Intro: Information Technology (IT) has the potential of change the face to India, especially rural India. But the IT companies need to reboot its system to realise its full potential as demonstrated by the figures of software exports post-1991 economic reforms.
The decade of 1990 was the golden era for Information Technology in India. With liberalisation, privatisation & globalisation, Indian IT Sector took huge leaps in Information Technology. The rapid growth of Information Technology and IT enabled services in India since the nineties has made this industry the foremost foreign exchange earner for India. India's low labour cost and the large population of graduates and post graduates with the working knowledge of English gave India this sharp global competitive edge in IT services and Business Process Management (BPM) and this edge continue to this day.
Today, India is a virtual global IT hub. With the aim to boost the manufacturing sector, the ‘Make in India’ programme of Prime Minister Narendra Modi has identified IT services and BPM as one of the sectors for expansion of India’s manufacturing base. The objective is to give boost to the development of IT products and service modules. And the policy initiatives outlined in this regard are appropriate and laudable.
Information Technology sector products are not the products which satisfy the original and basic needs of people like food, healthcare, clothing, shelter or travel. IT products are, therefore, business accessories. Hence, this sector effectively works like a tail to mainstream business. It is also subject to cycles of boom and recession, and its growth is directly linked to growth in industry and industrial technology.
India has seen a tremendous growth rate averaging 30 to 40 per cent in the IT sector during the decade of nineties. But in later years, this tempo of growth could not be maintained. At the present time, the growth rate hovers around the figure of 12 per cent. Big corporate houses like Wipro, Infosys, TCS and HCL technology have been the driving engines of this growth. They made a yeoman contribution to the creation of employment for our educated youth. But we must keep in mind the important fact that our IT companies have been largely performing the business of outsourcing jobs. Hence, despite India’s contribution in the IT sector, by and large, US multinational corporations like Microsoft continue to be the global original software developers. There are many reasons behind it. The business leaders of the globe existing in the first world countries hold most of the existing technology patents of industrial and business processing and therefore dictate things even in BPM. India though is an industrialised nation of the world but it has failed to give required attention to the field of research and development. Even till date, we have committed very meagre resources to R&D in our business and industry.
On the other hand, MNCs of the first world countries have been consistently utilising 15 per cent or more of their net profits in R&D in industry. Therefore, the holders of original industrial patents call the shots even in development and patenting of IT products. On similar lines, India needs to develop its own R&D base, original industrial technology patents and accordingly original patentable IT products to emerge as an economic superpower.
It is saddening to note that the average R&D budget of Indian IT companies has been on the decline since 2008 and is presently just about 0.8 per cent of revenue. The Modi government needs to pay more attention to this than being given at present.
The challenges faced by the Indian IT industry are both internal and external; Internal problems include includes rise insalary cost, attrition, talent crunch and shrinking revenue margin; while external problems include visa problems, economic slowdown and currency fluctuation. As mentioned above, the work continues to be low end, low margin, and manpower intensive even after two decades from the onset of IT revolution.
What ails India’s IT industry are innovation and skill development which must be seriously addressed by the government. IT industry needs development and innovation in niche areas like smartphone technology, cloud computing and Software as a service (SaaS). Indian companies like TCS and Cognizant are trying to develop capabilities in mobile, analytics and artificial intelligence, but similar activities should be taken up by other companies also. All this is essential for India to become the IT innovation hub of the world from the outsourcing hub that it is at present.
(The writer is a senior columnist)