Dot.compradors reveals the darker reality behind 'India Shining', providing a history of the industry from the 1970s to the present. Jyoti Saraswati punctures the myth of a free-market industry by revealing the role of state intervention and how vested interests and elite corruption have shaped, and continue to shape, one of the world’s most dynamic sectors.
Saraswati argues that the interests attached to the software industry and the policies they are pursuing are both an impediment to the growth of local software firms and to a broader-based, more egalitarian form of development in India.
Dot.compradors reveals the darker reality behind 'India Shining', providing a history of the industry from the 1970s to the present. Jyoti Saraswati punctures the myth of a free-market industry by revealing the role of state intervention and how vested interests and elite corruption have shaped, and continue to shape, one of the world’s most dynamic sectors.
Saraswati argues that the interests attached to the software industry and the policies they are pursuing are both an impediment to the growth of local software firms and to a broader-based, more egalitarian form of development in India.
Dot.compradors: Power and Policy in the Development of the Indian Software Industry
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Dot.compradors: Power and Policy in the Development of the Indian Software Industry
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Overview
Dot.compradors reveals the darker reality behind 'India Shining', providing a history of the industry from the 1970s to the present. Jyoti Saraswati punctures the myth of a free-market industry by revealing the role of state intervention and how vested interests and elite corruption have shaped, and continue to shape, one of the world’s most dynamic sectors.
Saraswati argues that the interests attached to the software industry and the policies they are pursuing are both an impediment to the growth of local software firms and to a broader-based, more egalitarian form of development in India.
Product Details
| ISBN-13: | 9781849647359 |
|---|---|
| Publisher: | Pluto Press |
| Publication date: | 07/06/2012 |
| Series: | IIPPE |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 184 |
| File size: | 889 KB |
About the Author
Jyoti Saraswati teaches on the Business and Political Economy Program at the Stern School of Business, New York University (NYU). He is the author of Dot.compradors (Pluto, 2012) and co-editor of Beyond the Developmental State (Pluto, 2013).
Read an Excerpt
CHAPTER 1
Introduction
I write because there is some lie I want to expose, some fact to which I want to draw attention, and my initial concern is to get a hearing.
George Orwell
[The economist] must examine the past, in light of the present, for the purposes of the future.
John Maynard Keynes
1.1 BACKGROUND
Over the past decade the Indian software industry has become all things to all men, ranging from the intellectual periphery of the Occident to the fanatical core of the Subcontinent. Neo-liberals have perceived the industry as evidence that economic liberalisation in India is working. In diametric contrast, statists have pointed to the industry's rapid growth as a demonstration of yet another example of the necessity of state intervention to engender development. For globalisation gurus it epitomises the sidelining of distance as a determinant in the accumulation of capital – often referred to as the 'flat world' phenomenon – while for the Indian middles classes it is the embodiment of a new, dynamic India. Even Hindu nationalists, not known for their embrace of modernity, have jumped on the IT bandwagon, proclaiming the success of the software industry as reflecting the superiority of Indic thinking and culture.
Such stances have been primarily based on either ideology or emotion: to prove an academic theory, confirm a world view or assert one's superiority. Scholars have been guilty, by and large, of a pick-and-mix approach to facts and figures, assembling them according to established views. The academic literature has, therefore, been characterised by an extreme expediency in terms of which evidence is used, abused or discarded. Moreover, given the underlying ideological and political motivations, many such studies have been impelled towards a degree of sensationalism in order to grab attention and penetrate public discourse. As a result, the proliferation of books and articles on the industry has, paradoxically, been accompanied by a rapid deterioration in any substantive knowledge about it.
Like their academic counterparts, well-respected industry commentators in the Indian and international business media have also shown a remarkable lack of interest in the workings of the industry. This is not, however, based on ideological point-scoring. Rather, this can be attributed to an entrenched sense of complacency regarding the current health of the industry and its future development brought on by two decades of virtually uninterrupted double-digit growth. Such spectacular development has created the impression that those responsible for IT policy in India – the bureaucrats and NASSCOM's top brass – are highly competent, and that therefore the industry is in safe hands. This Panglossian attitude has, in turn, rendered unnecessary any independent analysis of IT policy and the situation 'on the ground'.
The combination of academic point-scoring and journalistic credulity has meant that there has been little progress in understanding the actual material conditions of the Indian software industry, past, present and evolving. The changes in the underlying structure and economic relations of the industry have been either largely ignored or expediently interpreted; thorough analyses of the commercial linkages within the industry, and between the industry and other sectors, national and international, are rare; and political terms such as vested interests and corruption are virtually absent from the discourse in which commentators and scholars have been dazzled (or should that be blinded?) by the industry's halo.
These deficiencies have taken on greater saliency in light of the industry's rapid slowdown in growth from 2008 onwards. They have ensured that industry commentators and academics have blindly accepted the official line that the precipitous drop in industry growth rates is a result of the international economic downturn, oblivious both to the growing strains in the industry's economic relations and to the fact that the global recession has actually been a boon rather than a curse for software services industries in other countries. The attribution of the industry's slowdown to external causes has also meant that IT policy in India has evaded scrutiny. This has proved highly fortuitous for the policymakers, as even a cursory glance at the state's current interventions would suggest that it is having an adverse effect on the industry's development, in particular that of the major Indian software firms.
1.2 AIMS
There is a touch of farce about the scenario outlined above – less Karl Marx, more Marx Brothers. However, the comedy belies a very concerning situation. If the industry's slowdown in growth is not related to external demand but is instead due to internal structural issues, any international economic upturn is not going to translate smoothly into the revitalisation of the industry. As such, the industry's travails are likely to continue longer than is commonly anticipated. This is especially the case if IT policy is not able to address the problems adequately. Given that current IT policy appears to be fomenting rather than addressing the industry's woes, the omens for the long-term health of the industry are not good.
The key aim of this book is to explicate this imbroglio. However, contemporary analysis of the industry can only make sense and bear fruit if it is combined with a study of its historical development. It is necessary to understand the industry's previous structural changes in order to grasp the transformation it is now undergoing. And it is vital to know the determinants of IT policy over time to identify accurately those that currently shape it. The essential foundation in explaining the Indian software industry's current predicament is, therefore, a detailed, analytical study of its origins and growth over the past four decades. Taking this maxim as point of departure, this book has three specific aims.
• First, to provide a detailed and accurate historical account of the industry's development. More specifically, it will examine how and why the state intervened in different periods and what effects such interventions have had on the industry's structural transformation.
• Second to draw from this historical analysis a better-informed understanding of the present role of the state in the industry, its rationale and its effect. More specifically, the book will examine what effect IT policy is having on the conditions and prospects for the industry to develop in a sustainable manner.
• Third to outline a broader research agenda on the industry with the intention of promoting a more effective form of state intervention. More specifically, the book will identify the key constraints and opportunities facing the industry and discuss the important policy issues they raise.
1.3 STRUCTURE
The book is structured and presented in three parts.
Part 1 comprises Chapters 2, 3 and 4. It provides a background and context to the study.
Chapter 2 provides an overview of the global software services industry. The widespread public acceptance of the politically motivated literature on the Indian software industry stems in part from a general lack of comprehension of what exactly the global software services industry is. The chapter addresses this by outlining the three-tier structure of the industry, introducing its major firms and charting the evolution of the industry. It is intended that by providing such information, the reader will be better able to understand how the Indian software services industry developed within the wider framework of the Indian and global IT industries (as presented in Part 2).
Chapter 3 critically reviews the most influential arguments purporting to explain the industry's phenomenal growth in India. These are: technological advances in telecommunications allowed India to plug itself directly into the global software services industry; Indians have a particular intellectual proclivity for software programming; the implementation of neo-liberal policies in India freed entrepreneurial spirits and allowed the country to exploit its comparative advantage; and the inspired interventions of a 'developmental department' fostered the industry. The intention of the chapter is twofold: first, to show why all of the above are, at best, only partial explanations; and second, to highlight how the flawed state-versus-market approach prevalent in studies of development has distorted an understanding of the industry's transformation.
Chapter 4 presents an alternative analytical framework to understanding development. Taking as point of departure the problems inherent in the state-versus-market approach, the framework adopted in the book stresses the need to make concrete connections between economic interests, the interventionist policies implemented and the structural transformation of the industry engendered. The intention of the chapter is to familiarise the reader with the framework adopted in the book, as well as to highlight its superior analytical features.
Part 2 comprises Chapters 5, 6, 7 and 8. It examines the development of the IT industry in India from 1970 to 2010, with special reference to the software services industry.
Chapter 5 presents the period between 1970 and 1978. This was the first phase of the industry's development. The chapter explains how and why the state played a leading role in establishing a national Indian IT industry via the establishment of Indian computer production and the promotion of software exports. It highlights how the demonisation of this period by neo-liberals is by no means justified: while the policy was far from flawless, significant achievements were made during this period.
Chapter 6 examines the period between 1978 and 1986. This was the second phase of the industry's development, initiated after the election of the Janata Party to political power in the late 1970s. The chapter describes how the IT policy regime ushered in by the new Janata government was designed to favour a narrow set of commercial interests via instigating changes in the computer hardware industry. However, while this spelt disaster for the technological capabilities of the Indian computer industry, it inadvertently catalysed the growth of Indian software firms.
Chapter 7 describes the period between 1986 and 2000. This was the third phase of the industry's development. The chapter describes the interventions by the Indian state in the software industry during this period, highlighting how they chimed with the state's larger economic concerns. During this period the largest Indian software firms began to capture major segments of the software services market in the West, and with it, the world's attention.
Chapter 8 details the development of the industry over the past decade, 2000–10. This is the fourth and final phase of the Indian software industry examined, and is characterised by the rapid influx of IT-related FDI and major volatility in the Indian labour market for software programmers. The chapter explains how and why Indian software services firms, which started the new century with prospects for rapid development, have started to experience major problems in upgrading or expanding towards the latter part of the decade.
Part 3 comprises Chapters 9 and 10. Taking the findings from Part 2 as point of departure, it presents the implications and wider lessons derived from the development of the IT industry in India.
Chapter 9 concerns itself with the implications of the findings for the future trajectory of the industry itself. The chapter paints a depressing portrait of the industry, highlighting how it is rapidly being transformed from a potential global frontrunner in software services into a low-value-added back office of the world. It also explains why the state is uninterested in the industry's deteriorating situation, unabashedly continuing with an IT policy which is exacerbating the conditions leading to retrogression. It concludes with an outline of a research agenda which could help to reshape IT policy.
Chapter 10 discusses the wider lessons derived from the pattern of development undergone by the Indian software services industry. The chapter begins by refuting the conventional policy wisdom (promoted relentlessly by the World Bank) that developing nations can, and should, emulate the Indian software services industry by implementing tax breaks and subsidies to attract IT-related FDI. It then moves on to argue that the development of the industry forces a reconsideration of the role of the Indian state in development. Finally the chapter ends by identifying the negative consequences attached to the widening political influence of NASSCOM.
The book's closing chapter summarises the findings and locates the Indian IT industry as presented in Parts 1–3 in the wider economic, social and political milieu of the nation.
CHAPTER 2
The Global Software Services Industry: An Overview
You have fibre-optic lines running parallel with bullock carts ... the US doesn't understand [the Indian software industry]. The world doesn't understand [the Indian software industry].
Chief executive officer (CEO) of an Indian software firm
2.1 INTRODUCTION
The CEO quoted above could not have put it better. The reality of the Indian software industry, captured perfectly by the hallucinogenic image of optic fibres and bullock carts, continues to bedevil most people. While much of the misunderstanding can be attributed to politically motivated distortions (see Chapter 3), a lack of understanding with regard to the global software services industry per se has also played a part. This chapter endeavours to pave the way for a clearer understanding of the Indian software industry's growth by providing a brief overview of the global software services industry, presenting a succinct account of the structures, firms and processes of this much misunderstood sector.
2.2 BENEATH THE TIP OF THE IT ICEBERG: THE SIZE AND STRUCTURE OF THE HIDDEN INDUSTRY
Few people outside the IT industry are familiar with the software services industry. In contrast, everyone in the developed and developing world is familiar with the software package industry (also referred to as the software product industry). Indeed, the software package industry's most high-profile son, Bill Gates, is reported to be one of the most famous people in the world. In contrast, few people outside of the corporate world have even heard of Cap Gemini, a software services behemoth with annual revenues close to $10 billion. Odd then that the software services industry is of roughly equal size to the software package industry. And its biggest firm, IBM, has far larger revenues than the leading software package firm, Microsoft.
The reason for the software services industry's low profile is its character. The global IT Industry is like an iceberg – only its tip is visible, comprising the high-profile industries of computer manufacturing and software packages. Most of the industry, however, exists beneath the surface, none more so than the software services industry, often referred to as the hidden industry.
Software services firms usually provide highly specialised software services – such as systems integration, custom applications and IT consulting – to corporate or governmental clients. Unlike software packages, software services are, in effect, hidden, embedded in IT systems beyond the purview of individual users. For example, when using a major metropolitan underground transport network, one is not even aware of the IT system responsible for running it smoothly, let alone the huge investments, financially and in intellectual manpower, required to create, maintain and upgrade such systems. The only persons therefore fully au fait with these firms are those that work in them and those IT managers in corporations and governments who are responsible for contracting out software services to them.
(Continues…)
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Copyright © 2012 Jyoti Saraswati.
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Table of Contents
PrefaceAcknowledgements
A Note on the Terminology
Glossary
List of Figures
A Primer: the Seven Leading Myths about the Indian IT Industry
1. Introduction
Part I: The Context
2. The Global Software Services Industry: An Overview
3. The Development of the Software Industry in India: Existing Explanations and their Shortcomings
4. The Political Economy of State Intervention and Industrial Transformation: An Analytical Framework
Part II: The Development of the Indian IT Industry
5. IT Started with a War
6. Catalytic Corruption: The Domestic Software Services Boom, 1978-1986
7. Manna from Heaven: Satellites, Optic Fibres and the Export Thrust, 1986-2000
8. Passage to India: The Giants in the Land of the Majors, 2000-2010
Part III: The Analysis
9. The Indian Mutiny: From Potential IT Superpower to Back Office of the World
10. Lessons from the Lies: What Does IT Mean?
11. Conclusion: Of Compradors and Useful Idiots
Notes
Appendices
Index