Indian software industry is a thumping example of the modern day Information Technology revolution and is considered an example par excellence of a technology-intensive industry establishing itself in a developing country. The industry has come a long way from being a project based services model in its early days to an Intellectual Property (IP) intensive model prevalent today.
IT industry thrives on innovation in order to stay ahead in a highly competitive environment. The innovation can either be ‘new to the world’ innovation or ‘new to the market’ innovation. India has traditionally been good at ‘new to the market’ innovations wherein global technologies were customized for the local markets, while there is much to do in terms of ‘new to the world’ innovations. This is just a reflection of the kind of research being conducted in India. The technologies developed are typically not breakthroughs but are rather first implementations by transforming and reapplying known techniques to the software product under design.
Not many firms venture into product market because of the distance from the final market and lack of sufficient resources or expertise at the outset. While the service companies have resources, they are risk averse because of the nice returns service industry offers. Building a successful product brand takes an enormous amount of investment in sales, marketing and patience. While it may take a while for product brands to appear and succeed in India, a large number of globally successful products are being created in India.
To effectively capture the growth opportunities, Indian companies should focus on different kinds of innovation like business model innovation, organizational innovation, operational innovation, product innovation and service innovation.
Contrary to popular perception that the IT industry does not innovate, the offshore outsourcing model pioneered by the Indian IT firms was perhaps the most disruptive innovation in the global IT services industry. The Indian IT firms have continued to innovate and over the last decade extended the offshore outsourcing model into new services like BPO, Engineering Services, and Outsourced R&D etc. There is already an increasing trend of entrepreneurs focusing on deep technology innovations instead of mere services or commodity technologies. As the innovation intensity of the industry increases and IP becomes a key force, the propensity of the entrepreneurs to take more risks over a longer time horizon will increase leading to more 'new-to-the-world' innovations from India.
The global environment is highly uncertain today owing to many political and economic factors. Countries like the US - which has been and continues the most important market for Indian IT firms - are adopting protectionist measures to save their domestic companies. The recent VISA fee hike and ban by Ohio State on outsourcing by government departments are just a few examples. In this kind of a situation, as Mr. Narayana Murthy advocates, “Indian IT companies must continually innovate in order to be indispensable for overseas clients”.
-Pavan Kanakagiri
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