We always knew Silicon Valley was kind of obsessed with Bangalore. But, may not have known the extent. Now, thanks to a new study by Zinnov, a research and consulting company based in Sunnyvale, Calif., and Bangalore, India, we can finally drop some concrete numbers while talking about it. According to the Zinnov, 33 of the top 50 publicly listed companies in the Silicon Valley have their offshore operations in India.
The study classifies the top 50 companies, taken from the Top 150 list maintained by SiliconValley.com, into three broad categories: Software companies, hardware companies and conventional companies, and finds out the extent of offshoring in each of these categories.
The results are anything but surprising. The software companies, 15 in number, are the most prolific outsourcers to India. As many of fourteen of these companies have operations in India. Interestingly, all of them have captive operations, though operations sizes vary from 30 to 9000 people. Of course, Bangalore is the top choice with 10 out of 15 having their captive centers in what is often called the Silicon Valley of the East.
That of course, does not mean that they do not outsource to third parties. In fact as many of nine of them do outsource to other vendors, despite having their captive center. What is revealing is that most of them use multiple service providers. Captive, outsourcing and multisourcing —, they have tried everything.
Some major companies that have offshore development centers include Oracle (Bangalore, Hyderabad), Google (Hyderabad, Bangalore), Intuit (Bangalore), VeriSign (Bangalore), and BEA Systems (Bangalore). Some of them also work with vendors. For example, Verisign, which opened a facility in India in 2005, has also been working with India-based vendors TCS and Infosys. Intuit, which also opened its facility last year, works with Cognizant Technology, another offshore vendor.
The hardware companies including HP, Cisco, Sun Microsystems, and the semiconductor companies like Intel, Applied Material and AMD, are a little behind. As many of 17 of the 27 companies have their offshore operations in India. A similarity with their software brethren — all of them have a captive (15 of them in Bangalore) in addition to employing multiple service providers.
Many of these companies not just develop technology in India but use offshoring in multiple business processes. For instance, HP – the number one Valley company, today has more people in Bangalore than it has in Palo Alto, Calif., its headquarters. The company does not only develop software in India, but also uses third-party vendors for providing customer support; and has large captive operations for supporting its enterprise finance and accounting functions as well as for executing some HR processes. Intel has multiple design centers in India. Cisco, apart from its captive operations, also works with Indian IT vendor, Wipro, which has a dedicated offshore development center (ODC) for the networking equipment vendor. Apple Computer, whose decision to close its newly opened captive center in India has been more than spoken about by the media, has an ongoing relationship with an Indian BPO company, Transworks, for providing technical support for its products, including the celebrated iPod.
However, among conventional companies, only two of the seven in the list of Top 50 have been offshoring operations to India.
Apart from broad numbers, the study throws some interesting insights. The fact that absolutely all the tech companies that are offshoring to India have captive operations means India is part of a strategic plan and not just experimentation. Majority of them have outsourcing relationships (in addition to the captive centers) with multiple vendors.
As far as Indian locations are concerned, the study reveals that the claim of other Indian cities notwithstanding, Bangalore remains the clear leader. While some companies such as Oracle and Google and non-valley company, Microsoft, do have a bigger employee base in Hyderabad, none of them have skipped Bangalore altogether.
