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May 02, 2008

"Wave 3 of Indian IT Services"

Sudhakar Ram of Mastek has triggered off an interesting discussion with his guest article titled "Wave 3 of Indian Outsourcing" on Sramana Mitra's blog.
With rising salaries, the appreciating rupee and recessionary pressures in the US, it is difficult to see the Indian industry continuing to sustain a 40-50% growth rate in the labor arbitrage mode. Hence there is a genuine question whether Indian outsourcing is on the decline.

My view, however, is that this is the classic S-Curve in operation. And for Indian industry to grow, we need to shift to Wave 3 work – which is strategic, value-added and non-linear. Capitalizing on the large pool of technical talent available in India and the free availability of domain experts in the western world, Indian companies need to start making substantial investments in building intellectual property – not necessarily as packaged software, but also as frameworks, components, web services and the like. We need to move up to create solutions that have strategic impact and C-level visibility within client organizations. We need to own significant parts of the transformation initiative budgets and be equipped to convert our CMM advantages to predictable deliveries.

At Mastek, we have been involved with large transformation programs, not just within global corporations but also at the city and country levels. We feel that the next wave will take Indian software services exports beyond the $100 billion mark! Far from being a death knell for Indian industry, we see the decline in Wave 2 work as a necessary precondition for the emergence of the Third Wave.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.