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"While traditional industries such as manufacturing are highly dependent on the raw materials and demand heavy and reliable infrastructure, IT primarily needs human capital."

 

Manish Khandelwal, PA Sourcing expert

The Great Indian IT crowd

Manish Khandelwal

Sourcingfocus.com

11 February 2013


It’s February and there’s a real buzz. Valentine’s Day is fast approaching and the entire Indian IT industry is excited. But it’s not romance that is setting hearts aflutter but the Nasscom India Leadership Forum.

This is now a must-attend event, easily the largest gathering of the Indian IT industry, but with increasing participation from global outfits.

The buzz at Nasscom feels very different to any other industry event. The growth is dizzying and numbers mind-boggling. The event is a real celebration of the Indian IT industry. 

So, how has India got IT so right?

Partly it reflects a dauntless Indian spirit and a desire to succeed under any circumstances. India’s lack of quality infrastructure helped the Indian IT industry to succeed in a curious way. While traditional industries such as manufacturing are highly dependent on the raw materials and demand heavy and reliable infrastructure, IT primarily needs human capital. In the pre-liberalisation era, when industries such as manufacturing found it hard to succeed, more and more Indians looked for alternative jobs, and they found them in IT. The sector offered a powerful combination of significantly higher returns on investments for the employers and global growth opportunities for the employees.

And Indian IT was in the right place at the right time. In the ‘80s the industry was just emerging, by the ‘90s it was starting to gain some interest from around the world. Then came the Y2K bug. The world needed large volumes of basic IT skills and Indian companies were there on their doorstep to meet that need. The world’s IT glitch was India’s opportunity.

That drove a rapid transformational change. In the western world, it became acceptable to have an IT problem resolved in a faraway country, at a fraction of the cost. And no other country offered technical skills in the volumes that India could supply.

Inevitably, there were pessimists who said that once Y2K was over Indian companies would struggle to find work. The reverse was true. Changing economic realities, growing demand for technical skills and the valuable experience Indian companies now had meant they were much more in demand. Industry revenues that were 10 billion USD in 2001 crossed the 100 billion USD mark in the year 2012. 

Other than the cost differential, India has another advantage over the rest of the world. It has an English-speaking technical workforce that is willing to travel, relocate within or outside the country and explore. India produces innumerable numbers of English-speaking graduates every year. So while there are specialised skilled teams in various places in the world, outside India there are not many options for an outsourcing operation that requires large numbers of English-speaking IT or business process outsourcing skills.

Then there is the fact that success breeds success. Today’s Indian IT industry is actually no longer about Indian companies. Almost all the leading global service providers have their base in India and it’s where they find most of their skills. This has led to a virtuous circle, where the country has attained a critical mass of skills, so attracts more business and more skills. 

So, what does the future offer? 

It hasn’t always been easy for the industry and it won’t be in the future. Some Western governments are taking more protectionist positions.  Inflation is sky-high and therefore threatening the cost differential, the fundamental driver of offshoring. Infrastructure remains the perennial problem and the political landscape is as fragmented as ever. Then there is the issue of inconsistent quality of skills. And competition is hot on the heels, with many other countries wanting a piece of the offshore IT services pie.

India will need to use its experience and its head start to stay in front of the competition. More needs to be done to move ‘Brand India’ away from a focus on cost and more towards its ability to undertake large-scale transformational programmes. More investment will need to go into products to balance the services portfolio.  While the large outfits may continue to dominate, the smaller players will need to be more agile and nimble to explore the opportunities. Growth will need to be more inclusive, and need to touch the hinterlands of India.  

One thing is sure though. With India accounting for more than half of global sourcing business, India’s crown is not going to slip anytime soon. So, the Nasscom India Leadership forum will be as upbeat, energetic and full of optimism as ever. Not many can challenge St. Valentine in creating a buzz. The Indian IT industry can.


Manish Khandelwal is a sourcing expert at PA Consulting Group



To visit PA's pages on shared services and outsoucing, please click here.

   
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