IT Suppliers Increase Investment in India

VMware is the latest company to look east with a sizeable investment plan, and economic developments ensure it won't be the last.

VMware plans to spend $100 million in India over the next two years, in part by doubling its employee roster there. Today, VMware has about 500 employees -- roughly 10 percent -- spread across offices in Bangalore, Pune, Chennai, Delhi, and Mumbai. The addition of more than 500 employees will bring the VMware Indian census to over 1,000. The company also plans to open an 82,000-square-foot development center in Bangalore.

"India has both an excellent technical education infrastructure and outstanding people... India is also one of our fastest growing markets and where we have increasingly important system integrator partners," said VMware CEO Diane Greene, in a prepared statement.

The news follows similar India investment announcements from QLogic, Microsoft, NetApp, and HP, to name just a few. Only China rivals India in the investment by large U.S.-based IT firms.

QLogic announced on March 5 plans to open a QLogic International Development Plan in Pune, India. Also this month, NetApp has vowed to spend $200 million to $300 million over three to five years and bring its Indian employee roster from 750 to over 2,000. Microsoft is midway through a $1.7 billion plan to add 3,000 employees in India, first announced in 2005.There are several reasons why India is seen as fertile ground for vendor investment. First, there is the human resources question. "My opinion is we have a shortage of technical talent and India provides us with a much-needed resource for growth," says one industry source, who asked not to be named.

India also offers a cheaper labor pool -- something that U.S. shareholders continue to push for, no matter how politicians may argue against "off-shoring."

India is also growing at a faster rate than the U.S., with a gross national product growth of about 9 percent last year -- more than double that of the U.S. This makes it a better bet for investment as recession looms stateside. India also has lots of prospective customers for storage IT.

"You can expect more EMC growth to come from emerging markets than from the U.S. and other established markets," writes an EMC spokesman in an email today. "We're investing aggressively in emerging markets to increase EMCs presence in parts of the world where we've been historically under-represented and take better advantage of available technical talent bases."

On the downside, India won't offer a hedge against U.S. economic woes indefinitely. Wages for Indian technology workers continue to rise in double digits annually, and perhaps sooner than anticipated, companies looking for cheap engineering talent will have to go elsewhere.In the meantime, U.S. companies are building sizeable interests in India, in a trend that will continue for at least the next two years.

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