There were 251 universities and 11,553 colleges in India in 1998. Still, as of 1996, only 8% of the eligible population attended any college or university. Further, the interaction between university and the IT industry is minimal. There are several academia-industry research partnerships as well as few consultancy assignments for faculty from industry .Very little amount of independent research is done, partly because until recently, faculty (even at the IITs, countries most prestigious institutions) have not been expected to do research. The average number of citations over a 5-year period for the average faculty member at the Indian Institutes of Technology (IIT) is not more than 3.
This compares with 47 per faculty member at MIT and 54 per faculty member at Stanford University. The country produces only 300 master’s degree graduate professionals and just 27 Ph.D.’s in computer sciences(CS) every year (despite excess capacity), compared with U.S. numbers of 10,000 and 800 respectively.
However entry barriers are bit low, countries searching to develop software businesses are constrained by the following internal factors:
- small domestic and local markets
- lack of quality standards
- weak protection of property rights,
- poor quality labour workforce and infrastructure and lower level marketing skills
- And relatively low importance of labour cost savings (for packaged software).
As well as the following external factors:
- English language speaking barriers
The cost advantages that favour Indian-based software development are dwarfed by a problem that undermines growth policies in all developing countries which includes India: the problem of the brain drain. We believe that lots of programming activities will continue to leave the U.S. to some extent. All These activities are very much likely to emphasize maintenance rather than basic software design and development.
How did the industry withstand these problems? The solution found by domestic and local firms was to stay with programming for services, initially by exporting programmers and later by developing customized software solutions and programs in India. This type of work did not have to encounter threats such as small domestic markets, weak IP protection and lack of R&D in universities and university-industry linkages. Some challenges and issues, such as the lack of venture capital and shortage of project management skills, did not cause failure but took the industry towards a more stable structure of domination by large, well-capitalized, well-managed conglomerates that diversified from existing businesses into customized software development.
Policy reforms in the 1995s and 2002 reduced import tariffs to near zero and standardized foreign ownership, intellectual property protection, venture capital, stock market listing and telecommunications policies to global best practices. Thus, most of the weaknesses and challenges described above are likely to reduce in importance. In addition, may technological changes during this period, especially the Internet, led to a sharp decline in data storage and transmission costs. These changes induced a new round of entry of MNCs and start-ups and opened new opportunities for existing firms in remote software services, such as email management and remote software maintenance.