Will India’s information technology sector finally wake up and smell the opportunity?
It remains to be seen. One thing is for sure: The backlash will build if it does not—and
the Indian IT sector will accelerate its decline into oblivion.
“Carnage in Indian IT,” read the headlines in India
about retrenchments in its outsourcing industry
as markets stagnate and U.S. visa restrictions erode
profits. The Indian information technology industry
generates $150 billion in revenue but is facing an existential
crisis largely of its own making because it
became complacent and overconfident even as technologies
and markets changed. It can survive only if
it exits the business that has brought it success and
reinvents itself.
India’s outsourcing boomed during the Y2K crisis
of the late ’90s because there was an urgency in repairing
corporate information technology systems. Once
chief information officers (CIOs) became comfortable
with having their systems maintained across the
globe, they started outsourcing large-scale projects to
Indian companies, and billion-dollar contracts were
announced almost every week.
But with the advent of tablets and smartphones
and their applications in the 2010s, users gained access
to better technology than the companies’ information
technology departments could provide. They
could download cheap, elegant, and powerful apps on
their tablets that made their corporate systems look
primitive. Via cloud computing, companies such as
Amazon.com, Microsoft, and Google began to take
over the functions of data centers. So CIOs lost power,
and the importance of outsourcers declined. The billion-dollar outsourcing contracts evaporated.
Modern-day applications also don’t require large
teams of engineers doing software development: They
are user-customizable and can be built by anyone
with basic programming skills. To offer more value,
the outsourcers worked to reduce costs by improving
back-end processes. They offered low-cost offshore
development and cheap labor in the United States,
and this fomented a backlash by displaced workers.
The same technology advances that decimated
the Indian advantage offer a new opportunity that
could allow the Indian information technology sector
to reinvent itself and even gain the support of Americans
who have been rallying against it: to help America
modernize its aging infrastructure and enable it
to bring manufacturing back from China. Technologies
such as robotics, artificial intelligence, and inexpensive
and powerful sensors enable development of
smart cities and automated factories and a wholesale
upgrading of national infrastructure.
Robots, for example, have advanced so far that
they can now do the work of humans in manufacturing.
With the computing advances and dramatic price
drops of hardware components such as a core part of
most robots’ inner workings, the single-axis controller,
robots have acquired the dexterity to assemble circuit
boards and build cars. They now cost less to operate
than the wages of workers in China. And connected
devices and sensors in the Industrial Internet of Things
enable monitoring of every aspect of a manufacturing
plant’s operations.
China is well aware of the threat to its industry
and is taking the lead in building zero-labor manufacturing
plants, with robots doing practically all of the
work. But its robots have no advantage over American
robots; all of them work equally hard and consume
nothing more than energy. Manufacturing can now return
to American shores without raising costs.
There is, however, an obstacle. American businesses aren’t geared up to take advantage of manufacturing robots because they simply don’t have the know-how. This is where India’s outsourcers could help. They could master the new technologies and help American firms design new factory floors and program and install robots. They could provide management consulting in optimizing supply chains and inventory management. And they could manage
manufacturing-plant operations remotely. This is a higher-margin business than the old information technology services. And Americans would cheer India for bringing manufacturing back to their shores rather than protest its taking their information technology jobs away.
No, there won’t be as many jobs in each manufacturing plant as there were before. But many new high-paying jobs would be created to build factories and manage them.
It is also possible to build smart cities, with sensors monitoring every aspect of a city’s functioning, including parking, traffic congestion, lighting, waste management, pollution, and water leaks. The installation and design of these require managerial and
analytical skills; their monitoring functions are no
different from those of managing data centers.
And then there are opportunities to create applications that can revolutionize fields such as health care and education and to build technologies for the underprivileged—something that Silicon Valley’s entrepreneurs don’t focus on because they don’t understand the dire needs. These are all things that Indian information technology companies can do.
It is not that Indian companies don’t realize the threat. Tech Mahindra’s chief executive, C.P. Gurnani, told my class at Carnegie Mellon’s College of Engineering in Silicon Valley that he was working hard to change the focus of his company from services to technology products and to solve problems outside information technology. He talked about the rapidly changing markets and urgent need for his company to build offerings in areas such as health care, manufacturing, retail, and managed services.
Vivek Wadhwa (www.Wadhwa.com) is a Distinguished Fellow and professor at Carnegie Mellon University’s College of Engineering and a Director of Research at Duke University’s Pratt School of Engineering. He is a globally syndicated columnist for The Washington Post, where this column first appeared.