Bangalores meteoric rise to a globally integrated location of modern service industries reflects the recent trends of economic globalization.

This citys emergence as one of the hot new tech cities, however, should not obscure the fact that this development was mainly due to massive foreign investments in IT sectors, leaving Bangalore highly dependent on powerful global investor and vulnerable to crises in the global politicoeconomic environment. Case Questions With answer 1. Why has India been able to build a thriving software industry? What are the countrys advantages in this market? What are the countrys disadvantages? Answer: India has been able to build a thriving software industry. The labor cost in India is cheaper than other countries. However the Indian government reduced trade barriers opened the door to new foreign direct investments and modernized the countrys financial sector. The governments economic reforms with the blossoming of the internet have made the industry a powerful force. Software is rapidly becoming Indias primary export. The economy of Indias is changed due to the highest contribution of the software industry. In 2004 India has exported software and related services accounting for over $17 billion. Software development has triggered growth in an allied industry, business process outstanding (BPO). Software and BPO industries employ estimated 265000 workers. In 2008 Indias information technology and BPO industry employed 4 million people, generate $57-$65 billion in export and account for 7% of Indias GDP. The rapid growth has over whelmed the citys infrastructure, causing water shortages, disruptions in power supplies and nightmarish commutes. In 1951 it is a sleepy city of 800000; by 2001 its population had grown to 5.6 million. An estimated 7 million people today call it home. 2. What is the likely impact on the Indian economy if its software industry continues to grow? Answer: Indias labor cost advantage has been eroding. However, salaries of Indian programmers are rising as much as 15% a year because of heightened demand for their

talents. Software and BPO industries could suffer labor shortages of as much as 500000 workers as soon as 2010. If so, the boom may end and firms may shift software development and BPO activities to other countries.

3. Given the predicted shortage of qualified workers, what an India do to ensure that its software and BPO industries remain competitive? Answer: According to McKinsey and Companys study the software and BPO industries could suffer labor shortages of as much as 500000 workers. In this situation the Indias company begun to outsource low level software maintenance and development work to china, where programmers are cheaper and other countries where English is widely spoken.