India in the Global Software Industry: Innovations, Firm Strategies and Development. Anthony P. D'Costa and Eswaran Sridharan, editors (London, Palgrave Macmillan, 2004), 278 pages

The Indian software industry is fast becoming a folklore of the modern day information technology (IT) revolution, and it is considered as an example par excellence of a technology-intensive industry establishing itself in a developing country. India has, indeed, caught many by surprise, and the progress is sometimes received with a mixed reaction. I once commented to an MBA class that the London underground was run by software written in India. Then came quick reply from one of the students: "that's why the trains are always late!" I am not sure if the Indians should take part of the blame for tube delays, but, for sure, they have proved how a little freedom in the domestic business environment and liberalization of trade regulations can go a long way in developing an industry that, not very long ago, hardly existed. No doubt that the industry has done all the Indians proud, but huge challenges lie ahead.

Because they provide an objective view of the situation, books like this volume are welcome additions to the growing literature on the subject. This, in particular, is a timely book that contains articles written by academics. Divorced from the business, but still interacting with it via their research projects, the authors are well placed to take stock of the situation objectively and suggest recommendations.

There are a total of eleven chapters in the book. The book takes a holistic approach by examining the firm, national and global level determinants of the industry's growth. Firm level determinants consist of innovatory capacities, cross-cultural issues and linkages of various kinds. National level issues consist of the role played by the state and federal governments in providing a helping hand to the industry through, for example, infrastructure development. Global level issues consist of the dynamics generated in the industry by the ever-changing demands of the consumer and the industry.

Chapter one highlights that the Indian software industry, though successful, still faces major hurdles, as it is still small in terms of its global market share and producing low value-added products, while its own domestic market is only one-third of the size of its export market. As remedies, the author recommends large scale investment in IT infrastructure, both physical and human, fostering R&D and entrepreneurial skills, and forming close partnership with transnational corporations (TNCs).

Chapter two introduces the determinants of innovation in the case of the Indian IT industry and also provides the gist of innovation-related issues dealt in the book. Can India follow the examples of the Republic of Korea and Taiwan Province of China where firms started as assemblers of semiconductors for TNCs but moved up the value chain with the help of investment in research and development (R&D)? In order to be able to take a similar path, the industry needs to diversify and, in this regard, it should take advantage of "return entrepreneurs" from Silicon Valley. Business-friendly government legislations and improved infrastructure would also be needed. R&D in India has historically been the domain of public institutions and TNCs--the latter have shown added interests in IT recently, given the highly-skilled cost-effective labour force available in the country.

The message contained in chapter three (partly based on a survey) is that the Indian software industry is locked into the low-end of the software market, supplying mostly to the United States market. This lock-in effect has hindered its development of innovative capacity, which the industry must foster in order to move up in the value chain. This, according to author, can be done by diversifying both the geographic and the customer base and by establishing linkages with the domestic market alongside export markets. It is emphasized that face-to-face interaction with the end-users can be pivotal in enhancing key tacit skills and exploring new business opportunities.

Chapter four attempts to understand the role of governmental measures in enhancing innovation-based competitive advantage of the software firms. An econometric model is used to determine the variables that govern the innovative performance of firms. The descriptive and analytical findings in this chapter show the importance of State measures in the present-day success of the IT sector. It is a good reminder that, in a bureaucracy-ridden country such as India, a series of State initiatives have played an important role in the development of the present day IT sector. Lest it be forgotten, hidden behind these State measures are those technocrats who had an early vision of the growth path the industry could take with help from the State. The authors urge further tapping into the resources not-resident Indians offer, and increased focus on the domestic market for the development of the industry. Fortunately, the tenth five-year plan makes some important provisions in this direction, e.g. IT applications in the energy and the railways sectors. The multiple regression model used to assess the determinants of innovative performance shows that export intensity has no bearing upon the innovativeness; among firm-specific variables, size, selling cost, and skill intensity are found to be statistically significant variables.

Chapter five, written by researchers from Israel, provides an interesting commentary on the Indian IT industry from an Israeli perspective. The chapter is descriptive in nature, and it compares and contrasts the Israeli experience of developing its IT sector with India's and offers some useful insights, some of which are drawn after interviews with three cross-sectionally selected Indian companies (Wipro, Sasken, Hughes). Their most pertinent observation and suggestion seem to be on the support for start-up firms with regard to venture capital and R&D.

Chapter six addresses the issue of product development, which is one of the proffered solutions for Indian companies seeking to come out of their low-end service businesses. A case study approach is adopted to understand the intricacies of product development business. The difficulties associated with successful product development are easy to understand. Whereas the market for service software is the client's domain, the market for product development has to be found, developed and nurtured. As the authors put it succinctly: "product development requires discipline: in analysis, decision-making, and implementation. It involves intuitive understanding of markets, users and their needs combined with creative problem-solving, elegant design and robust architecture" (p. 159). The deepening of the domestic market for software products, collaboration between large and small firms, and checks on software piracy could be building blocks of successful product development.

Chapter seven is a lucid and candid account of what is missing for the further development of the IT industry in India that ought to be read by all those connected with the industry, in particular, government officials. The author provides a short but fascinating account of China's growing supremacy in the IT sector, both software and hardware, and also offers a valuable policy prescription for prospective entrepreneurs and public officials. The author's suggested remedies include: a greater interface of IT scholars with Silicon Valley; well-meaning and concerted efforts by the Government to rout out the corrupt and inept elements in government machinery; an overall improvement in the infrastructure; and incentives to motivate Indian talent to return to India. Also, no less important is the author's emphasis on the need for diversifying into the hardware side of the industry and into product development both for the domestic and overseas markets.

Chapter eight re-emphasizes the point that linkages help organizations build technological capabilities. The descriptive analysis is based on the links Nortel, the Canadian telecommunications firm, formed with Indian and Chinese partners. The lesson seems to be that learning from alliances should carry a strategic intent: i.e. a conscious effort to learn from different projects should exist. In addition, the involvement of the academia in technology networks can create significant positive spillovers. The Indian telecommunications industry is slowly emerging from State controls, which, in itself, given the vastness of the country and ample opportunities it provides, should accelerate the pace of collaborative activities for the benefits of the business and the non-business world.

Chapter nine addresses the issue of innovation and entrepreneurship in the context of the software industry in India. There is an enormous amount of theoretical and applied literature on both of these topics, and it is understandable if only a part of it is captured here. The central hypothesis is that, in order for Indian firms to move up the value chain, they need entrepreneurs who have foresight and vision, and can take calculated risks. In turn, the budding entrepreneurs need to be supported by active venture capital and reliable infrastructure. The chapter is primarily based on interviews with 16 entrepreneurs. Among the findings is the fact that most entrepreneurs in the software industry come from middle class backgrounds and only a few have a business background. Interestingly, most did not find the Indian market encouraging, which is a little bit surprising given the Indian market's vast potentials.

Chapter ten charts the growth of two well-known firms in the IT business, Infosys and NIIT. The underlying theme in the successful growth of these firms is the vision of the entrepreneurs who founded them. In particular, the learning traits of both organizations stand out. The IT business is human capital intensive; it is the people who drive the business forward unlike manufacturing where the physical operation of machinery is equally important. Both firms have successfully harnessed their human resources and channelled their energies in the right directions.

So what lessons do the discussions in the book lead to? Some of the key points are: IT firms need to be innovative, focus on the domestic market, move up the value chain, and form alliances with overseas firms with the intent of learning. In addition, technocrats in government need to become more imaginative in attracting entrepreneurs into the IT sector. There is a lot that can be learnt from China in this respect.

This is a timely and densely written book. Although it does not break any new theoretical grounds, it does successfully draw attention to pertinent issues facing the present day Indian IT industry. The highly descriptive presentations at places could have been tightened, and conclusions of some chapters could be shorter. A section on the central and state government policies that helped the IT industry grow could have been added. All in all, this is a well thought-out book that would be interesting to a cross-section of business and academic practitioners.

Satwinder Singh

Department of International Business Studies

Witan International College

Reading, United Kingdom.