BENGALURU, Dec 21 (Reuters Breakingviews) – Global firms are realising that white-collar jobs can be done from anywhere, so they’re doubling down on India, where labour costs are a fraction of what they are in the West. They will build a cheap and reliable workforce outside the traditional technology hubs of Bengaluru and Hyderabad. As a result, India will have many Silicon Valleys.
Fortune 500 companies from Walmart (WMT.N), opens new tab to Germany’s Bosch are just as likely to consider India when hiring artificial intelligence experts as they are for back-office roles. Increasingly, firms are leaning on employees in the country to execute more complex engineering and research tasks.
For instance, engineers at Boeing’s (BA.N), opens new tab hub in Bengaluru used machine learning to help upgrade wire designs on aircraft including the Chinook helicopter to cut down on design time. The company is investing $200 million in a new office near the city’s airport. Such global capability centres (GCCs) will employ about 4.5 million workers in India by 2030, more than double the current number, EY estimates.
However, centres like Bengaluru are plagued with infrastructure problems and are getting pricier to operate in. Currently, a third of all staff at India’s GCCs are based in just the one city, according to research from consulting firm Zinnov. These employees also tend not to stick around in their jobs for very long.
Record demand by global companies for cloud services during the pandemic coincided with high-paying venture capital-funded startups poaching workers. Attrition at India’s top three IT services firms including Tata Consultancy Services (TCS.NS), opens new tab soared to an average of over 22% in financial year 2022, for example. That makes places like Ahmedabad, Coimbatore, Mysuru and Jaipur more attractive as emerging hubs. Talent and real estate costs for companies can be about 30% and 50% cheaper, respectively, according to Deloitte.
While cities like Austin and Miami in the United States have struggled, opens new tab to replicate the success of Silicon Valley, India won’t face the same problem. Nearly 75%, opens new tab of the country’s top 100 engineering schools, like the alma maters of Microsoft (MSFT.O), opens new tab and Alphabet (GOOGL.O), opens new tab bosses Satya Nadella and Sundar Pichai, are in smaller towns anyway. Indian workers are young and willing to move, so companies can build offices in far-flung places and the talent will follow.
Firms are creating positions at a rapid pace – more than 200,000 roles in India for data scientists and AI experts remained unfilled as of August 2022. As global companies leverage technology to usher in the next wave of productivity, they could also find themselves spreading out across the South Asian nation.