U.S. Online Giants in India

Lately, there have been several moves by global e-commerce leaders establishing operations in India.  EBay purchased Baazee, Google has set up R&D operations in Bangalore, I know that Amazon is trying to setup an engineering center and Yahoo! continues to expand its software development and business operations in India.

The reason for setting up engineering centers here is quite obvious -

1. Cost (salaries are roughly 1/4th of their US equivalents)
2. Easier access to talent (relative to hyper competitive silicon valley where there are hundreds of hot companies going after the same set of super talented engineers).

Google though has claimed that cost is not a consideration (http://news.zdnet.co.uk/business/management/0,39020654,39118548,00.htm).  I find that tough to believe since, being based in Bangalore, I know that techies from here would love to work in the Mountain View center surrounded by the likes of Peter Norvig and Krishna Bharat - very few would have problems in moving, especially since the bay area is so conducive for Indians (lots of Indians, Indian food, movies, etc.).  Anyway, Google states otherwise, probably for PR reasons - given the outsourcing backlash and the scrutiny that H-1B visa applications are receiving these days.

But why are e-commerce giants setting up shop here in India which has just about four million net connections?  Wharton presents an analysis on "Overseas Forays of U.S. Online Giants".  Its safe to say that they are all doing it with an eye on the future.

Questions is -> is it worth it at these fast growing companies for precious management bandwidth to be wasted on miniscule markets while they could always acquire to enter in the future?