The Indian software services industry

Abstract

The Indian software exports have grown in spectacular fashion. Its success has, for the most part, been a combination of resource endowments, a mixture of benign neglect and active encouragement from a normally intrusive government, and good timing. The bulk of the Indian software exports have consisted of fairly mundane services such as low level programming and maintenance. The marked reliance on access to low cost human capital has prompted considerable scepticism about the ability of the Indian software industry to sustain its performance, given the rapid growth in the demand for engineers and the relatively inelastic supply of engineers. This paper reports on the results of research on the Indian software industry. We use a variety of sources, including a questionnaire survey of Indian software firms, and field visits and interviews with industry participants, observers, and US based clients. Although, maintaining the current rate of growth will pose a number of challenges, these challenges are not insurmountable. Not only can the available pool of human capital be expanded by tapping and training the very large pool of English-speaking college graduates, the leading Indian firms are making strong efforts to move up the value chain by acquiring better software project management capability and deeper knowledge of business domains, and reducing costs and improving quality by developing superior methodologies and tools. Moreover, the greatest impact of the software industry on the Indian economy may well be indirect, in its role as an exemplar of the new business organisational form and as an inspiration to other entrepreneurs.