Its Quality that Has Done the Trick – Developing Nations in Asia

and Latin America Want to Replicate India’s Story

Pankaj Jalote

Professor

Computer Science and Engineering

IIT Kanpur 208016

Jalote [AT] iitk.ac.in

 

The Indian software exports, as is well known, have grown from less than $100 million before 1990 to over $5 billion in 2000. What is not well known is that revenue per person per year has grown from less than $20,000 to over $50,000 in most large companies in the last five years. This is not simply due to “inflation”. Though the industry is still focussed on tapping the huge software services market, most of the big players have moved from lower value services to higher value services. In the early days, the service was primarily providing technical manpower, which later moved to providing low-value services like coding and testing. Now Indian companies are operating even at the top end of the spectrum in terms of technology (Corba, Java, E-commerce, etc.) or the services (complete business solutions, consultancy, strategy, etc.). The high rates they command is an indication of the perceived value in the eyes of the customer of the services they provide.

The amazing story of the Indian software industry has spread far and wide. Not only the countries which provide the customer of the industry, namely the developed countries, other countries are equally impressed by the performance of the industry. From the presentations that representatives of various Asian and Latin American countries made in a recent workshop in China on “IT industry in developing countries”, it is evidently clear that many developing countries today want to emulate the Indian success story.

Within India, however, many people continue to view the industry’s success with a mixture of admiration and skepticism. There is a lingering fear or doubt in the minds of many about whether the industry is inherently strong or is it just tapping a window of opportunity which will soon be tapped by other Asian countries with large population and better infrastructure. Given the state of almost everything else in the country, such doubts are not unreasonable. I, however, believe that India Software Pvt. Ltd, has developed some solid strengths which will continue to serve it well, and which are not be easy to emulate. Let us discuss some strengths that make India Software Pvt. Ltd. such a major force.

India has moved rapidly on the quality front. Indian software organizations adopted the ISO model soon after it came and then when the Capability Maturity Model (CMM) started becoming more important, rapidly transitioned to the CMM. Though no doubt the success of Indian companies with these frameworks is due to the “exam taking” abilities that our people have (what with exam taking being part of any career), still these models have been by-and-large absorbed quite well. This has given the Indian companies solid project and process management strength these models are supposed to bring.

This is a tremendous strength that is not easy to emulate. For example, china, despite the fact that it has about a 1000 software companies in Bejing area alone, has probably none at level 4 or 5 and is now actively looking at CMM as part of the country-level strategy to tap the global market. The situation in the rest of Asia (not counting the developed countries) is similar. The situation in Latin America is no different. In fact, outside of the developed countries, it is only India that has companies that have been able to successfully implement these global quality models.

The difficulty of achieving this can be illustrated by a small anecdote. Based on experience of Indian companies transitioning from ISO to CMM, I gave a course on this subject in various locations in Europe. The course suggests that from ISO companies should move to level 4 of the CMM. Almost all participants in Europe felt that this is “too ambitious” and found the suggestion almost amusing. This is when most Indian companies moved from ISO to Level 4 or above with a matter of a year or two! Overall, the project and process management abilities of Indian companies are very advanced and compare well with the best in the world. In fact, many Indian companies are now getting requests from their customers seeking help in setting up quality systems in their organizations.

The second strength is the business expertise that now exists in the industry. With time and experience with projects and dealing with clients across the world, many managers have developed good understanding of business practices in other countries and have acquired domain knowledge and an understanding of the cultural context of the customer. These are the factors that are essential for moving from low level technical services to higher level services, i.e. for going up the value chain. They are also essential for customer satisfaction, which, in turn, is essential for business. Many Indian software companies boast of repeat business of over 70% - a huge asset when trying to grow at rapid pace. The past customers remain – for growth at least loss of past customers does not need to be handled. At the same time, the senior management seem to have transformed from thinking like a India-based supplier to being a global player. This has brought in organization management and business practices that are in-line with the developed world.

Finally, Indian software companies have developed the ability to change rapidly with technology. This has been amply demonstrated by the quick movement to Java, E-commerce related technologies, etc., which are now major portion of the business for many companies. In today’s technology world, if a service provider does not have the ability to reprogram its people and processes to adapt to new technologies, it will not remain in service for too long.

These three solid strengths – processes, business skills, and reprogammability are not easy to acquire. There is a lot that goes into these. And how did India Software Pvt. Ltd. acquire these. Obviously there can be no simple explanation to this. Let me point out a few reasons.

Perhaps the biggest factor has been the export orientation of the industry. This has helped the industry being receptive to technology, and has brought about the quality orientation. There is nothing like fighting for customers in the global market for improving an industry. This has been shown earlier by the auto industry in Japan, the toys industry in China, semiconductor industry in Korea, etc. In all of these, like the Indian software industry, the domestic market was not the main market – the industry grew, and kept its focus on, the global market.

The second reason is that the software industry grew without government help. Perhaps the only thing that the government did was to get out of the way by liberalizing imports and exports in the early 90s. The ministry of IT has been formed only recently, and then too it had to go out of its way to explain that it will try to aid and not hinder the industry and focus on internal consumption of IT. Contrast this with the situation in other developing countries – almost all countries in Asia and Latin America are looking for government funding and help for developing the IT industry. Government help and funds can perhaps help for domestic market, but for global market this just cannot work. The government money and policies, particularly in developing countries, are too slow, while the IT business is very fast. Latin America has many examples  of lost opportunities because the government provided funds and subsidies to some industry sector, thereby encouraging it to remain inefficient and uncompetitive in the global market.

The business leaders have played a key role. The leaders in the major software organizations were quick to tap the opportunity when it became available and set high standards for the rest of the industry. After the standards set by TCS, Infosys, Wipro, HCL, etc., no company today aspires to be just a few-crore company. The aspirations have all gone up. And with increased aspirations came drive and innovation, which lead to increased success, particularly since the demand in the global market was available and the outsourcing model for software had matured.

Education must have played a role. Though we complain a lot about our education system, it is also true that no country outside of developed countries has been able to develop an education system like that of IITs. And though IITs have directly contributed little manpower to the software industry, it has indeed provided many success icons and many leaders across the world. And the IITs have set a high standard in education – something that indirectly aids education across the country. Even the fact that students frequently have to “self educate” because many colleges are not doing their job might have helped – after all, this probably helps develop the learnability skills, which are essential for reprogrammability.

All this does not mean that the industry or the country can rest on its laurels. The lead can, at best be viewed as a few years lead. There are many areas where the limits are reaching, particularly on the trained manpower front, and the use of IT with the country itself. These can start becoming the bottleneck. But for now, we can justifiably feel proud of what India Software Pvt. Ltd. has achieved, and feel proud that many other countries want to emulate it but are finding it tough. After all, how many such shining examples are there in India today which can make one feel proud?