Rise of India's IT industry is neither an accident nor a stroke of luck.

To understand how it has happened, we need to have a closer look at the history of the Indian industry during the past century which we divide into the following five periods:

1900 - 47 (a part of British Regime Period):

Basically, the key policy/strategy of the British Empire for this period was to discourage development of industry in India, rather to use it as a low cost exporter of raw materials and to keep India dependent on British industry for finished goods.

1947 - 60s:

Problems after independence included:

1. Various problems caused by the division of the country on political and religious grounds led to humanitarian and economic problems as we had to spend abnormally large amounts on defense and wars with neighboring countries.
2. Absence of infrastructure and heavy industry slowed development.
3. Fast-growing population, especially in the poorer strata of the society created poverty and illiteracy.
4. Lack of government policies and initiatives to create export-oriented industries staved off opportunity for foreign investment.

Despite all those problems in this period, Indian government gave high priority to developing core educational systems for the masses as a long-term policy. This required less capital and material infrastructure. During this period and thereafter, India maintained a closed-door policy thus has played almost no roles in the post-World War II Industrial Revolution. However, in the eventual shift out of manufacturing in most First World countries and the start of the Information Revolution, the educational policies and infrastructure in fact has turned out to be the magic formula and the underlying strength for India's eventual resurgence as a world player.

1970s:

India entered into technical collaborations with industries in many countries in this period. Similar to Japan, India looked west partly because of its familiarity with the people and languages in Western countries. However, both India and Japan did not pay much attention to each other as the focus was primarily to develop domestic industries by following the course of Western countries had proceeded.

1980s:

This period saw a sudden rise of computer usage both in the industry and by general public. With a large pool of English-speaking and highly-educated technical work force, Indians were well-poised to look for opportunities outside their boundaries. This time has often been referred to as a gbrain-drainh period, when India saw the best and brightest move west for better opportunities. Apart from the formal education, the following qualities of the Indian people also helped in establishing a position in its movement:

1. Enterprising nature to work in foreign countries.
2. Accustomed to live and work in unfamiliar places and speaking different languages.
3. Basic intelligence with ability to think logically.
4. Succeeding and rising in a very competitive environment (due to large domestic population)

This period also saw an ease in the immigration policies in Western countries as they started welcoming students, business persons, scientists and engineers.

1990 Present:

Radical changes occurred in the Indian industrial scenario in the last decade. Indian industry gathered strength after three decades of development in a protected environment. It also realized the demerits of protected markets. Eventually, a foreign reserves crisis initiated the opening of the doors in 1991. Initially, exposure to the fierce international competition from well-developed, advanced countries created much stress in domestic markets. However, Indian government together with the corporate leaders saw a new opportunity in the fledgling new IT industry. Together, new laws and institutions were created to foster ventures. Some of these key steps included:

•  Creation of Ministry of IT

•  Launching of Software Technology Park Initiative to incubate IT ventures

•  Exemption of corporate income tax for up to ten years

•  Complete duty free import

•  Availability of low-cost office and IT infrastructure

In addition to government's initiatives, several additional tangible and intangible reasons can also be viewed as keys to the success:

•  Educational and intellectual infrastructure

•  Inherent lingual skills including early adoption of English as business language

•  Lack of infrastructure or hardware did not pose as barriers to growth

•  Combination of the education focused on creativity and inherent logical thinking

•  Entrepreneur spirit

Start of the Internet boom, Y2K scare and a tremendous shortage of skilled IT engineers in the United States created the perfect storm in which India realized its opportunity and destiny.

In concert, American corporations also began to realize that India had taken initiatives to cover the three critical points to become a global outsourcing player. These points included COST, QUALITY & CAPACITY:

COST: This was easily addressed as India's cost structure is significantly lower and thus offered inherent advantages.

QUALITY: Lingual strength helped India a great deal to penetrate markets around the globe. Bilateral flow of communications with various countries in the Western World accelerated its growth. A very broad base got developed here. With Western countries as clients, India developed systems which had to meet the quality standards such as CMM, ISO, etc. Adopting these quality standards and processes helped to build a high quality image of Indian products and services.

Remarkably, the chapter on quality looks very familiar for those who have read the book on the rise and success of the Japan Inc. Recent history reveals that gMade in Japanh label went through a similar transition over a twenty- to thirty-year period in which Japanese products transformed from an image of low cost/low quality to one of the world leaders in quality in every aspect and in every industry. Japanese manufacturers developed measures for process management, continued improvement, managed cost, increased productivity, and increased skills, which eventually led to higher profits, brand image and greater innovations.

Likewise, Indian software companies are now in the early phase of a similar curve in the area of IT. However, unlike Japan's rise and success over the past several decades, India may be able to achieve a much steeper curve since vast capital would not be required in the case of IT.

CAPACITY: In the early-to mid- 90s, the problem of Y2K gave a sudden spurt of demand for IT professionals. This strictly time-bound requirement caused an unnatural growth for IT industry worldwide. But it receded as fast as it had started. And now only the fit survive; only the very genuine applications continue. India Inc. had to respond fast to meet the global requirements for IT professionals. This period helped build the infrastructure to deliver the resources in the country.

Next, we list the accomplishments that India has achieved since the start of the Information Age:

•  Achieved CMM Level 5 (56 out of 85 companies in the world)

•  Over 10,000 software development companies

•  47% of U.S. H1B working visas issued to Indian engineers (over 70,000 per year for several years)

•  Close to ten percent of India's total exports are IT products and services

•  IT industry has grown to US$12 billion

•  Over 350 foreign firms have established design and development centers in India

•  Several Indian software companies are nearing or have crossed the US$1 billion / year revenue mark

•  Indian software companies now serve the global IT market

•  India has clearly established the image of a low cost, high quality IT delivery center

•  Over 30,000 foreigners now work in India

•  Bangalore alone attracts investments from over six foreign companies each month

Until year 2000, the United States (61%) was the largest client for India, with Japan trailing at a mere 4%. Decrease in orders from the United States prompted Indian IT industry to turn their heads to Japan, the second largest economy and IT market in the world.

JAPAN - INDIA A relationship in need of pioneers

India's relationship with Japan is well-known and dates back to ancient time when Buddhist philosophy made its impact. However, such philosophy or connections now occupies very little space in the modern Japan. Not being tangible, the root of the religion has remained only in the minds of a few aged Japanese people.

In recent times, Japanese corporations and media have come to see India's global success in IT. But the general view is that India is still little understood and feels distant. A few of the large manufacturers have established development centers in India. Japan continues to be a large importer of software from the United States not realizing that much of the software development has actually been done in India

Remarkably, one Indian city which has clearly set its eyes on Japan is the City of Pune, located at approximately 180 km southeast of Mumbai. City of Pune, which is known since old times as a seat of knowledge and education, had sowed the seeds of Japanese language way back in 1965. Thanks to the enthusiastic support by the local students who studied Japanese without any specific commercial incentives, today, that initiative has grown into a movement which sees over 12,000 students studying Japanese language every year.

This clearly puts the city in the top place as for the number of Japanese language students in India. The software exports from Pune to Japan increased eight-fold to US$120 million in 2004 from US$15 million in 2000. In the past two years over 100 Indian IT persons from Pune have joined Japanese IT industry. On the Indian side, Pune clearly is a pioneer as a city to lead a new era of Indo-Japanese collaboration.

While India might have partially changed its direction to the east Japan has clearly not set its sights much beyond China.

The China Equation

For the past several years, Japan Inc. has taken initiatives to penetrate the Chinese market. China has become its largest trading partner. With a rise in trade and investments, Japan is placing a big bet on its future with China. Offering a large domestic market and low cost manufacturing base to Japan, China has enticed many Japanese companies to shift and outsource operations.

However, voices expressing caution have slowly but steadily been on the rise. Should Japan be putting all its eggs in one basket Will Japan's intellectual property (IP) be safe Will China eventually become the next Japan In the future, how will Japan compete or partner with a rising China

Japan should not be looking at the equation as India vs. China; rather it should be formulating a strategy that shows India + China. What Japan should come to realize is that India will never become a competitor of Japan rather a partner that can collaborate in creating an unrivaled partnership over the hardware and manufacturing fields where Japan has its strength and the software where India has its strength to challenge the United States' dominance in IT.

Sapporo Valley should aim for global markets:

A key to revitalizing Sapporo and Hokkaido's economy may be to aggressively develop the IT industry. But the Valley's IT industry must look beyond the domestic market and strive to go global. Many talented companies and engineers in Sapporo have a chance to market their talents to a global audience. But how should they transform from a domestic mindset to the one with a global perspective.

The Indian models and examples are worth exploring. As Indian companies have been serving most of the IT markets in the world. India has become a leader in globalization. In less than a decade, India has created a clear brand image and become synonymous with low cost, high quality IT services. Embracing Indian IT may be an approach for transformation.

We take this opportunity to outline the first few key steps as RECOMMENDATIONS for both government and corporate community:

1. Send delegations to India to get first-hand look and study models
2. Develop university exchange programs and tie-ups
3. Encourage and challenge students to study in India
4. Foster partnership with Indian IT companies
5. Provide initiatives and grants to foster new ventures
6. Secure media to promote IT as top destination for future success for young generation
7. Provide grants to engineers to study latest technology and management in India
8. Offer information in English for both self-promotion and attracting overseas investors & partners

It is time both the Japanese and Indian industries cross over the psychological distance between them, cooperate for mutual benefits and build global success.

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