The software industry clusters in India had emerged in a few cities like Bangalore, Mumbai, Delhi, Hyderabad, and Kolkatta, when conducive conditions became available. This paper highlights the development of the software industry clusters along with some setbacks suffered by them, and the pros and cons of industrial clusters. Arora (2007) reported that the early software industry clusters in India had emerged in Bangalore due to the existence of private engineering colleges, which provided a large number of fresh engineering graduates for the Indian software companies to provide services for software exports.
Ramachandran and Ray (2003) mentioned that the late software industry clusters mushroomed in the Indian cities of Hyderabad and Kolkatta due to the impetus provided by the entrepreneurship of the state as well as the individuals. According to Khomiakova (2007), these industry clusters have witnessed setbacks, which include an “overstressed infrastructure,” a steep rise in the cost of real estate, and scarcity of skilled professionals due to a progressive increase in demand being more than the supply.
Arora (2007) highlighted that the major advantages of the software industry clusters in India include generation of employment for millions of young graduates, enhancement of productivity, and an increase in investments by Indian as well as multinational companies. Consequently, the development of industry clusters has prevented migration of local graduates to other Indian cities, and also, helped in the economic growth of the city, its state and India.
However, their major disadvantage has been marginal loss of business and employment in the IT sector of developed countries, which have outsourced work to these industry clusters. The software industry clusters originated due to the prevalence of favorable conditions in some Indian cities, and they have redefined the global business operations of the IT industry.