Considering that India was a relative laggard amongst developing countries in terms of economic growth, its success in software, BPO and lately infrastructure management and it’s continued astronomical growth is nothing short of amazing.
India followed largely socialist economic policies in the 1970s. The Government controlled iron, steel, mining, electronics, cement, chemicals, telecommunications, railroads, banking and other major industries. Firms were prohibited from operating in India without majority ownership by Indian citizens or corporations, and import controls were put in place to encourage Indian firms and disadvantage foreign firms.
As a result, in 1977 IBM withdrew from India, and this, together with similar withdrawals by other companies left a dire shortage of skills to maintain the existing IT infrastructure. Indian companies were quick to step in to meet the need, and in so doing they kick-started the Indian IT industry.
Examples of this are HCL, who in 1978 developed an indigenous micro-computer at around the same time as Apple, and Wipro who developed an 8086 chip in 1980.
Another factor was the rise of Unix which started to break the hold of hardware manufacturers on enterprise software production. This allowed the birth of the Indian software industry with companies like TCS. Indian government support for Unix in common with similar moves in other countries also helped.
Although initially advantageous, by the late 1980’s the disadvantages of the centrally planned economy were outweighing the benefits. Excessive bureaucracy, inefficiency and lack on innovation in the public-sector were major contributing factors keeping many Indian firms from being competitive in international markets.
Responding to growing pressure, the government liberalised licensing requirements and followed this by rescinding rules on foreign ownership and a scaling back of government ownership in technology industries. As a result multinational firms began to re-enter India.
Protectionism had given birth to the Indian IT industry, and now the removal of protectionism prepared the way for rapid growth. In addition, during the 1980’s India had suffered from a brain drain to the USA. With the removal of protectionist policies these economic migrants were free to play an important role in bridging the gap between the customers with the need in the USA and the skills available in India.
Hardware, which had been the early powerhouse of Indian IT, has remained largely a domestic affair, but Indian software has blossomed into a global business. With the exception of the dotcom bust, everything that could go right for the Indian IT industry did.
India had the skills, the entrepreneurs and the connections. All it needed was the demand, which came in the form of the skills shortage created by the Y2K crisis. This provided a huge boost and the lower cost of Indian software developers made sure that sourcing from India remained an attractive proposition for many large software companies including such companies as SAP, Microsoft and IBM.
At around the same time in the telecoms industry the economic reforms resulted in a dramatic drop in international telecoms costs. This was a key enabler for Indian based call centres and data processing centres that were able to capitalise on the large educated English speaking workforce. Multinational organisations such as British airways, American Express and General Electric had led the way with captive centres but with cheaper telecoms and the new management vogue for corporations to concentrate on their core competencies, Business Process Outsourcing grew rapidly .
For the software industry the original dominant model was resource augmentation where the software was developed on client premises. However, Indian organisations have since moved onsite engagements to India, and today about 60% of the industry revenue comes from projects carried out in India.
Instrumental in this move of resources offshore has been Indian vendor’s enthusiastic adoption of quality certifications which has been used to overcome customer doubts. Indian companies are now at the forefront in adoption of ISO9000, CMM, CMMI and 6 Sigma certifications.
In recent years the Indian IT industry has also been turning its attention to systems support with the maturing of remote Infrastructure management. With this move, the Indian vendors have strengthened their position in the face of growing competition in software outsourcing from new entrants such as China, Eastern Europe and Russia.
Offshoring is now firmly established as a major focus for provision of IT, BPO and KTO services from India. This comes both from Indian vendors, and non Indian companies setting up wholly owned subsidiaries and joint ventures in India. It is perhaps India’s the best kept secret that these companies include traditional outsourcing vendors such as IBM, EDS, HP, ACS and CSC who have moved a significant percentage of jobs to India.
However in a final twist, the latest trend has seen Indian vendors growing their presence globally. Their expansion in locations such as China and Eastern Europe insures them against wage based competition from these countries, and provides them with language skills to support customers worldwide. In addition, the expansion of onshore presence is a symptom of their move up the value chain to play in the same space as their traditional outsourcing rivals.
Indian vendors have achieved their phenomenal growth with little or no advertising and publicity, and many will not have heard of the likes of Infosys, TCS, Wipro, HCL and Satyam. Whilst no-one can predict the future in the fast moving world of IT, it is a safe bet to assume that the reputation of Indian IT vendors with continue to grow.