NASSCOM BCG Innovation Report 2007 Executive Summary

IMPERATIVE FOR INNOVATION
With each success comes greater expectation. This is the challenge now facing many
segments of industry globally, including India’s successful IT-ITES industry. Delivering ‘more’
or ‘better’ can be done by improving effi ciency, but beyond a point the value curve begins
to flatten and it becomes increasingly difficult to keep providing ever increasing
value-for-money. The only way to do so is through innovation: not just executing the same
series of steps more effi ciently, but by doing new things in different ways to achieve new levels
of output.
Why Innovation
The Indian IT-ITES industry realises the need for innovation and the benefi ts that it can offer. In
our discussions with fi rms, we clearly heard an articulation of the IT-ITES industry’s aspiration
to signifi cantly increase innovation, developing path-breaking services/products and delivery
mechanisms, etc. that will be the envy of the world. The industry wants India to be acknowledged
as a world leader in IT-based innovations and not just a world-leader in low-cost talent pools
and commodity services.
The Indian IT-ITES industry does not intend to confi ne innovation to purely commercial gains.
The industry aspires for innovation to have a clear and tangible impact on improving the
well-being of Indian society as a whole. Industry leaders strongly feel that innovative usage
of IT can help improve the reach and quality of our healthcare services, reduce the extent of
unemployment and underemployment as also take connectivity to a billion people.
The Indian IT-ITES industry has shown a tremendous growth with a CAGR of above 25%
over the previous fi ve years. This impressive growth has been refl ected in both the exports
of the software and services sector as well as the surge in the domestic market. India has
led the fi rst phase of growth of the IT phenomenon due to some inherent advantages that it
offers: abundance of talent, superior delivery quality, cost advantage and favourable policy
interventions by the government towards IT infrastructure along with other growth-oriented
policy moves.
However, the traditionally successful Indian IT-ITES business model is increasingly coming
under strain and competitive advantages are weakening on several fronts such as:
a. Rising factor costs in India are eroding the traditional competitive advantages.
b. Geographical and cultural affi nity, growing concerns in the key western markets over
outsourcing to India, similar time zones and active local government support are resulting
in Latin America, Eastern Europe and China posing a serious threat to India.
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