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TECH TALK: The Indian Software Factory: The Software Conundrum

July 2nd, 2001 · No Comments

There is no doubt that in the last decade, India and Indian programmers have carved out a name for themselves internationally. Companies like TCS, Infosys, Wipro and Satyam are the nation’s pride. They are also incredibly profitable, and consistent in their growth. Much of this growth has come from software services. So, the irony is that while Indian software programmers are the toast and envy of the world and Indian software companies work with the largest and the best companies in the world, there are few Indian software products which have made a mark internationally.

One approach to this software conundrum is to say that why should we (or the software companies) bother to change something which has worked so well in the past decade. This is the same approach has now enabled 4 Indian software companies (Infosys, Silverline, Wipro and Satyam) to list on the US stock exchanges. Why change a winning team?

There is another way to look at this. As Indian software companies offer services to international clients, the IP (intellectual property) that is being created belongs to someone else, and thus Indian companies are leaving a lot of (potential and future) money on the table. There is an obvious element of risk here – risk which becomes harder to justify when one is expected to deliver high, consistent growth to justify their market capitalisations. It then becomes better to take the money instead of trying to worry about market risk.

At the same time, Indian companies (along with similar brethren in other developing markets) face a challenge: the high cost of legal software. A PC is now available for Rs 30,000, while a legal copy of Microsoft Office costs Rs 15,000. Little wonder then that piracy levels run high in many of these countries. This is not to belittle the importance of software. In today’s world, computer hardware may have become a commodity (and a necessity), but software is the fuel to drive a company’s growth. Software is a critical component of the enterprise. And yet, the high costs are scary and unaffordable for many of the companies in emerging markets, especially the small and medium-sized enterprises.

These “aspiring corporate poor” can now think of ASP services providing software functionality on tap, but there are three problems. The first is that of connectivity, which still remains intermittently reliable in most parts of the world. The second is that even for ASP services, the costs are dollar-denominated, while earnings for many of the companies are not. Thirdly, the ASP market is still very much US-centric.

So, then, here is the central issue. Even as Indian software companies help the world’s leading companies with their IT needs, the local (Indian) companies are faced with a no-win situation when it comes to fulfilling their own technology needs. What, then, is the way forward?

Tags: Tech Talk

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