Davenport, Leibold, Voelpel: India’s achievement

Even judged by the blistering speed of information technology industry change, India’s achievement is astonishing. In barely a decade, it has created a range of businesses with more than 800 000 employees and annual sales close to $20bn, almost all exports. The corporate names on the welcome boards at Bangalore reception desks read like the Fortune 500. And that, industry leaders say, is only the start. Roy foresees annual growth of 50% or more and a trebling of business-processing jobs to 1.2-million by 2008.

The larger companies are plotting their next leap: to evolve from subcontractors into strategic partners, sharing risks with customers. Many are busy hiring consultants with experience in target industries including banking, health care and telecommunications. The goal, says Roy, is to “suck out knowledge” from customers, to serve them better.

India’s ambitions seem to know no bounds. But these companies still face hurdles. One is building customer trust. They must also manage increasing complexity and scale, while keeping footloose employees loyal. Intensifying competition for skilled labor makes that harder. The industry recognizes all those challenges and is seeking to meet them.

But one potential hazard lies beyond its control: a backlash against outsourcing in the US, by far its biggest market. Although the threat has receded as US job creation has recovered, an economic downturn could revive it, along with hysteria about industrial “hollowing out”.

Pressure for protectionist measures could quickly follow (although such legislation would be difficult to enforce on multinational firms). If that happened, all the earnest arguments heard in Bangalore these days about outsourcing being a “win-win” game, and trade a two-way street, would be unlikely to cut much political ice in the west.

India’s information technology industry knows that. But it also senses a powerful counter-trend running in its favor. Fiercer global competition, bigger commercial risks, faster innovation, shorter product cycles and shortages of key staff are all transforming its western customers’ methods of doing business.

And the most sophisticated Indian firms, such as Wipro and Infosys, are establishing consulting and systems integration capabilities in the U.S. and other client markets, so that they cannot accurately be called foreign outsourcers.

Even the outsourcers are outsourcing. Wipro chairman Azim Premji says the company is defining its technological “crown jewels” ever more narrowly and entrusting work performed in-house to partners. That is an imperative of its commercial survival. The belief that it will continue and grow even stronger is the industry’s biggest bet on the future.