The Indian Software Services Industry

Abstract

This paper provides an analytical description of the Indian software industry, with a special focus on the software exports from India. 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. The Indian software industry is remarkable in a number of respects. It is service rather than product oriented, heavily export oriented, and is largely managed by professional and entrepreneurial managements. Also, domestic market experience and expertise appears to have had only limited benefits for successful importers. Although the industry has grown in spectacular fashion, sustaining this performance will pose a number of challenges. In order to counteract the widely reported shortages of skilled software professionals and the possible competition from other low wage, human capital rich countries, Indian firms are trying to move up the value chain by acquiring deeper knowledge of business domains and management capability, and to reduce costs by developing superior methodologies and tools. Whether and how many firms will be a key test of the management skills and willingness to invest along a number of dimensions. From a social perspective, the disconnect between domestic and export markets is a major challenge, but one that the growing diffusion of computers and the improvement of the communication infrastructure should make easier to confront. In the end, the greatest impact the software industry is likely to have on the Indian economy is indirect, in its role as an exemplar of the new business organisational form and as an inspiration to other entrepreneurs.

JEL Classification: O1, L8