The New Idea Labs

A decade ago, Whitefield, a remote suburb of Bangalore, made headlines on those rare occasions when gangs of armed bandits burst into homes at night. Today that former stretch of farmland and scattered houses is disturbed only by giant cranes, cement mixers and trucks piled up with white sand. Buildings of glass and steel are rising all over, as Bangalore's fast-expanding outsourcing industry radiates far beyond the city. Perhaps the most impressive spot in Whitefield is the campus of SAP Labs. The main building, with its comfortable sofas and a sunny atrium, is a sumptuous workplace by Indian standards.

But what is most remarkable about that site, built by the German software giant SAP, is what's going on inside. SAP Labs' 1,400 employees in Bangalore form the company's largest research-and-development unit outside Germany. Instead of dumping its call-center work and low-end programming in Whitefield, SAP relies on the area's computer scientists and engineers to carry out its most critical activity. More than 10% of the patents filed by SAP originate in Bangalore, and the influx of Indian engineers is accelerating the adoption of English at SAP and loosening up its traditionally rigid attitude toward software engineering, says Martin Prinz, the joint managing director of SAP Labs India. "The Bangalore center is starting to change SAP."

That transformation is just one example of a realignment by U.S. and European companies that is turning India from a distant satellite of Silicon Valley into one of the inner hubs of global technology. Since 2003, Yahoo's software-development center has been nestling up to the pizza joints and blue-jean shops on Bangalore's swank Mahatma Gandhi Road. Google co-founders Larry Page and Sergey Brin visited their company's R.-and- D. center in Bangalore last October and said they plan to create a mirror image of Google's U.S. research team in India. Microsoft CEO Steve Ballmer visited India a month later, unveiling a new campus and plans to hire hundreds of software engineers. "We want access to the phenomenal engineering talent graduating out of Indian universities," Ballmer told reporters. Intel hired 800 people in India last year, and CEO Craig Barrett last fall inaugurated construction of a new building.