Last week, I happened to visit rediff to read about top ten software companies of India. It nicely explained the achievements of top ten software companies including TCS, Wipro and Infosys. There I got the idea to discuss whether the Indian software industry is going in right direction or not. Let’s first see the data and reports released by NASSCOM(National Association of Software and Services Companies). It has forecast 21-24 % growth rate in software and services revenue in this financial year. Soon our software exports will touch the magical figure of $50 billion. The software and services exports segment grew by 29 % to register revenues of $40.4 billion this year from $31.4 billion in last year.
So from statistics point of view, everything is fine for this industry. It will employ 4 million people in 2008 and account for 7% of gross domestic product and 33% of India’s foreign-exchange inflows, says the Nasscom report. According to Forbes magazine “Jobs that are low value-added and easily automatable should and will disappear over the next decade in Indian Software Industry.” When we compare our industry with world business then we can easily see that we are still the world’s back office. India’s tech industry is a “services” (poor) industry. The Indians don’t do the thinking. The foreign customers or clients do, we Indians just execute.
The Indian software companies never take risk in launching new products. They are happy to just work for their clients for some dollars. But if the US market will continue to behave in the same way i.e appreciation of the rupee against the weakening dollar. India’s cost advantage will soon disappear. India has not learned to invent technology products of its own so this industry will be in real trouble if there is any scarcity of foreign offers. The top Indian companies have no plans to face this challenge. They are just happy thousands of new employees every year. The golden goose of Indian software industry is still laying large, warm eggs, enough to feed the 4 million Indians and their families, servants, chauffeurs and cooks. What will happen after the death of this golden goose? Let’s wait and watch.
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first, nice article…but u know wihtin a month ( july u write the article n comment is given in august) the valuation of INR as compared to dollar and the expectation has considerably changed… its trading around 42.5-43 and is expected to go down to 44 soon…so one relief for IT companies.
second, i think u must have mentioned the fact that the indian cost advantage WAS not only due to weaker rupee ( which is again is in their favor) but also due to cheap and skilled workforce available. BUT with the adoption of Global Delivery Model (GDM) by the giant MNCs like IBM and Accenture etc, that advantages also seems to vanish soon. and indian IT majors realize the fact thats why they are on a huge expansion spree in countries like China…
coming to your last point about moving up the value chain that is coming up with their own technologies…i think its still a far drream…..they are not investingmuch on R&D…looking at the MNCs like IBM which not only invest on R&D in their centres but fund the same at various universities….the result is that they come up with innovation, technology , concept an process leaderships…..
coming to the work culture in indian companies in general whic is still of very submissive kind,,,, u can expect any innovation in such an environment….so it needs a complete overhaul of work culture and mangement practices to pass on to the next level of IT industires development story..that is developing own technoogies….
Besides increasing cost disadvantage and low innovation, protectionist policies by the US government continue to threat the IT sector. Moreover, European countries are also considering adopting protectionist policies in a bid to increase local jobs and gain tax payers confidence. Besides taking away the tax breaks,companies that have received federal bail out money now need to prove the lack of technical talent at home before they outsource work to locations like India.
To read more on challenges faced by Indian IT service sector today, please refer to http://business-insight.webs.com/apps/blog/