Indian IT Industry losing sheen?

IT industry in India can trace its root back to 1970's when Department of Electronics (DOE) was instituted by Government of India. In a couple of years Software Export Scheme was launched which laid the foundation of IT off-shoring that has become a common business reality today. Policy changes in late 1980's accelerated growth of Indian IT industry and also encouraged foreign investment. Software Technology Parks of India Scheme launched in next decade facilitated export processing zones, where the government provided infrastructure, buildings, electricity, telecommunications and high speed satellite links.

Industry encouraging policies and organized industry effort has resulted in several vibrant and growing IT organizations that employ millions of young engineers. Market openings are emerging across four broad sectors, IT services, software products, IT enabled services, and e-businesses, thus creating a number of opportunities for Indian organizations. Today, IT industry enjoys the status of one of India's leading job generators. India has the second largest group of software developers after the U.S. IT industry has been the shining star of Indian industry for more than 2 decades. Now the question is whether this star will retain all its shine or lose some of it to competitors.

Outsourcing or offshoring has been synonymous with the growth of Indian IT Industry. So far, India has been a preferred outsourcing destination for leading organizations worldwide for various reasons such as cost savings, India's stable government, improved quality work, access to world class intellectual capital, operational expertise, time zone (24 hour work day) advantage, and reduced time to market. Most of these reasons have long term value and continue to provide strategic advantage to customers worldwide.

According to recent studies, experts contemplate that rising salaries in India will wear away the cost advantage over developed world. By another estimate, India will fall short by almost 50000 relevant IT professionals by the year 2010. That reflects while the wage differential in India and developed world might be narrowing, demand for the right kind of talent is not going to go away. This could spell re-skilling for many IT professionals. In addition to technical knowledge and expertise, functional and operational knowledge, and understanding of processes will be of extra advantage.

If the factors that drove Indian IT industry's growth so far continue to hold firm in future, Indian IT services market is projected to grow at a compounded annual growth rate (CAGR) of 23.2 per cent through 2011, according to a study by Gartner Inc. Industry friendly policies in future can boost the performance. If Government continues tax breaks or provides innovative policies for software product research and development, the industry would continue to keep its momentum. To stay ahead of the competition, Indian companies must continuously move up the value chain - provide end-to-end solutions, increase global presence and create world class working environment.

If Indian companies' cost and quality advantage is replicated by smart organizations from China, Russia, Brazil, Philippines, and Korea, Indian IT industry will have to find more innovative ways to handle the competition and provide value leveraging their rich background in scalable services.

Whether Indian IT industry continues to attract customers globally or loses them to competition, Indian companies will have to create better partnerships with innovative new organizations, investors and academic community to leverage new opportunities. Coming from its core technical roots, IT industry will require increasing number of techno-functional experts who can not only offer technical know-how but also deliver cutting edge solutions for business problems.

Growth of the sector is highly dependant on the critical availability of the IT professionals. How well Indian companies respond to the challenge and build a reputation for providing world class solutions will mean the difference between future success and failure.

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