Focus on India

Much has been written about software outsourcing to India as well as the trend towards offshoring call centers and services and support. Less has been written about the other ways in which Indian knowledge workers are making their presence felt on the global economic scene.

It was inevitable that India's highly skilled technical workforce would begin to find ways to migrate up the value chain to offering products and capturing more of the margins. Via Om Malik comes this interesting Far Eastern Economic Review article profiling some Indian software startups.

Increasingly some of the world's best-selling software products are being made in India by Indian companies.

Their rise is due to a convergence of factors: With the U.S. cutting back on issuing and extending work visas for Indian professionals, many have returned to India equipped with the expertise to develop their own software. Meanwhile, a protectionist backlash against outsourcing is gaining momentum in America and Europe, and competition remains fierce in the offshore IT-services market. Indian companies have already cornered 60% of that market, worth $16 billion a year. But with competitors slashing costs and margins in services shrinking, companies are realizing that the high-margin products business--where Indian companies have only tapped 0.2% of a $180 billion global market--is the way to go.

The real "Made in India" companies may have a small services component, but most of their revenues comes from their products, which are comparable to better-established rival products, not low-cost alternatives.

The article mentions i-flex solutions (whose Flexcube is the world's best-selling banking software package), iCode (which developed one of the world's first ERP software products for small and medium-sized businesses), Talisma Corp. (which makes Web-driven CRM software), Subex Systems (which has a telecoms-fraud-management product) and iCode (which sells software to SMEs to manage their accounting, payroll, customer transactions and other functions).

Many of these India-based software-products companies are incorporated in the U.S. But because they were founded by Indians and Indians perform all of the product work in India, they are essentially Indian companies They have incorporated in the U.S. to leverage their contacts and to raise venture capital, and many of their top executives commute between the two countries.

Indian professionals who have returned to India from abroad understand corporate software needs, they know which niches are potentially lucrative and they have global contacts. They've also gained exposure to the way multinationals do business from their IT-services experience.

On its heels comes this Business Week article titled The Rise of India that points out that offshoring is growing to include other core functions such as R&D, accounting, etc.

Indian knowledge workers are making their way up the New Economy food chain, mastering tasks requiring analysis, marketing acumen, and creativity. This means India is penetrating America's economic core.

Yup.