Indian IT’s crisis of innovation: Industry has allowed arrogance to replace its original vision

When arrogance replaces vision, organisations and their leaders reach a destination where logic and strategy are strangers. The Information Technology industry in India is in the same place the traditional industry or old economy was in the 1990s.

The old economy resisted and wailed against delicensing and foreign competition when the economy was opened up in the 90s. Similarly, the IT industry is now pleading for government support, crying out against perceived protectionism and feeding the fear of mass unemployment when faced with obsolescence.

Why else would the IT industry get upset with the change in the H1B visa regime in the US? At the core of the issues is a revision of basic salaries for highly skilled technical workers. The salary was set in 1989 at $60,000 per year. Since then, the basic salaries have not been revised.

Let’s dwell on 1989. It was a time when personal computers were just about picking up pace. Mobile phones didn’t exist. India’s economic reforms and delicensing wasn’t even a twinkle in the government’s eye. And India was about to default on its external debt.

Facebook, Google, and Amazon weren’t even concepts.

But today, the Indian IT industry is upset that the US government is revising the $60,000 salary of 1989 to 2017 levels of just above $130,000.

The Indian IT industry should consider itself fortunate that the salaries were not revised for 28 years. But this fortune has also led to their crisis. The cost arbitrage of sending cheap human labour fattened them so much that they became too lazy about moving up the value chain. IT leaders routinely mocked the community of analysts and media when questioned about the creation of products. When asked about new technologies, they were complacent enough to say that it was too early to have an impact.

Look at the impact also on the low salaries of young engineers. Earlier, the smartest of engineers would go to the US. A salary of $60,000 was princely in the 90s. The same salary in Silicon Valley today is lower than most other professions. Forget US professionals, even moderately skilled Indian engineers don’t want to accept such salaries. As a result, poorly trained engineers from small towns of Andhra are thrown into the US. Uncomfortable and unprepared for a new environment and lacking adequate social skills, they find it tough to cope. They live cooped up in garages turned apartments, four people in one room. Once they were high wage, high skilled engineers. Now they are low wage, low skilled workers.

No wonder the clients are upset and the US government is revising the salaries to relevant levels.

Several questions arise now. Where were the visionary leaders when artificial intelligence and robotics were expanding their reach? What were the pioneers doing when the Internet of Things platforms were being created? What were the founders and CEOs of Indian IT companies thinking when US and Germany began investing in new foundations of internet technology? US companies like GE began work on the industrial internet platform in 2013 while German companies created Plattform Industrie 4.0 the same year. They had been preparing for it for years before the launch. They saw the change much before the Indians did.  

By not investing in new platforms, research and skilling, the IT leaders have let down the millions of engineers and the industry itself. IT industry will lose 2,00,000 jobs per year for the next three years because of obsolescence, says a study by Head Hunters India.

Instead of funding and working with academia to start new skilling and education projects, companies preferred to invest in multi-acre campuses and multimillion dollar CEO salaries. Today, the elements of fourth industrial revolution make for a small percentage of the revenues of Indian IT leaders. In some ways, the government of India under Prime Minister Narendra Modi is way ahead of the Indian IT industry in its vision for digital India. This is short of shocking for an industry that grew and matured in the 90s before the governments of the day realised the importance of IT.

The time for being politically correct and polite is over. The decline has begun. Industry body Nasscom has predicted a flat growth for the sector. This trajectory could well take it over the cliff. IT industry can’t rest on laurels of the 90s. For the sake of millions of young engineers, it has to transform or perish. A new generation of visionary leaders has to set the foundation for a new technology revolution in India, much like the US and Germany did. The government, under Prime Minister Modi, should collaborate to invent a new and modern technology industry.

Vision must make a comeback and replace arrogance.

The author is an economic analyst, adviser, and writer who focuses on technology, globalisation and media