India climbs IT value chain

Strong talent base and focus on IT education helping propel India, which started out as low-cost development center, higher up tech value chain, say observers.
Written by Liau Yun Qing, Contributor on

India is moving away from its humble beginnings of being a low-cost development center and up the value chain to become an IT innovation hub, market observers noted.

According to Asheesh Raina, principal research analyst at Gartner, India started out from the low-end services rung of the innovation ladder, when overseas organizations delegated work to the local companies to take advantage of the country's low labor costs.

Over time, Indian IT services companies moved up the ladder to provide specialized services for verticals, followed by consulting services and eventually to product development, which is typical of the stages of a conventional IT value chain, he added in a phone interview with ZDNet Asia.

"It takes a lot of skills to create a product. The company not only needs to understand the market requirement but also what the missing link is for customers, have the technical skills to create a product that is bug-free, and have the marketing skills to promote the product," Raina noted.

"There has been quite a good movement for IT service providers in India as they have matured and know how to position their products and services."

The Mumbai-based analyst's observations were corroborated by V R Ferose, managing director at SAP Labs India. For instance, the India-based research and development team made a "significant contribution" to the development of the software giant's HANA in-memory computing appliance, he said in an e-mail.

Additionally, the two R&D campuses in India have complete ownership of products such as the company's human capital management (HCM) and supplier relationship management software offerings, the executive noted.

Big potential talent base
Ferose pointed out that SAP first set foot in India because of the country's availability of talent as well as low costs.

Today, beyond the rich ecosystem of qualified talent pool, he listed the country's network of top institutes for higher education and vibrant local technology industry as unique characteristics that make the country a preferred destination for R&D, he added.

Raina chimed in, saying homegrown service providers such as Satyam and Infosys contribute back to the industry by setting up local universities or training centers that aim to finetune the IT skills of entry-level employees. By training undergraduates with relevant skills in school so they can hit the ground running once they enter the workforce, this cuts down the need for on-the-job training, he explained.

The country's wide range of human resources also mean companies have the flexibility of hiring people with specific skillsets for the entire IT value chain ranging from low-end to advanced skills, the analyst said.

There has also been a skill exchange taking place in the past 10 to 20 years in which local talent employed in multinational companies were sent to work in overseas branches, Raina stated.

When they return, these professional not only bring home specific IT knowledge, but also the culture and understanding of operating in overseas markets. These skilled workers will then impart their knowledge, which helps cut down training time for future IT workers, he said.

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