I'm heading off to Mumbai next week to participate in the annual NASSCOM technology leadership conference and do some reporting for BW stories. This is my second time at NASSCOM. I spoke there in February of 2001, just after India's version of the dot-com bubble burst. What I sensed then was a lot of disappointment and frustration. The Indian tech industry seemed always to be on the verge of greatness, but never reaching it. What a difference six years makes! The industry has grown up and is changing the rules of global competition in the tech services business.

I did a Q&A in advance of the conference that appears on the NASSCOM site, which I have pasted on the next page:

Q: What do you believe will be the key technology trends that will impact the world? What will be the Next Big thing?
Ans: I think the Next Big Thing will be the accelerated proliferation of computer and Internet technologies around the world. We have seen the huge impact that connecting India to the rest of the world has had on India and on businesses in the United States and Europe. I see the next phase of growth happening first on the grassroots level. In particular, I have high hopes for the One Laptop Per Child project, which seeks to put simple and durable wireless network computers in the hands of school children in developing nations. If this program works and scales, it could have a dramatic bottom-up effect on these economies, and, eventually, on the global economy. Microsoft and other PC industry incumbents may respond with their own alternatives for the children of the developing world, which will accelerate the proliferation of technology. Ultimately, this is about redistribution of wealth via the Internet. It will be a really good thing.

Q: How can companies harness the power of innovation to build greater differentiators and competitiveness for them in the global markets?
Ans: The nature of innovation is changing. It used to be that individual companies would invent new technologies, devices, and processes--then patent them and turn them into products. That model still works. But a new model for innovation is emerging that serves the consumer better. Think of it as open innovation. Today, increasingly, companies share core open technology standards, collaborate in developing basic knowledge and tools via open source projects (in software and wikis), and bring new products and services to market with partners. The result of this trend is that basic knowledge is shared and flows freely, and companies can spend their resources focusing on the product features or services that differentiate them from the competition. There’s less waste, and products are brought to market more quickly.

Q: Your recent book, Bangalore Tiger, traces the rise of the Indian tech services industry. In your view what will enable the sector to get bigger and better?
Ans: The top Indian companies are doing all the right things to continue their momentum. They’re distributing their workforces around India to take advantage of a larger pool of employee candidates and control salary inflation. They’re expanding their global footprints so they can operate in other time zones and with other language skills. And they’re steadily adding to the services in their portfolios and to their expertise within particular service offerings. They still have progress to be made in turning their services into consultative partnerships with their clients. This kind of trust and capability can’t be created overnight. But I believe that with time, and a lot of effort, the top Indian companies will play this role--and it will provide a major boost to revenues.

Q: What are the challenges that Indian IT players will have to deal with in the future?
Ans: The main challenges are wage inflation and turnover. While the Indian players have much more to offer than just labor arbitrage, they need the wage advantage to keep growing fast. Also, as the Western incumbents continue to expand in India and other low-cost countries, the Indian’s costs advantage will erode. This is all the more reason for the Indians to focus energies on developing those consultative skills. One other potential challenge is backlash from American politicians. The US economy has been motoring along with healthy growth rates for four years, but, when the economy slows and unemployment rises, there will be pressure on politicians to erect protectionist barriers against competition from foreign countries. Obviously, that could bite India.

Q: Will India’s IT-BPO industry continue to be a key investment destination for global players?
Ans: I see the trend continuing for years--just so long as the Indians keep their costs down. In the US, many sizable companies haven’t yet done much offshoring, and small and medium-sized companies aren’t even in the game. Europe is even further behind. On the other hand, I wouldn’t be surprised if one of the biggest opportunities for the Indian IT-BPO industry in the future is India itself. I noticed that Wipro’s domestic IT service revenues grew twice as fast as its global business last quarter. India’s economy is being unleashed, and that will be a huge boon to Indian tech companies, which, for the first time, have the home field advantage.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE