For India Software Inc success has come by facing tough competition and facing it well. Today however, a new set of challenges face the industry. The India brand is quite well established, yet, there’s lot of ground to be covered in this space. Other countries (most notably China) are emerging as powerful threats that are snapping at India’s heels. And we’re not that high up the value chain to ignore them either. Even on the BPO front, the need is to move quickly up the value chain, and deal with fears in other economies about the dangers of offshoring to India, vis-à-vis nearshoring. We spoke to a cross section of industry heads to find out what solutions they had to offer to these problems. Here’s what they told us

Ashank Desai CMD, Mastek
There is no other country on the radar, which can be compared to India today in terms of value proposition versus cost. While today the English speaking countries are big markets, a big untapped potential lies in non-English speaking countries like say, Japan, Scandinavia and Korea. While competition is emerging from countries like China, Philippines and Russia, India currently is far ahead of the competition and we will maintain that lead for a considerable period of time. To face competition, we have to continue to move up the value chain and increase our scope of operations by moving into areas like high-end consulting and BPO.

Kiran Karnik, President, Nasscom
Indian companies should expand their portfolio to include new services such as systems integration, R&D services and BPO and build high-end skills like project management and solution architecting. They should continuously improve productivity, embrace higher levels of quality standards and expand software operations to second tier towns to enhance cost competitiveness. The Indian government should repeat the success of software hubs for custom application development and maintenance in other emerging service lines. In addition to the above, Indian companies should explore the possibility of leveraging the China advantage as an additional low cost offshore base or through remote tie-ups. This will also help them penetrate the Japanese market. Indian companies should also leverage Chinese strengths especially in chip design and telecom equipment to build world class R&D service capabilities. Finally, India needs to grow its domestic demand for IT services by expediting deregulation in key sectors such as telecom, financial services, retail and increase the pace of IT adoption by the government.

S Ramadorai, CEO, TCS
While India has already created its own value proposition, we need to not only maintain the value differentiator but enhance it. The Asia Pacific market is emerging as a key market and by setting up development centres in China and Japan, we can be geared to meet the needs of clients from Korea, Japan, China as well as transnational companies who are setting up base or consolidating their presence in this region. Africa is also a huge market. While companies have made a foray into the South African market, the rest of Africa is largely untapped. The European market especially Eastern Europe is also a key market. Indian software companies can also pursue markets like Germany, Belgium and Netherlands. In terms of emerging growth sectors, some of the emerging verticals are the government and healthcare. Almost all market studies indicate that the healthcare sector will be another major consumer of IT services in the near future. The projected figures for both the global market and the market in India indicate that there is likely to be a virtual explosion in the demand for IT services in the healthcare space.

Saurabh Srivastava, Executive Chairman, Xansa India
To meet emerging and intensifying competition, India Software Inc should focus on the following: Moving up the value chain not just in terms of technology and consulting but also on better management of client relationships, moving from IT managers and CIOs to CEOs and the boardroom, in order to effectively compete with the global majors. We should acquire customers and boardroom access through acquisition of high-end consultancy companies. Also, we should set up smaller/complementary centres in what we consider as competing locations.

Madhukar Dev, CEO, Tata Elxsi
The ideal way to face competition will be to develop more and more IP, tools, components and sub-components, which can be deployed quickly. Secondly, India Software Inc should increase its efficiency to compete with cheaper organisations and be willing to work in two-to-three shifts. I feel forming more alliances and partnerships to enter new markets and expand reach will be key.

Deepak Ghaisas, CEO, i-flex Solutions
I think that moving up the value chain, developing products, should be the strategy of India Software Inc. We need to focus on domain expertise, invest in R&D and shift to product development and marketing rather than only focusing on low-end ‘cheap’ services. Product development leads to creating an intangible asset in the form of Intellectual Property rights and a focus on creating world class product brand equity offers long term earning potential. The high profit margins earned along with long-term brand building are the chief advantages of the product strategy. The next phase of growth the software industry needs to see is a shift in focus from a people-based model to an IPR-based model. The biggest asset of the product revenue model is that it offers an exponential growth opportunity. The second important thing would be to tap global markets—traditional Indian software players have been US-centric and have not tapped the tremendous potential in Japan, Germany and emerging markets like Africa, Latin America, Eastern Europe, Middle East and China. Going ‘global’ this way is the way forward for Indian companies.

Sanjiv Kapur, General Manager & Head BPO, Patni Computer Systems
Companies having a simple service delivery model will definitely have an edge over others in the BPO space. Offering a complete range of solutions is another key aspect to success in this space. Software skills play a very important part in process re-engineering. So, companies having good software-skill sets will have an added advantage in this space.

Diwakar Nigam, Managing Director, Newgen Software
It is the right time for software companies to create a product focus. For a long time we have been service oriented and India has succeeded in building some great companies. Mid size and small companies will have to come up with niche segment products. Here the important thing will be the partnership of the product companies with the well-established service companies. In the case of BPO we will have to move to better process management. Process automation through workflow is a must and BPO outfits should employ these technologies immediately. This would give them better productivity and ensure quality processes.

Govind Singhal, Executive Director, Polaris Software Lab
If we are able to create and maintain organisations that can outperform the global market in downtimes, we do not have to really worry about challenges from the US, China or any other software companies. Indian software companies currently clock only around 2 percent of global software revenues. So, there are a lot of untapped markets and potential revenues out there and we can only increase our international presence and revenues from here. Indian software companies should develop long-term relationships with clients and provide end-to-end quality solutions with the best technology framework at the most competitive cost, thus partnering the software needs and charting the roadmap to a shared vision and mission.

N Lakshmi Narayanan, President & COO, Cognizant Technology Solutions
India's primary issue is building scale. Our top hundred companies put together are smaller than the services part of global majors such as EDS, IBM and CSC. If the global majors decide to develop the Chinese source, we have a battle ahead of us. It is therefore important that Indian industries build that scale through consolidation, through partnerships and other means. One possible way of doing this is to encourage global majors to invest in India and build capacity. On the bright side, today in software, we have established a brand synonymous with high quality, low cost, and high value-add solutions. This is where we need to focus to enable sustenance and growth.

Vishnu Dusad, Managing Director, Nucleus Software
My first suggestion to face this competition is to understand the ground reality and begin with a longer-term perspective. We must appreciate that all the competencies and positions of strength are temporary and will have to be defended very aggressively. We also need to look closely at product development and marketing, high-value IT enabled services, etc.

V Srinivasan, Managing Director & CEO, ICICI Infotech
Large user companies abroad (mainly US) are likely to set up their own software shops in India and thereby command finer rates. Even software companies in developed countries (mainly US) may set up their own resources in India as above. While this is likely to have continued flow of software work into India, margins are likely to be eroded over a period of time. To maintain their cost advantage, Indian software companies may have to resort to global sourcing by setting up software shops in places like China, where less expensive software resources are available. Gradually, Indian companies would also have to move beyond software services into the area of software products.