Getting Started | 3 min read

The Growth and Evolution of India's IT Industry

India is one of the most important and ancient civilizations in the world. It has contributed concepts such as Yoga, Ayurveda, and Vedic Mathematics. Vedic Mathematics helps in performing difficult calculations with ease. India has witnessed great development in the field of mathematics due to its enormous population and brilliant minds.

Software technology and mathematics in a way go hand in hand because both require problem-solving abilities. Indians are good at math because they are resilient and hardworking. This has a lot to do with the competitive exams conducted by Indian schools and universities. Growing up in India is difficult, considering the pressure coming from Indian parents, Schools, and competitive entrance exams. An average student has to face all these challenges and handle them simultaneously. This handling of competition and pressure develops resilience, hard work, and patience.

Growing Technology-driven companies of India

To begin with, American companies are the first who outsourced their "BPO" segment to India. BPO sector was the first outsourced IT sector in India. These companies saved up to 75% of their money spent on each employee for the same service. Indians get employment and these organizations cut more than 50% of their costs.

Thereafter, the Indian IT industry grew intensively. Currently, it contributes as much as 8% of India’s GDP. In the last three years, the Indian IT industry has contributed $177 billion US dollars’ worth of IT services to the GDP of India. Out of which, Indians had exported 135 billion US dollars’ worth of services in Information Technology. Over the years, the industry matured in providing cost-effective back-office services to global companies. The leaders of global tech companies have started setting up their offices in India to receive maximum benefits from the growing Indian tech ecosystem and the experienced workforce.

The same behavior boosted the demand here in India and many Indian business giants such as Flipkart, Paytm, Zomato, Ola, etc began catering to the growing Indian Consumer Market. Currently, India is home to 18 unicorns and 7000 startups. For an idea, Unicorns are startups with a market capitalization of 1 billion US dollars. The next generation of Indian software companies is now focusing on SMB’s small and medium businesses, which includes facilitating cab drivers and delivery personnel in making a shift to the formal economy.

Growth of Software industry in India

Indian liberalization policies with the steps taken by Indian tech entrepreneurs focusing on specific remote solvable problems brought a revolution of growth in the Indian Software Industry. To understand this, we have to consider the phases of IT development in India. That is:

In the pre-2000 era, exporting software services - For two decades, the Indian software industry was largely focused on being a software exporter to global companies. The Indian companies started solving Y2K problems for their customers and started managing their legacy portfolios. The Y2K problem was a millennium bug of the year 2000. The software, which was coded in the year 1946 did allow to store values in more than two places. This created havoc in 1999 with concerns of age data being lost as they enter the year 2000. Many skeptics believed that by January 2000, the systems would become irrelevant and damage banking system ledgers and stock trading. The Indian software companies leveraged their infrastructure and helped many enterprises solve these problems and other software development projects remotely.

Simultaneously, many tech companies started their hardware manufacturing facilities for VLSI (Very Large Scale Integration) in the subcontinent.

Between 2000 and 2010, the Rise of Indian Multinationals and R & D - With confidence in solving complex IT problems and the experience of working with international clients boosted the Indian Entrepreneurial spirit. Therefore, many Indian companies have started their offices in India and abroad and became multinational organizations. These new MNC’s began offering a broad spectrum of services ranging from complex IT projects to the integration of last-mile infrastructure. By this time, the global multinational organizations had also acknowledged India’s presence and started their offices in India. These offices include the process of Business Process Management and Research & Development centers. These centers gave global companies access to Asian markets, helping in product specialization and the creation of new products for these markets.

From 2011 to the present - Indian software companies have now evolved to build and manage complex IT systems for global enterprises. The combination of available talent, the presence of large technology companies’ R & D centers, and venture capitalists have accelerated the start-up culture. Currently, there are about 7000 (started less than 5 years ago) active start-ups in India and 1200 tech start-ups started last year. There are largely two sets of start-ups.

The first are replicas of US start-ups, consumer-led but largely focused on the Indian market. It began as replicas and soon morphed into the Indian market and started providing India-centric solutions.

In the last few years, 18 start-ups have touched 1 billion US dollars in market capitalization. In recent years, a 13-year old company, Flipkart which has been acquired by Walmart valued at 16 billion US dollars.

Global Impact

India to rise from the position of an impoverished Asian nation to embarking global presence in software technology is remarkable progress. India in the 21st century has emerged as a software powerhouse of the world. The IT sector helps global organizations cut their costs, improve quality, create new jobs, drives innovation and global businesses worldwide.

The high quality and low-cost services offered by Indians have helped global organizations to save huge operational costs as savings. These savings have facilitated multiplying the shareholders’ returns. Assuming a cost difference of 50% between developed nations and India, the Indian IT industry has helped to save 500 billion US dollars in the last 5 years.

The Way forward

The Indian IT industry is in a key position to lead global IT innovation in the coming decade. The government has also announced plans to build 17 more IITs to improve the quality of engineering education. The millions of engineering students who are about to graduate will adapt to artificial intelligence, cloud computing, and other new technologies. As a result, India will become the skills provider for more than 2000 global enterprises.

India’s per capita income is going to cross 3500 US dollars by 2025 from the current 2000 US dollars, which will boost consumer spending. As the individual income will grow, simultaneously the consumption market will also flourish. Therefore, a new wave of start-ups will be in business for creating India-focused technology and products. The government of India is also aiming to strengthen digital infrastructure. This will help in streamlining existing services and creation of new services for Indian citizens. Thereafter, the IT sector will be facilitating the traditional sectors such as agriculture, healthcare, and education which will boost the Human Development Index of India.

Over the last three decades, India has risen as a technology trailblazer and, with concerted efforts by Indian IT companies, multinationals, governments, and start-ups; India has the potential to become a world leader in the software sector.

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