will expand to 10,000 people, all of them developing technology for Big Blue and its customers across the world. He has just set up a software lab where IBM is investing $100 million (Rs 450 crore) over the next three years. ...Continued