Think IT, think India

IT means India now

Post Independence, one thing that the nation of India, that is Bharat, prioritized was economic development. Emphasis was on engineering education.

The Nehru government instructed policy makers and educationists to set up engineering institutions at various levels. The policy soon gave India a new identity, a knowledge-driven nation with highly-skilled technical expertise.

Modern education has played its part in India’s present economic prosperity. While modern education mushroomed engineers in the country, India’s intellectual trait, very few would disagree, dates back to the ancient age.

That India, after 60 years of gaining Independence, is an Information Technology (IT) superpower is no surprise considering its history. Not at least to them who know the history of the nation right.

The west still loves to call India the land of snake charmers, but the North-America centric global IT industry still prefers India over others when it comes to IT outsourcing.

Low cost is not the solitary reason behind India’s emergence as an offshore outsourcing destination. The skillful labor population with the ability to provide quality service also makes it the most preferred location to outsource. As a consequence of having a large working population it is possible to obtain niche services out of India.

These very attributes saw the Indian IT industry whiz past the $50 billion mark by the end of fiscal year 2006-07. India-bred software giants are now truly global entities, each having their own global delivery model. Their operations span worldwide and they are not reluctant to acquire North American or European companies. The Big Four – TCS, Infosys, Wipro and Satyam dominate the outsourcing market as far as Indian IT companies are considered.

While contributing to India’s economy, these companies also address the country’s unemployment crisis. The industry also plays it part in developing entrepreneurialism. Testimony to this is the hundreds of Indian millionaires in the Silicon Valley. American immigration rules benefited the country’s technical professionals at the same the government policies have egged on the IT industry.

Though strong on the services side, Indian companies do not have a strong product development history. Oracle-backed i-flex and 3i Infotech are exceptions who have been able to make a mark in product development. Product development in India in primarily involves around the likes of Microsoft, IBM and Oracle who have their development centers in the country.

On the semiconductor side companies such as Intel, AMD and Nvidia, have their product development in India. With the setting up of Fabcity in Hyderabad, the country can see a lot of activity in this space.

Presently, the bulk of IT activities happen around Technical triangle: Bangalore, Chennai and Hyderabad. Mumbai, the original home of the industry, Pune, NCR region, Kolkata and Ahmedabad are the other centers in the country.

Recent developments indicate the emergence of Tier-II locations like Mysore, Coimbatore, Visakhapatnam, Kochi, Chandigarh, Bhopal and Bhubaneswar. This can only expand the IT industry in India.

Domestic consumption is increasing by the day as financial institutions and manufacturing companies are beginning to rely on new technologies for improved efficiency.

Genesis

Fakir Chand Kohli pioneered the IT industry in the late 60s when steel giant Tata established a software arm. India’s journey as an IT superpower started in the early 80s when the country’s commercial capital Mumbai housed most of the companies that went on to become majors in the global market.

Bogged down by high cost and infrastructure problem, companies like Infosys and Wipro moved their headquarters to Bangalore, now known as the Silicon Valley of India.

The 1980s were not encouraging time for the IT industry. Foreign exchange crisis coupled with improper import and export policies could only limit the industry. Some like Wipro concentrated on the domestic market before going global.

Liberalization in early to mid 1990’s widened the scope of Indian IT industry. Global giants set up their operations in India thanks to the foreign direct investment. The Bubble (dotcom crash) was a dampener for a while but India’s position as a leader in the IT space remained intact.

The dawn of the twenty-first century saw India as a major player in the world economy and companies continued to see India as an IT superpower. In 2000-2001 the software industry grossed $6.2 billion.

Challenges and opportunities

A leader in the outsourcing revolution, India can face challenge in the future from other offshore centers. Unlike the locations who pose a threat, India’s advantage is its knowledge of the English language, the huge working population and of course skilled workforce. India needs to ensure it does not relinquish the early mover advantage.

Infrastructure is still a problem in many of the cities. Continued government-industry collaboration is the best way to tackle the infrastructure crisis. Attrition and brain drain are still a problem for the industry. Tier II cities are waking up. Invasion to these locations would only better the industry.

Diversification is a welcome sign. Exploration outside North America, for sure, mitigates the risk. But beware of the anti-outsourcing voices. However, Indian companies are helping themselves by recruiting graduates from local universities, and are even open in taking back NRIs who are willing to work at home.