Beyond Bengaluru Becomes Karnataka’s Only Scalable Tech Strategy
By C P Balasubramanyam ·
Karnataka’s effort to decentralise its tech economy isn't a new idea, but what's different now is the sense of urgency around it.
As global capability centres (GCCs) scale aggressively, AI workloads drive infrastructure demand, and cost pressures mount in Bengaluru, the state’s ‘Beyond Bengaluru’ strategy is beginning to look less like policy ambition and more like economic necessity.
At the centre of this shift is the Karnataka Digital Economy Mission (KDEM), which is operationalising a cluster-led model to redistribute growth across emerging regions rather than replicating Bengaluru’s ecosystem elsewhere.
The idea is not duplication, but differentiation.
“We are not trying to recreate Bengaluru in other cities. Each cluster is being built around its own strengths,” says BV Naidu, Chairman, KDEM. “What makes this work is execution with industry and government working as one team.”
From Spillover to Strategy
For years, growth beyond Bengaluru was largely incidental, driven by cost arbitrage or talent spillover. KDEM’s approach formalises that shift into a structured, multi-cluster network aligned to sectoral strengths.
The mission has identified Mysuru, Mangaluru, Hubballi–Dharwad–Belagavi, and Kalaburagi as key clusters, with Shivamogga and Tumakuru in the pipeline.
Each cluster is being developed across five pillars—IT services and GCCs, startups, electronics system design and manufacturing (ESDM), talent, and regional expansion, ensuring they evolve into full-stack ecosystems rather than satellite centres.
This localisation is becoming critical as companies rethink operating models in the AI era, where distributed teams, specialised talent, and infrastructure resilience matter more than centralised scale.
GCC Expansion is the Trigger
The biggest tailwind for this strategy is the rapid expansion of GCCs in India.
Mangaluru, for instance, is positioning itself as a plug-and-play destination for these centres. “GCCs that started as nano centres have scaled significantly, including headcount,” says Vaishakh Pai K, Cluster Representative, KDEM. “There is also potential for this region to evolve into a data centre hub, especially with the state’s focus on sustainable infrastructure.”
This aligns with a broader shift where GCCs are no longer just cost centres but innovation hubs, driving demand for talent, real estate, and digital infrastructure beyond tier-1 cities.
Mysuru is emerging as an extension for IT services and GCC expansion, aided by its talent base and proximity to Bengaluru. Meanwhile, the Hubballi–Dharwad–Belagavi belt is seeing traction as a startup and engineering corridor.
Kalaburagi presents a different case. Traditionally associated with agriculture and cement, it is now being repositioned as a talent-led emerging tech hub.
“With its cost advantage and untapped talent pool, Kalaburagi reflects how legacy regions can transition into innovation ecosystems,” says Sujay Mudgal, Cluster Head at KDEM, Kalaburagi.
Economics Driving Decentralisation
The economics are hard to ignore.
KDEM estimates a 20–35% cost advantage for companies operating in these clusters compared to Bengaluru. At a time when companies are optimising for efficiency amid global uncertainty, this differential is becoming a decisive factor.
This has led to what KDEM describes as a “spoke-shore” model—where Bengaluru remains the anchor, but surrounding clusters function as independent growth centres.
Unlike traditional hub-and-spoke systems, these are being built to sustain themselves—with local talent pipelines, startup ecosystems, and industry participation.
The redistribution of activity is already visible.
More than 30% of Karnataka’s startup ecosystem now originates from its emerging clusters, according to KDEM’s 2024–25 report. Over the past three years, 167 companies have set up operations across these regions, alongside 127 startups, 40 expansions, and nearly 11,000 jobs.
The contribution of these clusters currently stands at around $8 billion (~₹66,000 crore) and is projected to grow to $23–24 billion over the next four to five years.
Karnataka’s overall digital economy, estimated at $159 billion (~₹13.2 lakh crore), is targeted to reach $329–400 billion by 2031–32.
“We choose to aim higher than what we seem comfortable with,” says Sanjeev Gupta, CEO, KDEM. “These are targets that force execution.”
Beyond Bengaluru
The fundamental question is whether this change is genuinely about decentralisation or simply a reaction to Bengaluru’s constraints.
Rising congestion, infrastructure strain, talent saturation, and escalating costs are forcing companies to look beyond the city. At the same time, AI-led demand for compute, data centres, and specialised talent is geographically more flexible.
In that sense, ‘Beyond Bengaluru’ is less about moving away from the city and more about extending its economic logic across the state.
The strategy also carries a political and social dimension, reducing migration pressure, enabling local job creation, and broadening access to the digital economy.
For KDEM, the goal is clear: transform Karnataka from a single-city tech powerhouse into a distributed innovation network.
“We are building growth across every district and every region,” says Naidu. “The idea is to make the digital economy truly inclusive.”
Whether this evolves into a fundamental change or remains a well-executed extension of Bengaluru depends solely on KDEM's ongoing focus on implementation.