Competitive Challenge for India s Software Industry: Moving Up the IT Value Chain

Competitive Challenge for India's Software Industry: Moving Up the IT Value Chain

Indian companies placed themselves on the high-tech map as providers of low-cost software development in the mid-1990s by offering price-competitive, high-quality software development. This in turn attracted a multitude of MNCs that quickly set up remote development centers or contracted work to local firms.

The Indian software industry began with onsite staffing services at clients ' overseas locations. From this low end of the value chain of IT services, the industry is steadily becoming more sophisticated. By 1999, up to 40% of high-tech exports were in offshore services or packaged products. While Indian software companies before 2000 relied mostly on contracts to fix Y2K glitches, these companies are now slowly beginning to move up the value chain to write software for e-commerce, wireless applications, embedded software, and customer relation management (CRM).

However, despite India's success in the IT industry, it is still a low-cost service provider. According to the K.B. Chandrasekhar Committee Report ^[10] on VC (venture capital) in India, it is time for India to take a stronger position in the high-tech value chain. As outlined by this report, the sequence of steps is information, knowledge, ideas, innovation, product development, and marketing. India is still at the knowledge level in this chain.