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TECH TALK: India’s Software Industry: A Different Future

February 15th, 2002 · No Comments

Even as the Indian software industry races ahead in its effort to become a key component in the value chain of global companies, a few pointers need to be kept in mind which could dampen overall prospects in the coming years.

Domestic Market: Except for a handful of companies, the Indian domestic market has remained woefully slow in its adoption of technologies. The result is that most of the leading Indian software companies have negligible revenues in their own backyard. While the dollar-denominated earnings (a lot of them tax-exempt) are great, software companies need to help Indian industry become competitive with their global and state-of-the-art expertise. Obviously, Indian companies cannot match the dollar rates but what they can offer is a fertile training ground. No country can become a great player globally by ignoring its domestic market.

Software Products: There has been little of note by the Indian software companies in the global market for packaged software. The “intellectual property” creation is being for others. Not to say that Indian companies aren’t involved in cutting edge work – there are many of them engaged in mission-critical outsourced RD projects for global majors. The time has come for some of the Indian companies to look at making investments in using their expertise to develop products which can be targeted at global products. The lessons can be learnt from the Indian pharma industry, which is now moving from generics (the equivalent of outsourced services) to molecules (products).

Wider View of Technology: So far, the concentration in India has been only on software and related services. From an enterprise point of view, technology comprises of hardware and communications also. Indian companies can leverage their core skillsets in creating innovative solutions in these areas also. Lest we forget, there is an Indian hardware success story in Moser Baer, which has in the words of the Far Eastern Economic Review (Nov 1, 2001), “transformed itself into a turbocharged producer of recordable compact disks.It claims to produce the same quality disks as its Taiwanese competitors, but at a significantly lower costIt has now embarked on a risky strategy to double its production and become the world’s No. 4 manufacturer.In order to take a bigger piece of this fast-paced, high-risk industry, Moser Baer will be competing with the world’s best, both on cost and quality.”

The knowledge-intensive economy offers opportunities to build the foundation for a new India, which occupies its place in the world not due to geo-politics and its past but due to its economic prowess. While not discounting the inherent risks and challenges in their current businesses, Indian software companies and budding entrepreneurs need to focus beyond the labour arbitrage which has served it well in the past. They need to be able to envision a vastly different future – one in which India is not just the “back-office of the world” but a driver of technological innovation.

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