Strategic leadership in ICT sector

We must build on our strength in the ICT sector and focus on specific technology domains

The Indian Information and Communications Technology (ICT) sector can be proud of its achievements over the last decades. Good progress has been made on many dimensions.

The information technology (IT) market as share of GDP has increased from 1.22 per cent in 1997 to an estimated 3.15 per cent in 2003. The size of the IT market has increased from $ 5 billion to $ 16.4 billion over this same time-period.

The success of the Indian ICT sector has also enhanced India's export performance. While software exports accounted for around 5 per cent of India's total exports in 1997, this share was more than 20 per cent in 2003.

Parallels can be drawn between the successful evolution of the Indian ICT sector and the experiences of other countries in other sectors. For example, consider the evolution of the Japanese automobile sector.

Prior to the 1980s, Japanese cars were seen as low cost products and they successfully competed at the lower ends of the automobile markets in the USA and Europe.

Over the 1980s and the first half of the '90s, Japanese automobile manufacturers evolved to take the mantle of global leadership in producing high quality cars.

Over the last decade, Japanese firms have continued this evolution and successfully positioned themselves as leaders in innovation and creativity.

Today the products of the leading Japanese automobile manufacturers are seen as best-in-class globally, from both quality and innovation points of view.

The Indian ICT sector has successfully evolved over the last two decades from a low cost offshore location to a globally recognised producer of high quality software.

This is core to the global success and brand image of the Indian ICT sector today. Multinationals come to India to get software tasks performed that they would not be able to do easily in developed nations.

The performance of Indian ICT firms in programming productivity, software quality and other technical metrics are frequently superior to what can be achieved in developed nations.

The importance of this fact, that the Indian ICT sector has achieved global leadership in some key domains of technology practice, cannot be overstated.

Making this transition has not been easy for the Indian ICT sector. Like other sectors and countries that have made such a transition, this has been achieved by a combination of multiple factors, including ambition, leadership, talent and luck.

However, success over the last ten years is no guarantee of success in the future. Now is not the time to sit back and enjoy the fruits of the labour of previous years. Other countries such as China are making rapid strides in improving their own ICT capabilities and reducing their competitive gaps with India.

It is said that offence is the best form of defence. India today enjoys a position of strength in the ICT sector. India has to use its current position of strength to build for the future. Focused innovation has to be the centrepiece of this strategy for the future.

The Indian ICT sector needs to identify specific technology domains where it can innovate and lead the world. Indian firms cannot be leaders in everything.

India is a country with limited resources and infrastructure weaknesses. Hence focus is essential "" high value ICT domains have to be identified and India has to lead the world in them. Possible domains for such a focus include the following:

Software process technology: Indian firms today enjoy a leadership position in quality software practices, large-scale migration projects and global project delivery.

However, software technology is evolving rapidly and ICT projects are becoming more demanding in performance parameters. Indian firms need to continue to innovate to assure their leadership position "" they should seek to remain global leaders in software delivery capability.

Software re-architecting: Indian firms should become the software architects of choice for global businesses. Software is and will remain a dominant component of business processes and end products.

Technology changes will require the re-architecting of both business applications and the software components of end products. This innovation in software re-architecting will require, in many instances, the successful development of relevant domain competence "" i.e., 'front-end' knowledge to complement the 'back-end' capability in software process technology.

Business process re-engineering: India needs to become the destination of choice for the hosting and re-engineering of core business processes.

This will only happen if India first makes a deliberate transition from being seen as a low cost business process off shoring destination (as is the case largely today) to a hosting source of high quality business processes.

A focus on innovation is needed to ensure that Indian firms are able to instil the highest quality procedures in their operations and are recognised as being able to manage business processes better than their customer firms themselves (as is the case today in the case of software projects).

Next, a powerful global competence in business process re-engineering can be derived by combining this ability to host and manage high quality core processes with leading edge capabilities in software process execution and software re-architecting.

Special mention should be made about another potential area for innovation "" the integration of biology and information technology: India has a competence in biology "" both in the form of successful firms in this sector (biotechnology, pharmaceuticals etc.) and an abundant supply of trained graduates in the field.

Globally, the domains of biology and information technology are coming together. This is unleashing a large range of opportunities for innovation. India is well positioned to carve out a leadership position in this global trend of the future.

Beyond Global Success in ICT

The global success of India's ICT sector cannot be debated independent of the overall development of the country. The Indian ICT sector employs around a million employees today. If the sector grows at healthy double-digit rates over the next decade, the total number of people employed in the sector will be of the order of two million.

This is a small number when compared to the total population of the country. In effect, the successful growth of the Indian ICT sector will not be sufficient to significantly improve the poverty levels in the country.

In light of the above, a key question remains: what else can the Indian ICT sector do to help alleviate poverty and improve standards of living in the country?

Indian ICT leaders have to consciously assume responsibility for helping improve the overall levels of poverty in the country at large. This could come from a combination of multiple efforts, including but not limited to the following:

Focusing attention on domestic industry "" specially small and medium sized firms "" providing them with advice and materials to become more innovative and competitive. This can help increase employment beyond the ICT sector and help a larger segment of the population increase their overall standards of living.

Creating technology which is affordable and easy to use for the average citizen. This technology could ideally be linked into literacy and/or self-employment schemes. If successful, this technology could be exported to other developing nations and the Indian ICT sector can also contribute to the development of other nations.

ICT provides India with a unique opportunity to both help itself and to help others. Business and government leaders in the sector need to also consciously focus on these broader goals as they debate the future development of the sector.

soumitra.dutta@insead.edu

The writer is professor and Dean of Executive Education at INSEAD, a leading international business school with campuses in France and Singapore