India’s software development and IT industry is one of the world’s biggest and successful information technology industries. Begun in mid-70’s, it employed 1,500,000 persons in 2015 and earned revenue of $56 bn, almost equal to 12.5% of global software services spending.
In early days, Local markets were absent and government policy toward private enterprise was hostile. But, all these conditions had led to industry’s evolution. The industry was begun by Bombay(Mumbai)-based conglomerates which entered the business by providing global IT firms located overseas with programmers and talented software professionals. Their success owed to the creative and advanced exploitation of a new global market opportunity and protection from transnational organizations and start-ups by policy.
The protected atmosphere restricted the growth of software project management and domains expertize skills so that, despite access to a massive pool of programmers, the industry could not expand in value-addition.
A decade later, mainframe-based programming and manufacturer-specific operating systems (OS) and languages gave way to workstation-based programming and standard operating systems (OS) and high-level languages. These transitions improved and modularized the programming function, i.e., programming/coding could henceforth be done independently of the hardware platform infrastructures and from the other functions of creating software, such as system design and analysis. This, along with policy reforms that lowers costs of imported hardware and software, results the Indian software development industry to shift from supplying programmers to deliver software programs and packages. As work shifted to India, infrastructural costs raised as a proportion of total costs. This led the industry to relocate from Bombay to Bangalore.
During the initial years of the industry’s third decade, beginning in the mid-1990s, the introduction of the Internet facilitated the specification of services, such as software maintenance and email management, from the site where the software package was residing. Following telecommunications policy reforms in 1999, this has opened new opportunities for domestic and local firms.
In 2000, reforms in foreign ownership regulations, intellectual property protection and venture capital policy induced TNC, diaspora and foreign venture capital entry. The classical software services industry, dominated by large local and domestic firms, has subsequently competed with firms with superior domain expertize skills and access to finance. In consequence, the industry as a whole is learning new leadership, more software product development and higher value-addition.
Domestic entrepreneurship emerges as the major factor for evolution, survival and innovation in a hostile industrial policy atmosphere. The maturing of the industry needs a movement to a supportive government policy; maturation was also critically provided by the modularization of the programming function through new and advanced technologies. These changes favoured domestic firms that provided software development services. Later policy and technological changes induced transnational entry and led to higher value-added output.