Indian software dies at 17 from failure to grasp future
The Indian software services industry died on Friday after a short
battle with newer digital technologies

A slowdown alone wouldn’t have stopped the Indian industry if it had
been able to embrace ‘smac,’ or social, mobile, analytics and
cloud-based technologies. Photo: Abhijit Bhatlekar/Mint

Singapore: Seventeen years ago an Indian man from New Delhi mesmerized
the technology departments of global corporations with a doomsday
story many times more puffed up than the luxuriant crop of hair he
The latter was a wig, and the former was just bad science fiction
packaged by consultants as a $600 billion hair-raiser. But Dewang
Mehta, the chief lobbyist for India’s fledgling software services
industry, carried off both with aplomb, convincing businesses that at
the stroke of midnight of the new millennium, their computer systems
would crash because old programs measured years in two digits instead
of four. The solution, he persuaded them, was to let a horde of
techies from Bangalore and Hyderabad go through each line of code and
fix the Y2K bug.

That was the birth of India’s massively successful software services
industry, which died on Friday after a short battle with newer digital
technologies. At the time of its demise, the business was worth $110
billion in annual export revenue.
The first hint that the end was near came on Thursday when Tata
Consultancy Services, the biggest Indian software vendor by market
value, announced a virtual stalling of its business in the September
quarter from the previous three months. After Infosys followed up by
slashing its full-year revenue guidance for the second time in three
months, it was time to turn off the ventilator.

#Infosys revenue growth pre-Lehman

A coroner’s inquiry unearthed three signs of decay, the first of which
shows how Indian companies’ cheap-talent-fueled growth ran out of
breath. In the four quarters before the collapse of Lehman Brothers,
Infosys saw revenue increase an average 29% in constant-currency
terms. Back then, Dublin-based Accenture’s growth was just half as
high. But there’s nothing exceptional about Indian companies’
expansion anymore. All that investors have heard from managements this
year is gloomy commentary on how challenging it’s become to get
clients to open their wallets. When the companies do make news
nowadays, it’s more often for dodgy business practices, regulatory
slaps on the wrist, and senior-level exits.

A slowdown alone wouldn’t have stopped the Indian industry if it had
been able to embrace “smac,” or social, mobile, analytics and
cloud-based technologies. But the vendors wasted so much time
defending their legacy business of writing code for and maintaining
purpose-built enterprise applications that they failed to make a mark
in the new digital world.

As an analysis from Mint shows, the dominant trio of Tata Consultancy,
Infosys and Wipro between them had 1.5 times more workers doing
digital stuff last year than Accenture. But the revenue they garnered
was 40% less than what the latter chalked up from newer technologies.
That makes the typical digital-tech employee of an Indian vendor 25%
as efficient as his counterpart at the global consultant. This gap
sets the clock back on Indian companies, which have taken years to
narrow the productivity differential:
Maybe it’s just banking clients and their inability to pay like they
once did. Or perhaps it’s a combination of weak global growth, Brexit,
protectionism and Donald Trump’s vacillating stance on US visas for
Indian technology workers. Hoping that turbulence is temporary,
investors are still paying a hefty premium for future growth. They may
get lucky for a while. Still, a dead-cat bounce from delayed orders
coming through would hardly count as proof of life.

The millennium scare got Indian software a foot in the door at global
corporations. But now the shoe is on the other foot. Robotics and
artificial intelligence are putting the vendors’ labour-intensive
business at risk of obsolescence. Even if the concern is as puffed up
as Y2K, with plenty of growth candidates in the Indian start-up world,
at least for some investors it may be time to back new horses rather
than flog dead ones.

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