Recently, Mahindra Group chairman Anand Mahindra claimed that Google’s decision to build its biggest office outside of the US in Hyderabad was a geopolitical move. 

While it’s good news for the Indian tech ecosystem, what is odd is that Google opted for Hyderabad over Bangalore, which is the undisputed IT capital of India — our own ‘Silicon Valley’. 

Mahindra’s perspective holds merit, but Google’s choice adds an interesting dimension to the narrative. Bangalore emerged as the country’s largest IT hub due to a confluence of factors, including the presence of top-tier educational institutions, the right infrastructure, favourable government policies and pleasant weather conditions.

In fact, the establishment of Electronic City in the 1970s marked the beginning of Bangalore’s journey as an IT destination. Today, Karnataka has a matured IT industry and is home to over 5,500 IT/ITES companies, most of which have a strong presence in Bangalore. 

However, Hyderabad, over the years, has emerged as a challenger to Bangalore’s IT status. The city’s IT industry has grown tremendously over the years. In the financial year 2022-23, Telangana recorded an impressive 31.44 percent growth in IT exports and an increase of 16.29 percent in job creation in the IT sector.

Interestingly, last year, Hyderabad contributed to a third of the 4,50,000 IT jobs created in the country, relatively higher than the 1.46 lakh jobs created by Bangalore, according to a Nasscom report.

Favourable business conditions and progressive policies 

Over the years, the government of Telangana, under the leadership of Chief Minister K Chandrashekar Rao, has implemented several proactive programmes and legislation to foster a business-friendly environment, acknowledging the significant potential of the IT sector.

Much of the credit of the monumental rise of Hyderabad as a challenger to Bangalore has to do with the radical policies introduced by Rao’s administration over the years.

The Telangana IT Policy, initiated in 2016, offers companies a wide array of incentives, such as tax reductions, along with infrastructure support and investment opportunities. The progressive policy is one of the reasons the state has successfully attracted numerous leading global tech companies.

“What has also helped the state in retaining big-ticket companies is the focus and clarity in the government as far as its industrial policy is concerned. Another factor is the continuity in policy in the past 20 years. Hyderabad and Telangana benefitted from policy continuity. Stability in the policy regime attracts investment,” Madan Pillutla, the dean of the Indian School of Business, told the Print. 

Similarly, talking about Kaynes SemiCon’s decision to invest INR2800 crore to set up a OSAT and compound semiconductor facility at Kongara Kalan near Hyderabad, CEO Raghu Panicker said, “It’s the ecosystem. The speed at which Telangana works, quick approvals, and clearances were impressive.” 

Favourite destination for GCCs 

In the first half of 2023, Hyderabad witnessed the establishment of 11 new Global Capacity Centres (GCC), per the report titled ‘India GCC Trends – Half Yearly Analysis H1CY2023. Companies such as BlackBerry, CyberArk, Storable, and Align Technology established GCCs in Hyderabad in the first half of 2023.

An equivalent number of GCCs were also set up in Bangalore, accompanied by five in Pune and four in Mumbai. Over the years, Hyderabad has become the preferred choice for numerous multinational corporations to establish their offices. The fact that Google has opted to construct its largest office outside the US in Hyderabad rather than Bangalore speaks volumes about Hyderabad’s growing clout. 

Notably, e-commerce giant Amazon’s largest campus in the world is also located in Hyderabad. “The second-largest campuses of Apple, Meta, Qualcomm, Micron, Novartis, Medtronic, Uber, Salesforce and many more have also been set up in Hyderabad in the last 9 years,” Rao posted on X.

Furthermore, while traditionally known as a net exporter of talent, Hyderabad is now experiencing a notable increase in the influx of talent. This shift could be attributed to the growing tech ecosystem in the state.

The choice of numerous MNCs to establish a presence in Hyderabad is likely influenced by the city’s rich talent pool. With premier educational institutions such as the International Institute of Information Technology, Hyderabad (IIITH), Indian Institute of Technology Hyderabad (IIT-H), and Birla Institute of Technology and Science (BITS), the city provides a skilled workforce.

Moreover, the state government has undertaken numerous skilling initiatives to ensure that the state fosters a skilled and employable workforce, driving economic growth and development.

Robust Infrastructure

MNC’s desire to set up camp in Hyderabad has to do with its robust infrastructure along with favourable business conditions. The city boasts an advanced metro system, well-designed roads and elevated connectivity and accessibility. These improvements contribute to Hyderabad’s appeal for businesses and residents, fostering commercial and residential real estate growth.

While speaking to the Indian American diaspora in San Jose on March 23 during a week-long tour of the US, Telangana IT and Industries Minister K T Rama Rao asserted that the quality of infrastructure in Hyderabad surpassed that of Bengaluru by twofolds.

“There is inertia in Bengaluru; come and invest in Hyderabad, which is a dynamic city. The cost of living is low too,” declared KTR.

“About 40 per cent of the people working in IT in Bengaluru are Telugu, and given an opportunity, they would come back to Hyderabad or Visakhapatnam or other cities in the two Telugu states.”

Moreover, according to a recent report, ​​Hyderabad has surpassed Bengaluru in the demand for office space, underscoring its prominence as a premier global business destination.

Earlier in 2020, Hyderabad was ranked as the world’s most dynamic city amongst 130 cities across the globe in the ‘City Momentum Index’ (CMI) published by JLL. Interestingly, Bangalore came 2nd, and other Indian cities in the Top 10 include Chennai at 5th and Delhi at 6th.

The Index highlights key factors contributing to the success of the world’s most dynamic cities, emphasising talent attraction and robust innovation economies. It also sheds light on the challenges these cities encounter while managing rapid growth and sustaining positive momentum in the long run.

Growing startup ecosystem

While Bangalore still holds the bragging rights and is home to the highest number of tech startups in the country, Hyderabad is also rapidly growing as a startup hub in India. The latest data shows that 5,062 startups have come up in the capital city of Karnataka since 2020. On the contrary, Hyderabad’s startup ecosystem now proudly boasts 4,369 tech startups. 

Of late, investors’ attention has also shifted from major cities, such as Bangalore, Mumbai, and New Delhi, to Hyderabad. T-Hub, India’s largest incubation centre, has significantly nurtured entrepreneurship and innovation in Hyderabad. Incorporated in 2015, it has provided support, mentorship, and networking opportunities to startups, connecting them with influential stakeholders in the ecosystem.

“At T-Hub, we have nurtured over 3,500 startups, 150 mentors and 350 corporate partners,” Mahankali Srinivas Rao, CEO of T-Hub, said.

“The number of employees and employers who are looking at Hyderabad is growing. I sincerely believe that this is just the beginning,” Rao said earlier this year, while addressing leaders of the Hyderabad Software Enterprises Association (HYSEA).

Hence, Hyderabad’s growing IT sector, superior infrastructure, rising startup ecosystem, and talent influx position it as a dynamic and competitive alternative to Bangalore, challenging the traditional IT hierarchy in India. While Bangalore will continue to be the IT hub of India, whether Hyderabad can dethrone Bangalore as the coveted ‘IT capital’ remains to be seen.