In 2023 India has one of the world’s largest technology ecosystems and well over 100 unicorns – startups whose market value exceeds USD 1 billion. But India’s vibrant technology ecosystem had a modest start.
Back in the 1980s, the then-nascent Wipro, Infosys, NIIT and others were among that era’s startups. Over the next four decades, these companies grew into multibillion-dollar companies. Today, they have world-class expertise in cutting-edge technologies such as cloud computing, artificial intelligence, and a host of digital technologies.
Today India’s software companies are counted amongst the best in the world. They, along with their global peers, set the tone for the global software and technology industry. The prowess of Indians in technology is indisputable. Indians are at the helm of some of the world’s largest technology companies.
The Rise of Indian Software Companies
As recently as the middle of the 1990s, few would have guessed that Indian technology companies would become as dominant globally as they are today. Though Indian software companies were globally competitive in the mid to late 1990s, their abilities hadn’t yet captivated the world. It was the Y2K scare which brought Indian software companies’ extraordinary capabilities to the world’s attention.
As January 1st 2000 approached, there was a worldwide panic that computers the world over would crash, spew out garbage, and make egregious errors because the hardware at the heart of every computing device wasn’t designed to track dates beyond the 1900s. To become Y2K compliant, companies across the world started on a mad rush to hire IT professionals who could help them make the transition to the year 2000 and beyond. They looked to India – which had a large pool of talented IT workers. Indian programmers were initially hired to combat the Y2K threat; however, the global giants that hired them were so impressed by their talent, that they began outsourcing additional software requirements to India.
Arguably, the Y2K bug got the ball rolling for the Indian IT industry, and since then there’s been no looking back for the technology sector in India. Indian IT workers, who were initially hired by global giants not just because of their expertise but also because they were relatively inexpensive, have rapidly moved up the value chain. Today, Indian software professionals are prized almost solely for their talents; the cost arbitrage that made them attractive to foreign giants in the past is less of an allure.
The Next Decade
The 2000s was a decade when India’s top three technology companies were snapping at the heels of the world’s technology giants. But then, close to the end of the 2000s, something Indian tech didn’t anticipate happened. The mobile revolution began, and the world’s technology landscape pivoted from B2B to B2C. Technology giants in Silicon Valley developed world-beating applications solely for consumers. What’s more, these software products could be downloaded and used for free. Consumers were now the products and the catchphrase ‘Data is the new oil’, took hold.
A World Powered by Data
Smartphones, which initially were beyond the reach of many Indians, were now within reach of those at the bottom of the pyramid. Everyone from business executives to autorickshaw drivers to housewives now uses the same digital platforms. Driving this democratization of technology was the understanding that consumers’ data would henceforth fuel the world’s economy.
In 2016, when the Indian telecom sector was disrupted by a new entrant, the price of data plummeted. Now everyone with a smartphone could spend hours online on social media, streaming sites, e-commerce sites and the like without having to stare at a huge bill at the end of the month. The Indian startup boom took off in earnest as Indian entrepreneurs sprang into action. More Indian startups than ever before began developing products for customers. These startups could now serve hundreds of millions of smartphone-toting Indians who had cheap and easy access to data.
Petabytes of consumer data began to be generated every minute. Such data and the vast computing power of the cloud have given life to new business models in India and across the world.
Fintech companies now use consumers’ data to judge who is a good credit risk and have begun disbursing loans in minutes. Many who were outside the formal economy, now have a credit rating thanks to their smartphone and the data it generates. The ubiquity of mobile phones democratized education. Anyone with a mobile device could now learn from those who are leaders in their fields, often for free. In essence, smartphones have connected India to a world of possibilities. Smartphones are the linchpin of the nation’s tech renaissance.
Backing up the Indian IT sector is increasing spending on R&D and an education system which, though not without its share of shortcomings, is among the most rigorous in the world. The amount being spent on R&D in India has increased from INR 60,196 crores from 2010 to 2011 to INR 127,380 crores from 2020 to 2021. The number of seats in the country’s leading technical institutes, such as the IITs, NITs, and IIITs, have also been steadily increasing.
Software Goliath but Hardware Minnow
India’s immense software capabilities have helped transform the country from a sleepy tech backwater in the 1980s, into a global technology powerhouse. The software ecosystem in India is as advanced as any in the world. In this transformation, smartphones have played a central part by giving businesses access to hundreds of millions of new consumers and access to their data. Data is the oxygen that leads to the creation of new products.
But today the same India – a software goliath – is a manufacturing minnow. The lessons of India’s software successes should be applied to realize success in another vital area – hardware manufacturing – starting with smartphone manufacturing.
You Haven’t Seen Anything Yet
In the years ahead, new technologies like ever more sophisticated smartphones, VR headsets that resemble sunglasses, smaller and more powerful microprocessors, and perhaps the most earth-shattering, quantum computers, will have as great an impact on the world as the World Wide Web did in the 1990s. While software will play a central role in this new world, hardware’s role will be even more important.
For Indian companies to not miss the boat – as they did when the global technology landscape transitioned to a B2C model and data became the new oil – more robust initiatives that bolster the country’s hardware manufacturing landscape need to be rolled out now.
To thrive in this rapidly emerging world, the Indian government should support the development of a hardware manufacturing ecosystem by introducing relevant curricula in universities. Also, policies that encourage domestic hardware and smartphone manufacturing and safeguard the interests of domestic manufacturers shouldn’t be shied away from.
Already, the world is in the midst of a technology war. The tech war shows which way the wind is blowing concerning the future of the world economy.
Leading world powers are vying to curb others’ advances in a vital area: the manufacture of ever smaller and more powerful microprocessors. In this world, India’s prowess in software alone would leave it vulnerable to the dictates of those who have expertise in the vital technologies of tomorrow like microprocessors. Hence for India, having manufacturing capabilities that rival the strength of the country’s software sector is essential to the country’s economic growth.
By Madhav Sheth, CEO, HTech