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Genesis of the Indian software industry : a Lesson in Globalization Paradigm Shifts in Vendor Partnering in the I.T. Services industry Or alternatively.

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Presentation on theme: "Genesis of the Indian software industry : a Lesson in Globalization Paradigm Shifts in Vendor Partnering in the I.T. Services industry Or alternatively."— Presentation transcript:

1 Genesis of the Indian software industry : a Lesson in Globalization Paradigm Shifts in Vendor Partnering in the I.T. Services industry Or alternatively titled as Copyrights: PB : 2007 By Dr.P.Balasubramanian Founder & CEO Theme Work Analytics LLC balasubp@gmail.com

2 Source: cartoon by Jeff Koterba in Omaha World Herald March 5 2004

3 Genesis of the Indian software industry : a Lesson in Globalization Which country is the Worlds largest cut flower exporter ? Where are the Major Ship breaking firms located ? Where is the largest Flavor & Fragrance Manufacturer in the world ? Who is the World leader in orthopedic products ? Why is this so ? Locations…

4 Genesis of the Indian software industry : a Lesson in Globalization What does globalization mean to you ? Is it a threat or an opportunity ? How has it impacted your life ? Where is this headed ?

5 Indian IT Software and Services Industry Source : NASSCOM In billion USD Genesis of the Indian software industry : a Lesson in Globalization Annual growth of 30 % over a decade 2003- 04 21.6 2004- 05 28.4 2005- 06 37.4 2006- 07 47.8

6 Genesis of the Indian software industry : a Lesson in Globalization Source : NASSCOM 2008 estimate of 2.0 million professionals 2003-04830,000 2004-051,060,000 2005-061,293,000 2006-071,630,000

7 Indian IT Software and Services Industry Source : NASSCOM Genesis of the Indian software industry : a Lesson in Globalization Source: NASSCOM Software Export as a percentage of India’s Total Export Critical to the nation’s economy

8 Genesis of the Indian software industry : a Lesson in Globalization Magic Quadrant for North American Offshore Application Software 2007 Completeness of vision Ability to Execute Wipro TCS Infosys EDS IBM Accenture CSC Perot HP Deloitte Bearing Point Unisys Source: Gartner (August 2007)

9 Indian IT Software and Services Industry Source : NASSCOM Genesis of the Indian software industry : a Lesson in Globalization In addition, the visitors can experience Bangalore’s hi-tech climate. The city has the highest number of engineering colleges in the world, almost 50 percent of the world’s SEI CMM Level 5 companies, COPC/ISO recognized Customer Interaction Centers, and over 103 R&D Institutions. It is, in fact, home to GE’s biggest R&D Center outside the U.S.—the Jack Welch Technology Center, which hires over 200 PhDs/scientists every month! To top it all, Bangalore has just been ranked the fourth best “Global hub of technological innovation” by none other than the United Nations. Emulation worthy

10 Genesis of the Indian software industry : a Lesson in Globalization Infrastructure Management Application Development Application Maintenance Business Process Management Network & Data Security System and Data Base Administration Package Implementation Consulting IT Services Segments It is a 300 Billion dollar industry now. Almost half of it in United States.

11 Genesis of the Indian software industry : a Lesson in Globalization Infrastructure Management Application Development Application Maintenance Business Process Management Network & Data Security System and Data Base Administration Package Implementation Consulting IT Services Segments These segments have evolved over decades. They were unbundled over years. The skill sets needed have diversified and have given rise to specialization over time.

12 Genesis of the Indian software industry : a Lesson in Globalization In three decades, 1. how has India become a powerhouse in the global software services industry ? 2.What has been its origin ? 3.How was it nurtured ? 4.Why has it grown at an annual rate of 30 % for more than a decade ? 5.Where does it find the manpower ? 6.When technology skills can become obsolete in less than five years and training is expensive how does India cope with it ? 7. In short what is the secret of its continued success ? What are the facets of globalization ? What is the role of individual entrepreneurs / business leaders ? We will explore these topics in this session

13 Genesis of the Indian software industry : a Lesson in Globalization Factor Advantages Large pool of scientific talent English language skills Low cost of labor Low investment needs for the IT services sector Necessary but not sufficient requirements for an industry to develop

14 Genesis of the Indian software industry : a Lesson in Globalization Factor disadvantages till 1970s Lack of Robust data and voice communication networks State of the art hardware to train staff Access to international markets Access to investors, funds Project Management and delivery capabilities

15 Genesis of the Indian software industry : a Lesson in Globalization Historic Prelude… 1975 : After 25 years of democracy, Emergency is declared in India, following an electoral defeat of the Congress Party. 1977 : emergency is lifted. Public opinion swings in favor of a coalition government with a nationalistic fervor. 1978 : The new Janata Government asks multinationals to leave India. IBM and Coca Cola are heavily impacted. 1979 : IBM India employees form a new company called CMC to maintain IBM equipments.

16 Genesis of the Indian software industry : a Lesson in Globalization Historic Prelude… Early 1970s Tata Registry formed earlier to provide shareholder services, grows to Tata Computing Centre and then evolves into Tata Consultancy Services. Provides services to companies outside the Tata group. Is hungry for growth. Mid 1970s Senses the widening gap between the government and IBM. Creates a structure and platform for Burroughs Corporation to enter India. Enters into an agreement to provide services to Burroughs Customers in India. Develops considerable competency in Burroughs platform of System software, Languages and Applications. Leverages this skill base to partner with Burroughs to provide services to Burroughs Customers abroad Late 1970s Burroughs Corporation sees the opportunity and seeks to form a joint venture with the Tatas to form a new company called Tata Burroughs Limited. Many other Indian companies follow suit and enter into similar partnership with Digital Corporation, Wang etc. TCS decides to widen its skill base to IBM, Tandem and other platforms. Positions itself as vendor neutral and capable of cross platform work.

17 Genesis of the Indian software industry : a Lesson in Globalization The labored 1980s Consequently the IT services industry develops mainly as a Manpower Services Provider and not as a Project bidder. Margins are low. Growth is slow. The silver lining is the extensive development of Unix skills in India. The going gets tough. Government policies make it hard to import computers, necessary to develop skill base. Foreign travel is restricted. The telecommunication infra structure in India is primitive. Not conducive to provide quality offshore services. Banks are unwilling to provide support to the software industry as it is not sufficient collateral.

18 Genesis of the Indian software industry : a Lesson in Globalization The opportunity of early 1990s The IT sector grabs this opportunity to expand aggressively. Imports state of the art systems; trains staff and seeks to enter international markets with project outsourcing. In the process the industry discovers the magic of Quality, Processes and Best Practices. India faces a massive crisis of low foreign exchange reserves and the possibility of defaulting on international loans. The Congress government takes a bold step to deregulate, liberalize, privatize and globalize the Indian economy. MRTP and FERA Acts withdrawn or diluted. Moves away from socialism. Taxes are lowered. Import impediments are removed. Foreign investment and tie ups are welcome.

19 Genesis of the Indian software industry : a Lesson in Globalization The golden decade of 1996 -2005 and beyond.. The IT firms leverage their client base and systems knowledge very well to consolidate market share. Expand skill sets to offer a full suite of services. 1. The IT industry invests heavily in Quality Processes and Certification. ISO 9000, Six Sigma and CMM of SEI at Carnegie Mellon University become the buzz words. They help to assure high quality deliverables to international clients. [27 out of 54 companies in the world with CMM Level 5 certification are in India] 2.The Y2K opportunity. Lays the foundation for exponential growth of the sector. 3. The explosive growth of internet,intranet and web based solutions,since 2000

20 Genesis of the Indian software industry : a Lesson in Globalization 199920002001200220032004200520062007 No. of Employees 15,35625,25536,75052,71572,241 Revenues m USD 1212034145457541063159221523090 Net income m USD 1761131164195270419555850 Infosys Growth

21 Genesis of the Indian software industry : a Lesson in Globalization Current Challenges in Supply Chain Management Recruitment & Training Campus Connect Four months of training, post graduation Soft skills enhancement Continuous skills up gradation Domain Certification Retention Multi platform work opportunity Multiple geography and domain rapid role and career progression competitive wages, stock options Risk Management onshore facilities local talent engagement distributed work management My Infy experience

22 Genesis of the Indian software industry : a Lesson in Globalization Globalization means A borderless world where all resources can move with ease 1.Markets are unprotected. 2.Cost efficiency and Quality of Service reign supreme. 3.Where produced does not matter. 4.Customization required. Firms must learn to 1.Dismantle expensive work components 2.Manage operations spread across the globe 3.Innovate on Supply Chain Management 4.Be nimble DHL win

23 Genesis of the Indian software industry : a Lesson in Globalization Vendor Partnering Models TCS relationship with Burroughs commenced as a Value Enabler. (a ) Value Enablers : They facilitate effective delivery of a firm’s full and current capability to its customers.If they are not effective it is likely that the firm would under-perform. (b) Value Enhancers : They are Value Enablers as well as catalyst for enhancing the value set of the firm. The firm can increase its service offerings and reach out to new markets and customers because of this partnership.

24 Genesis of the Indian software industry : a Lesson in Globalization Vendor Partnering Models We can recognize these vendor partners in two broad categories, example: (a ) Value Enablers : Travel,Transportation,Visa Services, Security, Cafeteria,Facility Management, Real Estate, Architects, Infrastructure Products and Services etc (b) Value Enhancers : Hardware, Software, Network and related services Vendors

25 Genesis of the Indian software industry : a Lesson in Globalization Vendor Partnering Models Burroughs entry into India was facilitated. TCS develops skill sets on Burroughs platforms. (Value Enabler to Value Enhancer role) Provides services to Indian customers. So does TBL TCS and TBL reach out to international customers. Multiplatform skill sets of TCS enable it to score over TBL (Value Enhancer role with Client firms) Tight coupling with a vendor has not helped TBL TCS goes public in 2004.Becomes the largest IT firm. TBL ( now Tata Infotech) merges with TCS.

26 Purchase Effectiveness Quality Assurance Continuous Cost Reduction Relationship Growth… Value Enablers

27 Purchase Effectiveness Skills Development Service Offerings Joint Solutions for the Market Relationship Growth… Value Enhancers

28 Genesis of the Indian software industry : a Lesson in Globalization Summary Copyrights: PB : 2007 In Information Age, criteria for success are 1.continuous investment in enhancing people skills 2. focus on motivational and aspiration needs of employees 3. relentless and simultaneous commitment to quality and cost of service 4. nimble supply chain management 5. innovation 6. execution excellence

29 Genesis of the Indian software industry : a Lesson in Globalization Summary Copyrights: PB : 2007 Lessons for Entrepreneurs 1.Sense an opportunity when it is not knocking on your door 2.Assess and Qualify any perceived opportunity before pursuit 3.Let every proposition be structured as Win Win for all stakeholders 4.Validate perceived benefits 5.Extract appropriate value from the Enablers and the Enhancers 6.USP is a myth. Value Proposition is practical.

30 Genesis of the Indian software industry : a Lesson in Globalization Copyrights: PB : 2007 Thanks Embrace Diversity of thought ! In his book Games Indians Play: Why We Are the Way We Are, V. Raghunathan writes about a farmer whose corn won top awards year after year. When a reporter asked about the secret of his success, the farmer attributed it to the fact that he shared his corn with his neighbors. Why, the reporter wondered, would the farmer want to share his seed when those neighbors also competed with him for the prize? The farmer's reply was, "The wind picks up pollen from the ripening corn and swirls it from field to field. If my neighbors grew inferior corn, cross-pollination would steadily degrade the quality of my corn. If I am to grow good corn, I must help my neighbors do the same."


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