Is Indian IT sector condemned to be the dumping ground of the West?
Prathmesh Bhargav 25 February 2013
While US, China, Israel and even smaller countries are busy in harnessing their youth to build something innovative, the Infosys, TCS, Wipro and others are just doing mundane tasks that the West thinks is not worth their time. That is fine, but are Indian IT companies then worthy of being entrusted with large and difficult domestic projects like Aadhaar and other government databases?
According to NASSCOM, the IT industry contributed about 7.5% of the GDP. For FY2012, the net revenues were $100 billion. It is also said to employ 2.8 million people directly and 8.9 million indirectly. Indian IT companies compete for deals along with global peers for outsourcing and our companies have the cost advantage. They would get the project executed in India and deliver the end product to the client. This is a win-win situation. The client can get the work done to his satisfaction for a low price. The IT companies earn profits by two means ­ labour arbitrage and dollar­rupee arbitrage. The software developer benefits by having a well paid cushy job with occasional overseas opportunities. This industry offers well paying jobs to a large number of young people. The career is also attractive as it provides overseas opportunities. All in all, this paints a very attractive picture. Our government is happy because it has got exports to cut the current account deficit and more jobs are being created. So everything should be all right with this industry. Right?
However, there is a different aspect to this glittering story – the core of which is what is being outsourced and how the country benefits. My issue is with how we have transformed outsourcing. Outsourcing is good as long as it is a level playing field for both the parties. Currently, outsourcing is being seen as doing the core work in-house and outsourcing the menial task to India. India is becoming a dumping ground for all the work that the West doesn’t want to do. The West thinks “I have developed this software but how do I test it?... Ok. Let’s outsource it to the offshore team”. “Calling our clients and reminding them of their mortgage? Let’s hand it over to the Indians.” When it comes to slightly value-added work, they say “We can’t trust the offshore team to do this task. They are not competent enough. Let’s get it done here and get the documentation done by them”
I feel that India shouldn’t be allowed to become a dumping ground. Yes, Indian labour is cheap. Pay them the market rate at India, no problem. But to say that Indian labour is incompetent and thus they should just do these sets of tasks is grossly wrong. Unfortunately, our IT companies are falling head over heels to grab more deals of this kind.
We suffered a brain drain in the ‘80s and ‘90s. We are facing a different kind of problem now. Every year lakhs of engineering graduates join these IT companies. Little do these graduates realise the kind of work that they are going to do. Most of them don’t ever get to do real engineering. They are run through a crash course of few months and then allocated to projects. Not everyone is able to learn it all in the training. Some of them understand this and then move on to better companies, which allow them to do use their skills well. Also their low cost model can’t retain a skilled employee as he is likely to find greener pastures soon. Although no one has ever thought about it, can we imagine a day that when this current set of engineers retires what is that they have to their credit? Did they build something significant? What use did they put to their education they learnt in college? To develop software which would hardly see the light of the day or one which would silently die as it doesn’t serve the intended purpose?
In fact, thanks to intense competition, Indian IT companies will just grab any contract. They don’t care as to what is the nature of the project. They are ready to do tasks like infrastructure management, website management etc. Now that since the pools are drying in the West, they are looking for similar contracts in India. Does by any means handling passport application look like a contract to brag about? Even our government blindly trusts the so-called leaders of this industry.
One should look at US and China. US houses some of the best technology companies. Search engine, social networking, e-commerce, cloud computing and mobile are all that have been brought to the masses by companies based in US. Can our IT companies boast of building something world class? Isn’t our government doing a grave mistake by entrusting the monitoring of UIDAI database to companies which lack the credibility to maintain such a system?
Even China, whose internet regulations are very tight, has its own search engine and social network. While we Indians have always joked saying that China has not adopted outsourcing due to language barrier ­ I feel that it is more a matter of pride for the Chinese to not compromise. The Chairman of a large IT company keeps bragging about what we need to learn from China whenever he goes to a college to deliver a lecture. I wonder what he has learnt from China. The Chairman and the cofounder of the company are from a prestigious college. However the same college doesn’t allow this company for its campus interview ­ because the students of this college realise that they deserve much better. Doesn’t that send a message to them?
Even smaller countries like Israel and a host of Eastern European countries are miles ahead of us in terms of technology. While these countries are busy in harnessing its youth to build something innovative, we Indians are just doing mundane tasks just because the West thinks it is not worth their time and the IT company sees a big dollar­rupee arbitrage and labour arbitrage in this. In fact now, we are in the league of countries like Vietnam and Philippines which are proving to be low cost outsourcing destinations. Our IT companies instead of learning a lesson from this and adopting new technologies will open a shop in Vietnam and Philippines.
Indian labour is well-skilled. They just don’t have the right exposure. There is a disconnect between what we learn at our colleges and what actually happens in the industry. Most of the graduates dream of working for big companies but lack innovative thinking. It has become a rat race of sort where every corporate house wants to have a slice of the pie.
If coal, telecom spectrum etc are natural resources, then a country’s human resources are the most valuable assets that it possesses. They drive its economy. Using these resources for such menial tasks should be labelled as a grave crime. NASSCOM the voice of the industry is not any better. It is more a lobby as is FICCI. They raise a hue and cry over a visa restriction but have nothing to say when a ground-breaking technology is released. NASSCOM will organise a string of events to cater to the IT industry but has very few events for startups and product development. This is why a group of companies, which is focused on product development, has parted its way to create a separate group called ISPIRT ( Their focus is on innovation and product development.
This sector has created a vicious circle. There are many dependent sectors on it. Housing sector on metros depends on workforce of this industry. The same goes for the auto and consumer goods industry. An entire army of security guards, support and infrastructure staff is deployed in the offices of these companies. A host of mutual funds and insurance companies have invested in these companies. If there is a problem in the West the whole system comes to a halt. Do we plan to build an economy around this?
Our country has a young population. We should harness it to good use. We need to encourage innovation, adoption of new technologies and product development. Among the IT exports only 20% is constituted by products. The young graduates and the adults alike have to be taught that working for a big company is not the ultimate achievement rather building something disruptive is.
Having said this I would also say there are companies which take the outsourcing route but do very good engineering projects. Likewise, not all product companies are good. There are companies which are product-oriented but their engineering doesn’t live up to the mark.
I would like to reiterate that outsourcing is not the problem. The problem here is the greed to earn profits at the cost of quality (of both the software and developer). Some MNCs have tried to copy the outsourcing model by setting up shops in India. Initially the staff was doing mundane tasks at India, however of late the MNCs are offloading some real work to India. This is a welcome step but we need more of this to happen.
1 year ago
Finally someone who spoke the truth!!. Cheers to the author
1 decade ago
If we are not utilizing country' talent in right field this is the problem of government not of the business men!

Veeresh Malik
1 decade ago
Interesting comments. Let us look at more truths, then, shall we? Could we open the books on the role of the various STPIs and the certificates they issued, since '98-'99, for tax exemptions and more? Is it true that the Income Tax Department has been wanting to carry out investigations, especially on the Maharshtra and Karnataka STPI offices, but has been holding its hands for ?? reasons? Dig further - let us try to analyse how many of the Infotech companies were also fronts for builders and real estate majors, who used every possible trick in the book to, again, benefit from the various exemptions under STPI over the last few decades?
Krishna Prasad
Replied to Veeresh Malik comment 1 decade ago
What is your point? If tax benefits are misused,let the Govt take action as per law.But to call the STPI benefits wrong is unfair.Garment,seafood,tea, spices exports get tax benefits. Why did they not becomse as big as IT? Because in IT, the corrupt departments like Customs/Central Excise/Income tax could not get their dirty paws on the product flow which went over the wires/satellites.Imagine what would have happened if Infosys/TCS have to put their software output in CDs and transport it through our airports/ports.The biggest expense of an IT company is salary.The Govt gets a lot more back in terms of higher income tax collection than what it gives in STPI benefits.
Krishna Prasad
1 decade ago
I do not understand the angst of the author.The biggest contribution of the IT industry is the tremendous self confidence it provided to Indians that we can sell our skilled output in the global market.What is wrong about the Outsourcing model pioneered by the IT majors? Perhaps he has not heard of the theory of core competency.Veolia Environmental Services is one the world's largest Environmental companies specializing in waste management/recycling garbage. By the author's yardstick he would derisively label it is a low end work and not a worthy business.NRN, Premji are incontrovertible proofs that given the right business environment, world class companies can emerge out of India.Comparisons with the US companies are meaningless.Can a company like Twitter/Google thrive in India with its shaky commitment to free speech? India got independence in 1947 and the disastrous socialist policies smothered entrepreneurship.The government instead of creating a conducive environment for entrepreneurship has increasingly become venal and corrupt.Compared to 70s/80s, a majority of IIT graduates continue to stay in India.Once a better business environment is created, their skills would be harnessed batter and a new generation of superstars will emerge.The world thought that we'll be limping permanently.We have learnt to walk, we'll run very soon and then fly.
Replied to Krishna Prasad comment 1 decade ago
The problem is not with outsourcing. The problem is with outsourcing work below par my skills.

Comparison with US companies should be done. In technology sector geography doesn't matter. While Google and Amazon started after our IT bluechips, they are miles ahead in both technology and financially.

If China can have its own social network - why can't we? Free speech laws are more tight there.
Krishna Prasad
Replied to pravsemilo comment 1 decade ago
If you find that work below your skills,leave the company or start something of your own. Nobody is forcing you to work there.If the country is not able to harness the skills of its people,it's the government's and society's challenge.Do not fault the entrepreneur who has spotted a business opportunity.In tech geography does not matter. That's why TCS and Infosys are headquartered in India when their major business is outside.Google and Amazon did not blossom out of IBM or HP or Digital.They were new companies started by people with ideas.Create a favorable environment for Venture Capital/entrepreneurship and over time you'll see the results.For every Google, there are more than 100 failures. Who'll fund those failures? Comparisons with China are pathetic.China has it because it is paranoid about free information flow and has banned Google/Twitter.Does anyone outside of China use those products? What next -"Rajiv Gandhi Social Network" under the Ministry of Information Technology-To open account submit application forms in triplicate & a police verification certificate?The point is, do not deride the few successes. Is it perfect-absolutely not.Celebrate them and improve upon them.
1 decade ago
Good article full of anguish. All parties are equally responsible for the situation, the least being companies in West. They are just doing business which we don't want to stop and cannot be blamed for it. Also, its not that Indians are being singled out. The article doesn't point out that several Indians are holding senior positions in Western companies like Google, Microsoft, Facebook, Intel and even NAA. So West is not biased. Rather them keeping talented Indians in India, they call them to west.
Problem is Indians are not looking inwards. There can't be a world-class product developed unless there are customers. India had very less penetration of IT and even among them very less for e-commerce (leaving IRCTC) etc. We can build social network as for that we may get large audience but who is going to pay? We enjoy Facebook because it is free. How many would be willing to pay if it becomes paid?
Fortunes of IT industry is linked to fotunes of Indian society at large. IT industry cannot excel when Indian population is not excelling.

Till that happens let's keep the iron hot by doing outsourced work.
Replied to Roopesh comment 1 decade ago
You raised a very valid point that I had held back. Yes its true that Indians are working on top positions in US companies. The difference is however that most of these people went to study at the US. And most importantly they have never worked for our IT bluechips.

Just open any technology book and look at the Acknowledgements section. You will see a string of American names, European names, Jewish name and Chinese names. There would be a occasional mention of a few Indian names. This guy would have either studied at US or was working there (not as an employee of our bluechip). Why is this? Are we just meant to do some grunt work?

I would suggest that you do some research about software companies in India. There are world class products from India. For example Zoho - similar to Google Docs. Your customers need not be Indian. You can have global customers and still not do grunt work.
1 decade ago
Product development and innovation is inevitable for making Indian IT industry sustainable. New outsourcing destinations other than India are emerging faster. The jobs can move outside from India much faster than they moved to India. Focusing solely on outsourcing jobs won't be a wise step by IT industry policy arena stakeholders. Welcome ISPIRT....
Replied to Abhishek comment 1 decade ago
Thank you for your inputs
Sucheta Dalal
1 decade ago
The big IT companies, handling domestic projects have come under fire for the very first time -- TCS, Infosys are just the beginning.

Their reaction? To immediate start trolling the writers with nasty comments. Some "IT experts" are not even wise enough not to troll from their official email IDs. Others claim they are not from IT, but the kind of nasty aggression they reveal reeks of vested interest -- otherwise why would they emerge from nowhere and discover Moneylife only when there is criticism about the IT blue chips?

Maybe the IT industry, which has been feted for too long for their allegedly high governance standards need a reality check really quick!
Replied to Sucheta Dalal comment 1 decade ago

In fact this is the first time Indians have got to know about it. Till now this was happening in the West and the web was filled with similar discussion on outsourcing. Now that West is slowing down and these companies are looking for projects domestically we are getting to know of these facts.
Replied to pravsemilo comment 3 years ago
I have gone through the article, in a hurry, and found the keywords, like outsourcing, skills, training etc. The fact is, it still deals with how to help the IT giants to be more profitable, and not, how to drive the middle class people, towards the chain of innovation.
The article, no where has discussed that how to make youth of India not to do mundane tasks. Where the problem starts? At the school level. Education. That needs to be fixed, first.
So, overall, still, it's some handful of corporations, who owns India, and they still are dynasty, and media would always talk about their interests first, and not of common man.
Replied to Sucheta Dalal comment 1 decade ago
IT industry in India has long been on an accelerated downward spiral. It might still be bringing in dollars, however the industry has lost its soul. We all think of it as a skill based industry. But unfortunately, skills of the highest caliber are fast draining out of this industry. What we now see is more of a labour industry with bare minimum focus on acquiring and expanding skills. It has all become a game of headcount based dollars. Sadly this culture has been spawned by the biggies in the industry. The quality of management is at a pathetic low, with the result that when something goes majorly wrong, they are totally clueless on where to turn to. If the pressure from the business becomes immense you can see them stooping to their lowest while dealing with their sub-ordinates. The kind of outages you have quoted has now become commonplace and the powers-that-be in the industry thinks it is normal. One of the reason it is taking increasingly longer time to come out of such outages. The process framework which were put in place to ensure consistency and quality has sadly become masks for hiding inefficiencies. The reason why the biggies can't grow out of the labour-arbitrage based work model.
pravin varma
1 decade ago
does comparitive advantage mean anything to you?
i dont see any economically sound idea in the whole rant/article.just appeals to authority and nationalism.?

for a couple million people to have broken out of the shackles of poverty is achievement enough.if you know how to make world class products,go ahead and do it.
Replied to pravin varma comment 1 decade ago
My issue is not with poverty.In fact in the big IT companies the pay are lesser compared to real software companies. The only person who benefits is the owner of these companies by way of arbitrage. Why do you think every other well known industrialist has a IT company? Who is benefiting?

As far as world class products are concerned, we are already doing it. Just that they are not in the limelight.
Replied to pravin varma comment 1 decade ago
Tell this to people who are paying more for even buying a small flat in cities like Pune. The moment you mention IT, the rate doubles. Ditto for other things. And it is not just the IT people who are paying the price. All others have to bear the burden of your growth.
Few students from Mumbai have created m-indicator, an app that shows timings of all local trains. At present there are over 20 lakh users for it. This shows nothing is impossible, unless you want to do it.
1 decade ago
innovation? and Indians? We are herds, Narayanamurthy should be honoured by US govt. for giving providing cheap labour. we have forgotten what innovation means.
biren subudhi
1 decade ago
INDIA being WORLD's 2nd largest Country by POPULATION has lot of Challenges-cum-Opportunities in order to become a DEVELOPING Country giving its Masses QUALITY EDUCATION/HEALTH SERVICES/GOVERNANCE/SECURITY.

Lets talk about SECURITY aspect:
- CCTV Monitoring : So many TERRORIST attacks happened yet our Big CITIES like MUMBAI/PUNE/DELHI lack of CCTV Monitoring System in place.
Indegenious Solution: We have so many WORLD CLASS institutes (IITs) Govt can ask them to come up with an UNIQUE SOLUTION forREAL TIME CCTV Monitoring Solution using COMMUNICATION SATELLITE.
(Imagine all CCTVs relaying visuals to CONTROL CENTRE via SATELITE in REAL-TIME). It can be useful for TRAFFIC CONTROL/VIGILANCE by POLICE as well.

Hurdle: POLITICAL VISION and Will Power. If it would be developed Indigenously how dey would get KICKBACKS to fill der SWISS Accounts.

- DRDO & HAL : Defence Organizations like are not Operating upto der POTENTIAL. GOVT is not at all worried about HAL's performance rather dey are hAppy bcoz as long as HAL & DRDO underperform they can HAVE FOREIGN DEALS .

Undersuch circumstances what can be done!!!!!!

biren subudhi
1 decade ago
Quite a big article., many points to discuss!

-On Dumping Yard : Professionals working in IT industry are from Middle class background, with higher aspirations to Live a happy life from every prospective.
Govt doesn't promote any R & D activities, only busy in SCAMS with ZERO VISION for DEVELOPING INDIA.
Leaders like APJ Abdul Kalam & MODI has made a difference with their VISION.
Don't Expect IT Companies to do any such INNOVATIVE WORK when they facing so much of COMPETITION to manage Revenue/employee & customers.

I have been in touch with People who have BRILLIANT IDEAS & would like do Something. They didn't find support very often, in countries like US/ISRAEL support is Enermous.

Now a days Companies like TECH MAHINDRA & MAHINDRA SATYAM combine are promoting INTRA-PRENEURSHIP., ENCOURAGING Employees to come up with INNOVATIVE IDEAS/SOLUTIONS.
They have well defined schemes to Fund such projects.

-About MCA21 being DOWN

Its better to question MCA Officials bcoz being a CLIENT they have the RIGHT to take any STEP on VENDORS causing LOSS.

Request: Do not giveup confidence on Indian Professionals and BRAND INDIAN Companies !
1 decade ago
First Reason: Big IT companies being leader and out spoken should have shown some courage to invest in product development and build capability. But I just see all of them are listed on exchange .. is it that all of them were focused short term gain(stock price, bottom line, obsession with margin)

Second biggest reason of not having that kind of companies is legging of manufacturing sector .. We get all our electronics from LG, Samsung, Nokia. All our defense purchases are imported. For what sector should we produce that top notch software.

First, second and third reason is govt. They never have long term view. If we had good manufacturing sector, if they would have promoted innovation at least in telecom. etc ..

Forth : We are not yet there .. The number of product I purchased online in US ten year back I still need to reach to that level in India.
Replied to Bhupesh comment 3 years ago
Last point, which all emotional people of India forget, that India as a nation as never meant to exist, and in reality, all politicians wanted to bring a civil war inside here, and it's largely due to the reason that India is not a homogeneous nation, but a multiethnic, multi cultural society, and erstwhile nations of many migrants from persia, turks, mongolia, etc have been annexed as part of the republic of gujrat, known as hindustan, by patel, with the help of mountbatten and british army.

You see, majority of India is owned by small faction of corporate elites, who have managed to sway their way in the politics also, and they have been the driving force behind the future of India, because, only corporates want an united India, which serves their interest to exploit masses and loot resources.
Kalpesh P Shah
1 decade ago
In my opinio, it starts with society and education.

All of us want to bring about new things and make huge amount. We look at Bill Gates /Steve jobs, serge etc and we look at their success, not look at the hard work, setbacks.

Success has many friends, failure has none. This holds mostly true. Life of safety, salary closes our mind. The society doesn't encourage trying out, neither do schools, colleges. Passing with higher marks is important than using different dimensions of intelligence.

'A' coach can help make A player. Our schools, colleges with some exceptions are full of B coaches. What can we expect?

Wonder why lots of Indians do great abroad?
A flower needs enough of sunshine, water, soil to grow. We don't have such ground. Some people realize this, went abroad and made it - including those who didn't go to schools, colleges or had poor support.

Can the parents, teachers, society try not to discourage the children from doing what they want to do?
Kalpesh P Shah
Replied to Kalpesh P Shah comment 1 decade ago
Think of big IT companies in India as wholesale stores as Walmart.

And for now, we lack gutsy people everywhere.
Deepak Shenoy
1 decade ago
I hate the concept of code coolies as much as you do but I think the solution is in only two things:
a) Costs
b) New players

You will never replace the maid you have for washing dishes unless it becomes too expensive. Because she does work you don't want to do. That's why Indians will always be code coolies if we are inexpensive. We are inexpensive because the salaries in dollar terms are very low. If that equation changes - without the RBI poking its nose into the market - then the costs will go up automatically.

Second, all disruption is caused by new players. You can't expect the TCSes and Infys to fix things, to get rid of their golden egg producing goose. New companies should come that get new business. We should actively remove any silly barriers to entry - and there are very few today.
Replied to Deepak Shenoy comment 1 decade ago
Hi Deepak. Thanks for your comments. Your points are valid.

However the cost equation is already changing. The bluechip IT companies are scouting for low cost offices outside India. And irrespective of geography, a good software developer will anyway switch for a good paying job which his skills are worth for.

Your point about disruption being caused by new players alone is only half right. Do you think that Apple and Google are new companies? What about Amazon? Yes it is true that new players are causing disruption and this is also true in India. Look around and you will see many small companies which are doing some innovative work that too from India.

I don't expect TCS or Infy to fix things. To fix things is our own responsibility.
Deepak Shenoy
Replied to pravsemilo comment 1 decade ago
Google was definitely new when it disrupted. Apple was new in 1984, and new to the music/phone business in 2000s. A Reliance disrupted mobile telephony in India and it was a "new" company in that space.

No doubt that there are innovative companies in India.
Replied to Deepak Shenoy comment 1 decade ago
What is disruptive might be subjective. I still consider Google and Apple to be disruptive despite their size and age.

In general when companies grow big they lose track. Not sure why is this. Could be due to greed of promoter or could be shareholder pressure. There are very few companies in this world which despite growing big still remain true to their spirit.
Veeresh Malik
1 decade ago
Very valid and apt article. Reality is that we appear to be producing a generation of code coolies whose soft-skills are often like those of indentured labour. That's the simple truth.
Replied to Veeresh Malik comment 1 decade ago
Yes true. But it is not just the soft skills. We are lacking behind even in technical skills.

Our companies are still stuck in the world of Java, .Net and etc, while the West is exploring and developing on newer languages and platforms.
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