The Issue: What if we don’t move up the value chain?

The

issue of moving up the value chain is closely tied to infrastruc—tural

bottlenecks and quality of manpower at one end and growth at the other. Despite

the obviously high growth rate, the Indian software export segment still works

largely on a T&M (time and materials) basis. Till that model changes to

fixed price delivery, further largescale growth will be affected. Says Amit

Sircar, group GM, marketing, Wipro Infotech, "Software exporters are doing

well but we’re really just honing our technical skills. You need to build up

consulting chains——business consulting; domain consulting, productization..."

A recent Nasscom survey revealed that Indians were in leadership positions in

a very large number of international IT firms. There is also little doubt that

Indian software programmers are moving into hi-tech skill areas. The problem,

however, remains with originality. Says Anant Koppar, CEO and president, Krishma

Technologies, "We tend to take up projects after people conceptualize

something. Why can’t we move up the value chain by going to the customer and

analyzing what he needs and offering him the service or the product? Most of us

are in the skills-to-domain area. We need to move from domain to

conceptualization." Says Achyut Godbole, Concio Technologies, "We have

to build products. Not a single, world-class product is made in India."

But there are problems. MG Subramanian, VP, strategic resource development,

Tejas Networks, identifies two–maturity of Indian software professional and

marketing muscle. "The quality of manpower will start telling when you can’t

create. You’ve got to create new technologies, new products, new services and

new boxes. The world’s greatest brands are product companies. Right now we don’t

have the marketing muscle to do it. But when we do, we will find that our

education system has let us down." Who was it who said, "it doesn’t

matter how good the best German mechanic is. What matters is how good the

average German mechanic is?"

On the surface, things seem to be changing. India Inc, is now a recognized

brand name. Most big software houses have offices in the North American and

European markets and direct interaction with their customers. Skills of Indian

software programmers are much sought after the world over and they are

establishing a presence in areas like communication and embedded systems

software. But as Sircar warns, even if we do manage to produce world-class

products——whether productized services or shrink-wrapped packages——there

is still the small matter of money. "From what I’ve seen, the money

muscle that goes into the marketing of even one product is $250-350 million.

Maybe more. I don’t see that we have that kind of money now. In fact, to bring

that marketing muscle will take at least five-plus years."

Inability to climb that ladder can cause multiple problems. Says Subramanian,

"Labor prices will rise. That’s where moving up the value chain becomes

important. We have traditionally been exporters of raw material. But it is no

longer enough to say I have a lot of manganese in my backyard. You have to get

beyond that. We really need to focus on intellectual property creation."

Basic idea: to adapt is good, to create, better. Also more profitable.

The scenario

Infrastructural bottlenecks and manpower quality issues continue to plague

Indian software industry. The T&M model continues, margins remain low and

glorified body-shopping is still the order of the way. The industry grows for a

while and then hits a plateau.