IT industry needs to re-innovate itself: V Balakrishnan

Written by fe Bureau | Bangalore | Updated: Jun 2 2014, 15:48pm hrs
V BalakrishnanV Balakrishnan, Former Board member and CFO of Infosys, says the IT industry in India needs to re-innovate itself.
The IT industry in India today is worth more than $100 billion and is employing over 3 million employees. This is one of the largest private sector employers in the country. It also contributes close to 10% of Indias GDP and is one of the highest forex earners for the country.

While the industry had done exceedingly well and had put India on the global map, it is also going through a huge transformation. While the first $100 billion came primarily from services, the next $100 billion is expected to come from innovation in new technologies like social media, mobility, analytics and cloud (SMAC). These new technologies are re-defining the way IT is spent by big corporates, globally.

The traditional Gabbar Singh model of Kitne Aadmi thay resembling the resource based revenue model is seeing its sunset. The industry is getting commoditised rapidly and is fast losing its competitiveness to other countries like Philippines and China. The high unemployment in developed countries is also resulting in restrictions on visa usage which is impacting the industrys ability to move people seamlessly across borders, which is the bedrock of the current services led business model of the industry. So, what does the industry need from the new government

Support R&D and innovation: The IT industry in India needs to re-innovate itself. Large Indian IT companies have lost their ability to innovate. Being in public markets inhibits their ability to make investment in new technologies ahead of the time. The services led culture in those companies restricts their ability to attract good talent to support innovation. To some extent, it will not be an exaggeration to say that the industry is at its cross roads today and need to re-innovate itself to remain relevant in the global markets.

This industry had attracted more than $2 billion in PE/VC investments but it requires much more. The government should become an enabler for creating an innovative ecosystem similar to the one that exist in the Silicon Valley in the US. This innovative ecosystem can act as a feeder to the larger IT industry which is not investing in innovation for various reasons. It requires greater connect between academia, research institutions, the PE/VC industry and the entrepreneurs. The government should support and enhance research by academic institutions in collaboration with the industry and young entrepreneurs; simplify the tax system for start-up companies and make the process easier for them to set-up companies; and provide tax incentives to PE industry so that greater capital can be attracted into the country.

E-governance: Increase spending on IT to drastically reduce corruption and increase transparency while improving the quality of delivery. The government should focus on passing the Electronic Delivery of Services Bill introduced in parliament in 2011. This will accelerate the adoption of IT in the government and benefit the country. There are several big-ticket IT projects in railways, defense and other ministries. But the decision-making process is very slow with inadequate allocation of funds. Also, the country needs a CTO (chief technology officer) who can take a holistic view on the IT needs of various departments and bring in standardisation in technology and accelerate the investments.

Tax clarity: It will be unfair to ask for tax exemption for an industry which is more than $100 billion in revenues now. However, there are several disputes with the tax department on the definition of software exports, especially the onsite exports and the deputation of technical manpower. Fair to the earlier government, they appointed a committee headed by N Rangachary to look into the issues and come with solutions. The CBDT clarified most of the issues but the field officers refused to provide the benefit citing flimsy reasons. This tax terrorism should end and the government should instruct the field officers to re-look at all the demands raised for all the past years.

I think, with appropriate policy measures, the IT industry in

India can continue its growth path and create millions of more jobs which is a crying need of the economy today.