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Sustaining IT industry success

Ganesh Natarajan
Tuesday, December 1, 2009
Ganesh Natarajan
The danger of treating the Indian IT story as either a flash in the pan or a never ending story of hyper growth is that one can ignore both the realities of its success and the vulnerability that exists in the changing context of our times. Professor Jay Mitra, Head of the School of Entrepreneurship and Business at the University of Essex in UK has used an innovative model for analysing the evolution of the software industry and entrepreneurship in any country. Viewed through the lens of this model, the story so far for the fifty billion dollar plus software sector in India throws up some interesting analysis and conclusions.

Drawing on the pioneering work done by researchers like Prof H.A. Aldrich, the model argues that the nature and scope of software development allows for the evolution of entrepreneurship through the operation of four generic processes: ‘variation’, ‘selection’, ‘retention and ‘diffusion’ and ‘the struggle over scarce resources’. In this context entrepreneurship is referred to as the process by which new venture creation, or innovation is generated and supported by a mix of talented and creative people, responsive and dynamic organisational values, and a conducive environment created by both external factors and effective policy formulation.

Variation and selection have occurred in the creation and reorganisation of the IT sector through a recognition of the global environment for software development, an acceptance of the value of interaction between different levels of consulting and technological capabilities, the choice of and focus on software service provision such as coding and maintenance (as opposed to design, R&D and product development), and the entrepreneurial approaches taken by the private sector in opportunity identification in both the software business and education and training of professionals for IT and BPO services.

The analysis by the early entrepreneurs like FC Kohli and Narayana Murthy of the variations possible in the Indian economic model with support from visionary bureaucrats like N.Vittal led to the selection of a new approach in the eighties which was entirely export led. The subsequent retention of the abilities of this ‘virtual’ industry through the innovative STPI scheme and the simultaneous development of scarce resources in IT through private sector initiatives from NIIT and then APTECH followed by the IIITs and the BCA and MCA programs in the country have seen the industry rise to its present heights. While there is no doubt that the early successes of the Indian industry in providing solutions to American and European customers was primarily due to lower cost highly skilled talent from our better institutions of learning, the subsequent demonstration of process excellence and innovation has been the trump card for Indian industry in recent times. There is a confidence today that India’s position at the top of the technology and process outsourcing pack will take a lot of challenging, with no competitor possessing the heady mix of a large talent pool, familiarity with Western processes and culture and relatively low cost that India has in abundance.

The industry has had a dream run till 2008 and it is only the recessionary trends in its key markets since the summer of 2008 that has led to the decline in growth from the high twenties to sixteen percent for the recent year and now the rather pessimistic anticipation of a meagre four to seven percent growth in the current fiscal.

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