India's IT Industry at the Crossroads: Grave Challenges Ahead

India, the global leader in information technology enabled services (ITES ) has emerged as a most prominent developing nation in the world. Different factors are responsible for its success. The Information System (IS) and International Business (IB) literature which provide us adequate information about the past success do not explain us about its sustainability in the long run. India has emerged as the world’s largest sourcing destination in the IT services in the world. It has been predicted by Indian Software Product Industry Roundtable (ISPIRT) that India can build a US $ 100 billion software product industry by 2025. In 2014 the Indian software products market can be expected to grow up by 14%. There are so many factors which have contributed to this success like human capital, information and communications technology (ICT) infrastructure, trade policies, national culture and language, Government regulations, policies, market potential and several other factors. Now, one can always put up a question about the sustainability of these successes in future. Four hurdles to sustainability of success of IT business

The quality of human capital is not able to meet the new global demands of standards. It lacks in constant upgradation.
ICT infrastructure needs to be given immediate attention. So India should take some drastic and immediate steps for its improvement. IT-ITES companies should consider relocating themselves to the next tier cities as the operational costs in the urban areas are getting escalated day by day.
India has an added advantage as an English speaking nation. But as the other countries are catching up very fast, India’s most prominent potential is eroding drastically. The most prominent country among them is Philippines. Philippines not only has gained its prominence in the world’s IT market because of the language proficiency, but has overtaken India in the software skills and the call centre business. Philippines as former US colony, has a large population of young people who speak American English very proficiently. These young Filipinos have embraced American culture unlike Indians. American clients are very comfortable to communicate with the Filipino executives than their Indian counterparts. In addition to language skills Philippines has better infrastructure than India.
Indian business sector is still controlled by stringent Government regulations though India is a politically stable country. Moreover, corruption also makes India less competitive globally.

How to face new challenges to IT industry The Indian IT – ITES industry cannot be sustained in the long run just with the competitive advantage which India enjoys with its low cost back office service. Indian IT-ITES industry faces new challenges as it has to provide higher value products and services instead of providing low cost services. Endogenous growth theory explains the sustainability of the Indian IT-ITES industry. The importance of endogenous growth theory lies in its uniqueness to explain how the growth rates can be sustained in the long run. For the first time the endogenous growth theory has made the process internal which influences the domestic policy to take initiatives in economic growth. Proper incentive structures should be designed for both the public and private sectors so growth rate can be sustained. The main aim of the endogenous growth theory is improvements in productivity so that economic growth takes place.Then the economy should create such an environment so that new ideas are encouraged for the success of the IT-ITES industry which will be sustainable in future. Innovation and new ideas should come up constantly. For the growth of new innovative ideas the number of researchers should be increased. In the unfolding scenario, it may be said that India’s success cannot be sustained in the long run. So, after a brief span in India, technology and innovation may move westward if we cannot implement right policies and create proper business environment, and meet the new challenges.

India's IT Industry at the Crossroads: Grave Challenges Ahead

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