3 big acquisitions & 2 major GCCs in a remote region

“Manipal is like a mini Koramangala (one of Bengaluru’s tech hotspots). You have the best nightlife, 55,000 students from some 35 countries.” That’s what Rohith Bhat told us in 2021, soon after his Udupi-based app development company Robosoft was acquired by Japan’s TechnoPro Holdings for Rs 805 crore.Yet, we tended to assume that Robosoft’s acquisition was a oneoff for the coastal region of Mangaluru-Manipal-Udupi. We’ve been proved wrong. Since that acquisition, there have been two other big acquisitions of companies in that 60-km belt – Google Cloud specialist Niveus Solutions, founded by Suyog Shetty , Rashmi George, Roshan Bava, and Mohsin Khan, was acquired by Japan’s NTT Data last year; and automation services company Novigo Solutions, founded by Mohammed Hanif, Praveen Kalbhavi, Mohammed Jarood, and Shihab Kalandar , was acquired by Blackstone-backed R Systems International last month for Rs 400 crore in cash, and a promise of performance-based stocks.What’s more, MNCs are getting excited about establishing global capability centres (GCCs) in the region. Renowned audio brand Bose Professional recently chose Mangaluru for its first dedicated R&D centre outside its headquarters – to help build the next generation of Bose products. Denmark’s EG, which makes enterprise software and provides cloud services to European companies, and which started a GCC in Mangaluru – called EGDK – in 2019 with less than 20 people, has expanded rapidly in the past few years to 850 people.Excellent educational institutionsBig action tended to be in big cities, but these trends are an indication of the opportunities that small towns in India today offer startups and MNCs.Bose Professional CEO John Maier was in Mangaluru last month for the inauguration of their facility. He said the centre was a testament to the region’s burgeoning talent pool, and that it would be a hub for innovation, with a strategic focus on embedded software, apps, and cloud technologies.Talent, as Bhat also noted, is the primary attraction. The region has long been an educational hotspot, driven by high levels of literacy. There are many colleges, some of which really stand out. The National Institute of Technology (NIT) Karnataka is a six-decade-old premier technical institute that produces over 1,000 BTech graduates every year. The Manipal Institute of Technology produces 3,000 BTech graduates and 600 MTech graduates annually. Most of the students at these institutes come from outside the region, making for a very diverse population. And, as Bhat indicates, the students live in an environment made for the Gen Z and Gen Alpha.Many of these institutes have startup incubation programmes. Bhat’s Robosoft emerged out of NITK’s Science and Technology Entrepreneurs’ Park (STEP) established in 1994. The centre has incubated about 80 startups, some of which have grown into multi-crore businesses. Manipal Universal Technology Business Incubator (MUTBI), an initiative of Manipal Academy of Higher Education (MAHE) and established in 2010, has incubated over 50 startups, and graduated nearly 29, the most successful of these being Blackfrog Technologies that’s developing patented tech to enhance immunisation supply chains.quality of life, low attritionDenmark’s EG had entered India through the acquisition of IT firm FrontAvenue InfoSolutions, which had offices in Denmark and Bengaluru. Anand Fernandes, CEO of EGDK India, says initially, postacquisition, there was no plan for expansion in India, and Mangaluru wasn’t even considered. However, the Danish leadership, he says, was swayed by Mangaluru’s quality of life and work-life balance, key aspects of Nordic culture. Mangaluru, he says, also offers a rich tech talent pool, entrepreneurial spirit, and AI-native graduates who can be trained to meet work needs. “Many employees have relocated to Mangaluru, enjoying less traffic, more family time, and excellent educational opportunities for their children,” he says.Even for the Japanese who acquired Niveus, culture played a big role. Suyog Shetty of Niveus says NTT Data was very impressed by the diverse culture and quality of life in the region.Many of those we spoke to also highlighted the lower employee attrition levels in the region as a huge advantage. Bhat notes that attrition in Bengaluru is 20%, while it’s 3-4% in the MangaluruUdupi region. “That’s where the real savings lie, not in salaries,” he says, noting that salaries tend to be almost on par with that in bigger cities. Fernandes notes that lower attrition leads to deeper domain knowledge and stronger team cohesion. Shetty echoes that and adds that it gives clients more confidence, and enables deep-tech work.Indeed, this may be a reason why Robosoft, Niveus and Novigo became so successful. Robosoft, when it was acquired, was one of the best app developers in India. When the iPhone was launched in 2007, five of the 200 or so apps on the App Store on Day 1 were those built by Robosoft. Its customers included Discovery, McDonald’s, Lowe’s, Target, Paytm, Disney, National Geographic and Heineken.Need exposure to complex projectsThere are some issues the region needs to address. Quality office spaces are in short supply. Gurudatta Shenoy, managing partner at realty company Mukund MGM Realty, says Mangaluru’s managed workspace market started only in 2022. But he also notes that it has grown from 300 seats to 3,000 in three years, and more are getting added.The region’s talent lacks exposure to large-scale systems and complex global projects. That kind of experience usually comes from being in bigger ecosystems like Bengaluru. But given the global acquisitions, and GCCs coming in, Mangaluru-Udupi engineers will get more opportunities to work with international customers, collaborate across borders, and manage large, distributed systems.Bhat also warns against repeating Bengaluru’s mistakes. “We must invest in urban planning now. Our slogan is Mangaluru is a 15-minute city (15 minutes to get anywhere). We have to keep it that way. Our main driver is quality of life. If we lose the 15-minute city advantage, the story is over.”