The success story of Indian IT has been well chronicled in the recent study by industry association NASSCOM with support from global Management Consulting leader Mckinsey. As the industry grew from less than a percentage of GDP in 1998 to over four percent at the end of 2008 with its share in Indian exports quadrupling from four to sixteen percent, it has been responsible for a six fold increase in tertiary education capacity in all the key states which are substantial contributors to the export industry and has created over forty percent of incremental urban jobs since the year 2005 – no mean achievement by any standards!

Much of the growth happened through the discovery of India by global CIOs as a prime destination initially in terms of cost and increasingly over the last many years for the quality and scalability of processes that all significant IT and Business Services firms have demonstrated time and again in engagements. In the last five years, the industry has also demonstrated its ability to innovate – in new products and services, well crafted methods of people hiring and engagement and new business models of delivering service that have transcended Indian boundaries and seen hundreds of Indian offices and centers being established in near and far locations all over the world to provide consulting led solutions to discerning clients.

Specific research into innovation eco-systems elsewhere in the world done by NASSCOM a year ago has revealed that innovation communities are best fostered by the collaborative working of five distinct entities – large companies interested in initiating and supportive joint research projects with academia and the academic institutions themselves who need industry support for upgrading their educational inputs as well as to strengthen the quality of their academic and human resource output are the key contributors to the Innovation Eco-system. The other players are entrepreneurial start-ups, financing agencies and the Government. Cases of successful innovation communities range from the much celebrated Silicon Valley in the US where the Government has played the least significant role to Singapore where the drive towards IT and Biotech capabilities has been spearheaded by the Government – both successful models and it is really left to the communities to choose the model they would adopt for success.

Three cities in India which together contribute to over fifty percent of the fifty billion dollars of exports in Information Technology demonstrate various nuances of the eco-system in their own success stories. Bangalore probably is closest to the ideal mix while the Hyderabad surge was initiated by the Chandrababu Naidu regime and carried forward by the new administration. Mumbai as would be expected has been almost entirely entrepreneur driven though the initial establishment of the Santacruz Export Processing Zone by the Ministry of Commerce and the subsequent creation of technology parks under the STPI scheme have had a role to play in infrastructure creation.

One location which has thrived over the last five years by the assiduous application of an Innovation Cluster approach has been the city of Pune which has emerged from the shadows to be one of the fastest growing cities in this sector. The early success of a few local firms and the establishment of reasonable physical digital and social infrastructure by the State Government as well as the Municipal Corporation has supplemented the excellent educational apparatus the city has always had and paved the way for a slew of investments in large centers by Indian and global IT firms as well as captive operations of multinationals from US, Japan and Europe.

So far so good but the future success of the industry cannot be taken for granted and more collaborative efforts are required, not just in the seven developed locations but in forty-three other towns and cities that have already been identified. These will need to be developed and nurtured till they find their own place in the knowledge firmament. The Perspectives 2020 study of NASSCOM with Mckinsey has suggested that the industry can scale to over two hundred and fifty billion dollars if the shortcomings are overcome and the right steps are taken to provide better infrastructure and education on the part of Government and to innovate in more areas on the part of industry. If India does not do what is needed and other countries which are eyeing the lucrative outsourcing business are allowed to take the lead, we could well fall short by seventy to eighty billion dollars which would be a loss of opportunity that the country can ill afford.

The Innovation clusters research of Michael Porter and the models for innovation in companies suggested by Clay Christiansen and Michael Tushman, all of the Harvard Business School, provide adequate food for thought and tips for action to strategy planners in the Planning Commission, the Governments and industry associations and CEOs. NASSCOM’s work on the fifty location study and recommendations on the setting up of more PhD seats and twenty IIITs through Public-Private partnership can be the first steps in strengthening the weak areas across the country. The recent initiatives taken up in Jammu & Kashmir, Punjab and Maharashtra through Government-Academia-Private Sector collaborations and the ambitious initiative of industry assessment and finishing schools launched in Maharashtra by the CII can be scaled to find solutions to the employable skills problem that has been plaguing the industry while the Government can and should do its bit by focusing on primary education, opening up the Higher Education sector to the private sector and extending the tax benefits and facilities offered by the STPI Scheme in line with the SEZ policy. Will the new Government take the path of support and play its role in the new Innovation eco-system? The industry will heave a collective sigh if relief if that does happen!