Last month, I “cut through the fog” to offer my views on the inanity of the so-called “debate” on offshoring jobs to India. To me it’s clear—while I am not a fan of the offshore model I find the “our jobs, not theirs” argument myopic at best, and morally bankrupt at worst. But, nevertheless, a backlash has started, will soon gain considerable momentum, and will—within 18 months—have a fundamental effect on the financial well-being of the Indian software industry. Unless the Indian software industry acts strongly and acts now. The following paragraphs contain my suggestions on what the Indian software industry must do to lash back against the backlash and ensure long-term, sustainable, and meaningful growth.

• Believe what we preach. Correction: Truly believe what we preach: We are constantly talking about how the “TCS, Wipro, Infosys, Patni”(s) offer rapid, high-quality software development services, with world class standards and project management, at a considerable cost savings to the U.S., EC, and Japanese companies. We go further to say—and this is the crux—that this troika of parameters (quality, cost-savings, low time-to-market) confers comparative advantage on the firms availing of these services. Do we believe this? If we do, then our stance is simple: We offer comparative advantage to you so if you don’t use us, it’s at YOUR peril. You want comparative advantage, come to us. If you don’t, then build it in-house or go somewhere else. Let’s see how long you’ll last!

• Turn away business: This is a corollary to the first one. Comparative advantage is for the deserving-not for everyone. Sorry my friend, you don't deserve it so I won’t do business with you. Some Indian companies already do this, which is good. Its also classic psychology—we covet that which we cannot have. The moment Indian firms say, “Backlash? Ha! We don’t want your business,” watch the suitors line up.

• Reduce dependency: Concentrate on the domestic market. Build the domestic market. Grow the domestic market. The world has walls and the walls can be erected higher. Legislation, business cycles, internal dynamics, nationalism, and nativism, even whim—all of these factors can fundamentally affect companies dependent on the needs of a foreign market. To counter this, a significant portion of a company’s business should come from its domestic market. This not only helps the company steer the shoals of global politics but also helps organic capital formation.

• Move up the Value Chain: Constantly analyze the composition of revenue. An increasing share of revenue should come from higher-end activities that require more creativity, human capital, and original architectural knowledge. It is imperative that we don’t confuse information intensity with task maturity. Data entry is information intensive but is a fairly immature task. Building web-services on the other hand is a mature activity that will continue to yield fruit.
• Productize: Seek the lofty heights of the value chain—build products. The services game is pretty much a linear one. I have a bill-rate and make a margin on human talent. The more humans, the more money. The development of patterns, practices, project management, and methodologies somewhat offset the linearity, but to the first approximation, the model remains linear. To make more money you need more people. Products, however, offer a way out of this. With products, one gets recurring revenue via an installed base and ongoing royalty/license fees and one escapes the linear for the world of low marginal cost and high marginal return. Build products and make money now and for a long, long time. And back to point 3 above, sell these products locally as well as in far-flung places.

• Think politically: Business is replete with politics. It is not a pure, meritocratic endeavor. If we don’t understand the Machiavellian geo-political climate of business, we will lose. Build ties with allies and know your enemies. We are not good at this at all. It might sound cryptic but think about it.

• Build alliances: Indian firms have got to partner with companies from other parts of the developing world. The only way to ensure that the large multi-national corporations don’t play entire countries against each other is to build alliances with companies in China, Mexico, Indonesia and so on. We are all Spartacus.

If we do these 7 things and start soon, we can make our successes expand my orders of magnitude. The time has come for real leadership in the Indian software industry—not from the point of view of an individual business or company, but from the point of view of the entire industry’s sustenance and growth. We don’t need just another cheerleader extolling the virtues of the offshore model. We need a series of hardheaded decisions that might appear outlandish in the short-term but will bear enormous reward sooner than we might imagine.

The backlash is pathetic but it is there. But the game is still on. Who has the best clutch plan?

I submit that we had better be the one who does.