Beyond Bangalore: India's Next Outsourcing Hot Spots

A leading Indian economist cautions that outsourcing-fueled inflation in tech hubs like Bangalore could cause social disruptions in the country. It's also not good news for companies looking to boost profits through offshoring. So here's a look at what some lesser-known Indian cities have to offer.

Bangalore … Mumbai … Hyderabad … Chennai … Pune. These are among the cities one thinks of first when considering an offshore location in India. But rapid expansion by indigenous and Western tech-services companies in these locations is driving up local tech wages at a rate of about 15% per year.

Because of the compounding effect, at that rate it won't be long before labor costs approach U.S. levels.

So outsourcers and companies looking to build captive offshore operations need to start thinking beyond Bangalore and the other big Indian tech hubs if they want to enjoy significant savings. With that in mind, the outsourcing experts at Dallas-based Alsbridge have compiled a list of India's top five up-and-coming cities for business.

Alsbridge ranks Ahmedabad as India's most attractive upstart. It's home to Gujarat University, and the local government is supporting widespread infrastructure improvements. Hewlett-Packard and Oracle are among the Western companies that have already discovered the place.

Next on the list is Nagpur, which boasts numerous colleges and universities, including Visvesvaraya National Institute of Technology. Its large and relatively cheap labor pool has already caught the attention of Satyam and Oracle.

Ranking third is Kochi. Mahatma Ghandi University is nearby, and it's building a so-called "Smart City" in cooperation with the government of Dubai. Wipro, ACS, and HP are present.

Coming in fourth is Visakhapatnam, which has Andhra University and numerous other higher-learning institutions. An exclusive IT zone is under construction, and Satyam and TCS have set up shop.

Finally, Mangalore ranks fifth as an alternative outsourcing location, according to Alsbridge. The consultancy likes its proximity to Mangalore University and the fact that three office parks are in development. Infosys, Wipro, and Mphasis all have offices in the city.

The message: There is outsourcing beyond Bangalore.