Volume 15, Number 1 Article by Deependu Jain, Hemant Daga, Nitin Kakkar March, 2003
Award Winning Student Essay : Theory of Business of Indian Software Industry :
Although modern management has developed sophisticated analysis and decision-making tools to help companies manage change and competition better, these tools are essentially, in the words of management guru Peter Drucker, how to do tools. They cannot help businesses understand what they have to do. The major cause of most enterprise level crises is the growing divergence between the assumptions on which the organisation has been built, what it stands for and what reality demands. Drucker propounds a framework based on three sets of assumptions (assumptions about the environment, mission and core competency), which constitute the Theory of Business of an industry or company.
The Indian software industry has been the torchbearer of the growth of the Indian economy in the last decade, contributing 14% of the $44 bn Indian exports in the year 2000-01. Deependu Jain, Hemant Daga and Nitin Kakkar, in this award winning student essay, study the industry and apply the Theory of Business framework to understand its fundamentals, during the past decade of the 90s and the current one.
During the 90s, the software industry was characterised by an environment of liberalisation, and increasing demand for software services in the United States. With a common mission of ‘Excellence through Quality’ and using the core competency of cost-competitiveness, Indian software firms saw unprecedented growth. However, with the meltdown in the late 90s, both the structure of the industry and the market scenario have undergone drastic changes. While their mission remains the same, the cost competence of the Indian companies is dwindling with rising wage bills. The competencies required in today’s scenario are: developing a global brand and presence; good quality processes; and moving up the software value chain—in terms of both moving from services to the product development paradigm, and increasing revenue productivity per man-year. The key lesson yielded by this analysis is that infotech service companies that combine global delivery capabilities with the ability to provide end-to-end solutions will emerge as winners in the new scenario.
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