Gurgaon is the best city for setting up a software or BPO centre in India and Bangalore comes second. This is according to a research on Offshore Competitiveness conducted by neoIT, an offshoring consultancy.

The study which scanned 27 cities in India, rates Pune, Hyderabad and Chennai (in that order) behind the top two.

The cities have been rated on various vectors such as people, education system, catalysts such as governmental support social and political stability, infrastructure and financials such as cost of living and real estate prices.

• India and Outsourcing: Complete Coverage

While Gurgaon gets a score of 100 on a scale of 120, Bangalore comes close at 99.6.

NeoIT has highlighted that earlier countries competed for the location of an offshoring business, but now competition is  at a granular level.

"Lately, we are more likely to observe competition between Bangalore and Manila than between a generic India and the Philippines," the report notes.

The report adds that the current trends indicate that top supplier companies in India, as well as global companies are looking at alternate cities to locate additional development centres, including outside of India.

While competition from Chinese and Filipino cities is strong, there is a healthy competition among Indian cities to entice suppliers and clients alike.

This increasing trend is sure to accelerate the emergence of multiple delivery centres within India and rapid development overall. The study notes that there is a mushrooming of cities aspiring to host offshoring businesses, with leaders and challengers in the IT and BPO industries separating themselves from the crowd.

"Over the course of the study, we also witnessed a sudden spurt in activity among Tier II cities in India, increased government involvement in infrastructure development and facilitating policies, a narrowing gap between urban and semi-urban areas and the adoption of a totality approach towards the goal of attracting overseas clients and talent," the report noted.