What does India need to do to realise the full potential that information technology and outsourced business services will offer in the next decade by building on the capabilities that it already has?
The achievement so far - exports of $47 billion by 2008-09, giving it a 51 per cent share of the global outsourced market. The challenge - by innovating and acquiring new capabilities which will make it more competitive than now, achieve by 2020 an over six-times rise in exports to $310 billion and a global market share of around 57 per cent, according to a scenario outlined in the latest Nasscom-McKinsey report.
To achieve this goal an agenda for action has to be adopted by three key stakeholders - the industry players, government and the industry body Nasscom. The most critical task naturally will fall on the shoulders of the industry.
From doing a great job in using superior management skills to get the best out of its cost advantage even while being rather low on innovation, the industry has to build an innovation hub in India.
This has to be done by building innovation-friendly organisations (most are not so right now) and promoting collaborative research with academia. The industry, in fact, has to reinvent offshoring by developing new business models like pay-per-use and risk-gain sharing.
By becoming innovation-centric the industry will partially transform itself from being an almost entirely software services provider into acquiring a capability in software products also. If this should happen then it will lessen a major handicap that the Indian software industry faces vis-a-vis the Chinese, which is far larger (1.6 times in 2006) and has a strong software products play. To acquire this product capability, the industry has to globally shop for niche technology players to supplement its knowledge base.
The Chinese software industry, which is largely domestic, has ridden on the back of its economy's phenomenal growth. The trauma that the Indian industry is currently facing because of the global recession has highlighted the need to derisk its business model by growing a sizeable domestic industry which can additionally transform India.
Connectivity and access have to be built across India and IT solutions have to transform the delivery of education, healthcare, public services and financial inclusion. This will create a virtuous cycle. IT will promote growth which will create fresh demand for IT.
The industry association Nasscom will have a major role to play in achieving capabilities which are by nature industry-wide. It has to establish incubators and foster networks and partnerships.
In particular, Nasscom should take the leadership to bring into being institutions like Stanford which is at the hub of Silicon Valley and can in fact take credit for virtually incubating it. The innovation content of Indian IT can never increase significantly unless industry-academia interaction grows manifold, and for that to happen the right type of institutions which are at the technology frontier must form the new nuclei.
There is a whole area where action has to be taken by industry and government in partnership and for that Nasscom has to come forward as the coordinator. The foremost task in this regard will be to establish India as a trusted hub for professional services.
For this high standards of corporate governance, risk management, security and an adequate intellectual property framework have to be achieved - tasks which individual firms have to deliver on but within a framework developed in dialogue with the government.
There are major areas where the government has to deliver mostly on its own -infrastructure and the talent pool. In both these areas the Chinese government scores as high as the Indian government does not. The physical infrastructure does not need elaboration. Enabling tier-II and -III cities so that they can host IT-ITES establishments, making them livable, improving inner city transport and delivering enough power are the most obvious areas where action is required.
As for the talent pool, a constant threat of developing inadequacies in it hangs over the head of the industry like a sword. Not only does the talent pool need to multiply, the proportion of ready-to-be-employed products from institutions has to go way up from the present dismal levels which require extensive training by industry. This adds to costs. Curriculum and faculty need to be transformed and industry has to play a role in making this happen.
In boosting domestic demand the government has to play a major role by taking forward programmes like e-governance, connectivity and a national identity card system. None of all this is beyond the reach of the stakeholders. The corporate leadership of the IT-BPO industry has till now more than risen to emerging challenges.
The government, from the STPI innovation and tax break of the early nineties onwards, has been an exemplary partner. As an industry association Nasscom has more than delivered. What is needed is consistent action by the three over time in concert.