Introduction

This chapter examines the need for a change in the growth strategy of Indian information technology (IT) service majors such as Infosys, TCS and Wipro. The chapter starts with the innovative global delivery model (GDM) that the Indian IT majors have implemented and the problems they may face if they continue on the same growth path. After this, it looks at the problem of path dependence and its manifestation in terms of low investment in research and development (R&D) and large cash build-ups. The chapter then looks at the challenges in bringing about a strategy change, the capabilities required and the role of both organic and inorganic growth.

The Indian IT services innovation model

The Indian IT software services industry was built on the basis of providing middle- to low-end programming services as part of an overall software service. The conception, design and architecture of the software were done by consultancy services such as IBM and Accenture, by the clients themselves, or by other IT consultancy companies. The Indian IT companies entered the picture to carry out programming, testing and maintenance of the software solution. In order to do this, the Indian industry innovated in coming up with what came to be known as the global delivery model (GDM), in which a software development service was broken up into a number of components. Some of the higher-end tasks requiring continuous or frequent interaction with the client were carried out on-site by the Indian firms’ IT engineers, who were sent to work on the client's site. Other components of the work were carried out offshore by engineers in Indian offices. The completed and tested software service was finally put together for delivery to the client.

This GDM, with its division of onshore and offshore work, was able to utilize the difference between salaries paid to IT engineers in the high-income client countries (HICs) and the low- or middle-income provider countries, such as India. In addition, it was also able to ‘follow the sun’, with work continuing in India while offices in the USA or Europe closed for the day and vice-versa. The GDM reduced both the costs of IT service production and the time required for delivery.