The story of the Indian IT industry is perhaps the greatest ever transformation seen in the country in the past 50 years.
Today, the IT industry exports $126 billion worth of services. Of the top five global software service firms by market value, three are Indian. In the top 10 software services companies by market value, there are 2 million employees, of whom 1.5 million are of Indian origin. Nearly 60 per cent of global outsourcing comes to India. Of the $600 billion of software created every year, more than 30 per cent are from India. The US has around 6 million people working in software services, of whom 1 million are of Indian origin.
The reasons for such stupendous success are many. India opened up in 1991, and this removed many of the constraints. Tariffs were lowered, IPO pricing became free, travel restrictions were eased and the capital market was deregulated. The biggest of them all was when in the US there was a shift from mainframe to client-server technology. The biggest growth in the IT sector happened during the 1990s as the proprietary hold of the mainframe providers was broken by Microsoft, Oracle and the others. This set off an upsurge of spending in IT service in the US and Europe.
This opened up the market for India since there was a huge shortage of talent and the country had abundance of trained workforce. Indian IT firms were started not by traditional business families, but by highly educated middle-class Indians. They attracted the best talent, created great campuses and ran their companies in an open and transparent manner.
Then, the Y2K boom started — which again Indian IT companies capitalised on; it was followed by the dot.com surge. That boom went bust because of overvaluation of stocks. After that, the ERP wave took over and led to web-based technologies. This rapid shift in technologies in a matter of 15 years created a huge opening. India was globally recognised as a country to go to if you wanted to develop software. Today, according to official records, there are about 75,000 Indian IT firms. Five giants have dominated the journey of the domestic IT industry. These are FC Kohli of TCS; Azim Premji of Wipro; NR Narayana Murthy and Nandan Nilekani of Infosys; and N Chandrasekaran of TCS. Each one built upon the success of the other, and yet admired each other’s work.
Infosys is perhaps one of the greatest success stories in corporate India. But the company had humble beginnings. It listed in July 1993, but the response to the IPO was lukewarm. At that time, its revenues were $5 million and the total IT industry would have been about $100 million. Today, Infosys alone is a $45-billion company with 2.25 lakh employees, and has total revenues of $11.5 billion. An extraordinary set of people came together to start this company and went on to hire some of the best talents in the industry.
Infosys set standards in all areas of activities, including technology, HR, marketing and corporate governance. Infosys led India to a new era. Another success story was TCS, which was led by the marketing wizard N Chandrasekaran, who took best practices from Infosys and brought them into play in TCS, which has now become the largest software services company in India.
Though Infosys set standards, it could not sustain itself beyond a point as the founders stepped down one after another, which left a huge vacuum. It ultimately led to Narayana Murthy coming back to revamp the company. Now, Nilekani is the chairman of the company, which now has a new CEO. The old magic of Infosys is coming back. In the next 25 years, Infosys will be among the top five global companies by market value… unless deep-pocketed rivals acquire it. All listed companies are publicly held and are available for sale to the highest bidder. We cannot take any company’s long life for granted.
Many have asked me as to which country can overtake India. I keep repeating that it is China, given its huge human capital potential. But China has not been able to create global IT services companies till today. This is despite its having a huge internal market and unbelievable capital access and some big IT product companies.
As told to Giriprakash KV . The writer is Chairman of Manipal Global Education. He was a former Director of Infosys.