I looked at my watch...it was showing 10:30 a.m... the sweat on my forehead was witness to my tiring 5hr journey from Chennai. All of a sudden a cool breeze blew up my hair the minute, I landed out of Bangalore station, it was soothing.. I said to myself "This is it ... the Silicon valley of India"...had read a lot about it, but now was the time to experience it...I straightaway headed to the bus stop since I had plans to catch up with my friends,. The bus stop was like any other bus stop one would find in an Indian City...all crowded, no queues. As my journey continued I passed by various buildings one or two malls, road covered with trees on either side, offices of Accenture, Oracle passed by…Though it was good, I said to my self ..”Big deal...Is that all it takes to become a centerpiece of an International bestseller by Thomas Friedman…"The world is flat"...somehow the city was not convincing enough. A hint of nostalgia for colonial days co-exists with Victorian architecture buildings; even the police wear white cowboy hats. A statue of Queen Victoria stands in one of the main parks; streets are named after British commissioners.. As i was walking down Ulsoor road into the by lanes of the city; things started getting interesting..I could find offices of small technology companies sprouting all over the area promising cutting technology services all along the road.. While walking on the road u could here people debating the advantage of using .Net over Java.. Geeky huh..!!! At the same time the dust all along the road gave a sense of desperation with which the city is trying to struggle & win over the problems of sprawling population, crumbling infrastructure, etc..With all this; as the evening came along, I thought of indulging in Bangalore's second favorite activity after software porting and patching: pubbing. Indeed, one of Bangalore's charms is the nightly cruise among the umpteen bars around M.G. Road .You can easily make out that, almost every night in establishments like Pub One, Knockout, NASA, etc. the young guns of India's software industry gather, drink beer, groove to Music, and, naturally, talk computers. You could see the young vibrant crowd all set to experiment right from their bikes to their hair styles. You could see the cosmopolitan culture of Bangalore at its Zenith.All this was like a glimpse of what INDIA is going through, where a perfectly explosive combination of struggle (to overcome its crumbling infrastructure) & aspirations ( of the youth, that they can take over the best minds of the western world) co exists..It was Simply Awesome.!!
Here was a nation of staggering ethnic and religious diversity that somehow holds together by dint of tolerance and a sense of shared destiny.
So, how did it all happen...??? What changed..??
Well, It is said ...“Delhi is Keynesian while Bombay is Schumpeterian.” One city gets its importance from being the heart of government, while the other thrives on entrepreneurial energy.
Almost 60 years ago in a ground breaking article, Nobel prize winner Ronald Coase answered a question "So the question was: why are some things done better in the market and some within a firm?". He said, "Firms exist because there are costs involved in market transactions. When these costs are too high, it makes sense to coordinate certain activities within the boundaries of a firm. Whether a transaction would be organized within a firm or whether it would be carried out on the market depended on a comparison of the costs of organizing such a transaction within a firm with the costs of a market transaction that would accomplish the same result,”
In a very crude sense, a company employs workers on a long-term basis because the costs involved in finding skilled workers every morning would be too high. If by some wave of the magic wand, it would be possible for a company to locate just the sort of talent it needs for the day, then we would all be freelancers. “So what does all this have to do with Bangalore and its success as a global outsourcing hub?” you might ask. Bangalore’s astonishing boom over the past 15 years can best be explained by using Coase’s insights into the nature of the firm. Bangalore had most of the ingredients on its later success in previous decades—including a skilled workforce that could be employed at a fraction of the wages paid for similar work in Europe and the US.
Coase’s insights on transaction costs help us understand why Bangalore eventually became an outsourcing boomtown. As firms in the rich countries grew in size and became large and tangled conglomerates, the cost of carrying out certain activities within these firms went up. It made economic sense for them to focus on their “core” activities.
Coase’s insights on transaction costs help us understand why Bangalore eventually became an outsourcing boomtown. As firms in the rich countries grew in size and became large and tangled conglomerates, the cost of carrying out certain activities within these firms went up. It made economic sense for them to focus on their “core” activities.
It is now 60 years since Coase wrote about the nature of the firm, a paper that led to the rise of an entire discipline known as transaction cost economics. The young techies who gather in Bangalore’s buzzing pubs should perhaps raise a glass of cold beer to salute the man whose work so neatly explains why their city is such a success today....CHEERS..!!!!
