Vviewpoints

DOI: 10.1145/1364782.1364789

Emerging Markets
India’s Role in the
Globalization of IT

Tracing the exponential growth of the Indian IT industry.

FORTRAN and COBOL. Furthermore, Indian import duties on hardware were extremely high (almost 300%), and even IBM used to sell old, refurbished, and antiquated machines (because that is all most Indian companies could afford). Hence, large enterprises ( including the Indian defense department and other public organizations) that needed customized applications usually employed in-house teams that did everything from installing systems to writing software.

INDIA’S INFORMATION TECHNOlOGY (IT) industry is a product of serendipity—it happened mainly by accident and partly by design. In the 1960s and

1970s, there was no separate IT industry in India. Multinational companies such as U.S.-based IBM and U.K.-based ICL were the largest providers of hardware, which was bundled with operating systems and few software packages that were generally written in

ILLUS TRATION BY ESKIMO SQUARE

The first software company in India was Tata Consulting Services (TCS), which began operations in 1968. Fortunately, after executing a few local or-

ders, TCS obtained its first big export assignment in 1973–1974, when it was asked to build an inventory control software solution for an electricity generation unit in Iran. During this period, TCS also developed a hospital information system in the U.K. in cooperation with Burroughs Corporation (at that time the second-largest hardware company in the world). Through its software exports and collaborations, TCS became a role model for other Indian IT companies later. Also, during the late 1970s, the Indian government lowered import duties on all IT equip-

ment. But there was a catch. Importers had to recover in exports twice the value of the foreign exchange they spent on importing computers. Partly as a result, by the early 1980s, India was the only developing nation to have any significant software exports with 30 companies that were beginning to export IT services. If we now look back at the 1970–1980 era, it is clear that the following four unrelated incidents contributed heavily in shaping the Indian IT industry:

˲ In late 1970s, the Indian government passed a controversial law (only repealed in 1992) that forced all multinational companies to reduce their equity share in their Indian subsidiaries to less than 50%. Since IBM did not want to comply, it decided to leave India. This opened the market for local IT competitors and made Indian companies generally less reliant on mainframe computers.

˲ The advent of personal computers in the 1980s reduced the cost of importing hardware substantially, thereby, spawning an industry that has more than 3, 100 companies today.