The Indian software Industry
The Indian software industry dates back to the late 1960s. Software was an integral part of computer package. IBM launched the first software unit that was separate from the computer package. In the 1970s, software revenues as well as software development jobs increased in domestic as well as in international markets. In the mid-1980s, Indian software service firms successfully internationalized and Indian software services became visible in the global market. Multinational companies including Citicorp Overseas Software Limited, Texas Instrument and Hewlett-Packard established software development centers in India during this period. Indian software companies at this time were providing on-site work, popularly known as ‘body shopping’. The main market for these companies was the USA in which they established a reputation. In the early 1990s, Indian software companies started moving towards off-shore activities. This move toward off-shore activities can be attributed to the quality of work of Indian companies, quality work force and improved telecommunication infrastructure. From the mid 1990s, the domestic market also started to develop. Mumbai, Bangalore and Delhi emerged as clusters of software development in India. More recently, the export of software services has grown steadily and the industry achieved growth of 26% in 2002-031a. According to Nasscom, Indian companies have increased global IT spend. Contributing to this are
ICTv multinationals, which have increased their share of exports, and Indian companies, which have started moving into high value segments of the software industry. There has also been an increase in exports of the Indian software companies. Though India may not perform well in other sectors, it has performed well in the software services. Particularly, indigenous software firms from Mumbai and Bangalore have become internationally successful. In the next section, we discuss the software industries in Bangalore and Mumbai.

Bangalore
Bangalore, the capital of Karnataka, is home to national as well as international software companies. Bangalore has world-class information technology infrastructure, a skilled work-force, pleasant climatic conditions, a cosmopolitan environment and high quality research and educational institutions. Bangalore has a strong base in telecommunication and other high technology services. There are more than 100 multinational companies in Bangalore. The software technology park (STP) was formed by the Karnataka government in the year 1990 to boost software export. The growth of STP units in Bangalore is given below in Figure 1.
Bangalore has the highest number of engineering colleges in the world and over 103 R&D institutions. It has almost 50% of the world’s SEI CMM level 5 companies. The first satellite gateway was set-up in Bangalore in 1993 due to pressure from IBM. STPI, Bangalore had hosted India’s first video-conference, first communication network, etc. The Karnataka government has successfully marketed Bangalore as an IT hub. The government of Karnataka has been proactive in formulating its development policy. It is observed that software exports from Bangalore have increased from US$0.92 billion in 1999-00 to US$ 2.06 billion in 2002-031 in Figure 3.
Figure 4 shows the growth of software exports from Bangalore in comparison with other cities in India during the year 2000-01.

Mumbai
Mumbai is also home to many indigenous software companies. The largest software company in India, Tata Consultancy Company, is based in Mumbai. TCS was established in 1974. Mumbai started producing software before Bangalore. Mumbai pioneered the concept of a software technology park, which led to a major software success story. Mumbai has a large number of multinational companies as well as small software units. The Santacruz Electronic Export Processing Zone (SEEPZ) has a concentration of IT companies. SEEPZ was established 30 years ago. The formation of software technology parks in Mumbai proved to be catalyst in providing high-speed data with sufficient bandwidth. Educational and research institutions with excellent infrastructure facilities are spread across the Mumbai-Navi-Mumbai-Pune corridor cities. The power supply in Mumbai is the most reliable in India. It has the largest voice and data gateways. It accounts 60% of all international and voice traffics from India. It has good voice and Internet connectivity. It is the financial capital of India as most of the major Indian and foreign banks have headquarters in Mumbai2.
There are eight IT parks in Mumbai. Incentives are given to those companies that set up operations inside software technology parks. Under the comprehensive IT policy in 1998, several benefits have been extended to companies inside the IT parks. For example, exemption of stamp duties, refund of entry tax, part exemption from regulation charges, etc is provided for such companies. Additionally, all IT companies are exempt from electricity duty for five years from the date of their establishment2.
In case of India, the export performance of software services is far better compared to the other sectors including manufacturing and agriculture. This raises the question: ‘How has this happened?’ It is in this light that we tried to discover what impact, if any, the locational factors of Mumbai and Bangalore had influenced the international competitiveness of indigenous software firms