India 2.0 Aims to Sustain Its Global IT Influence

News Analysis: Continued warp-speed IT growth will require changes.

It has become practically conventional wisdom on the subcontinent: India will do in IT what Japan has done in the auto industry—dominate it. But to make that happen, Indian companies will need to reinvent themselves: Call it India 2.0.

Executives at Indias top technology services companies know their extraordinary ride of recent years wont last forever, so theyre hard at work coming up with new ways to turn a profit without relying on the wage advantage that has allowed them to operate at a mere 30 percent of costs in developed countries such as the United States.

That edge has enabled companies such as Infosys Technologies, Tata Consultancy Services and Wipro to lead an industry that has grown 200 times in revenue in the last 15 years.

What will India 2.0 look like? Customers can still look to India for high-quality code at low prices, the hallmark of India 1.0. But, increasingly, theyll see Indian companies setting up shop down the street in the customers own countries in offices staffed with local employees.

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Customers also will see Indian companies eager to develop, patent and license their own IP (intellectual property), instead of just working on projects where their customer retains rights to newly formed ideas. More customers may even see Indian companies beginning to sell software products.

In the meantime, Indian outsourcing companies need to convince customers that they can do more high-level work.

"India does what it does best: low-cost, high-quality coding," said Paul Coby, CIO of British Airways, in Harmondsworth, England, adding that he intends to retain control of IT architecture decisions.

Mitchell Habib, CIO for Citigroups North America consumer operations, in New York, added that he will "go to India for application development but not for security."

The recent Nasscom conference in Mumbai served as a forum for Indian companies to express their collective aspirations.

Two key themes of India 2.0 emerged: the need to innovate and the need to globalize. Both themes have parallels with the Japanese automotive success story.

Once dismissed as creators of cookie-cutter economy cars, Japanese automakers have innovated a host of new designs in luxury, sport utility vehicle, sports car and hybrid vehicle markets, even as they have built assembly plants around the world. The Indians aim to do no less in IT.

What follows are the seismic shifts facing Indian outsourcing companies and what they mean for customers.

Next Page: India eyes innovation.