Value versus volume
Often, when I look at the Indian IT industry, I am forcibly reminded of a similar industrial situation a couple of centuries ago. It is one that every Indian school going kid of a certain age is familiar with: India, which had been famed for its high-count, fine-quality cotton since the centuries before the Common Era, was reduced to supplying raw material to the powers-that-were. We lost out on our markets by bring forced to provide low-value raw material and products. Sure, it was probably easier to do, for the producer, at an individual level but the opportunity costs were tremendous. India as a brand, became associated with low-value, low-grade products and was seen as a source of basic raw materials rather than high-end finished products. We had the capability but we were not being able to utilize it.
Today, hundreds of years later, the IT industry is in a somewhat similar position due to a combination of several factors. We have the talent and capability to do far much more than we are doing now. The country still churns out the largest number of engineers in the world. Unfortunately, most of them are unemployable when they graduate due to a massive disconnect between the education system which focuses on certification rather than imparting usable knowledge, and industry requirements. Also, a lot of youngsters today, who opted for employment in BPOs are joining these operations either as a stop gap or for easy money that they offer. This unfortunately soon palls if the employee is not focused and equipped and does not enjoy what he or she is doing. The resultant attrition again hinders growth and development at all levels - that of the individual, the organization and the industry. Quite evidently, if the talent pool that we are drawing on is barely equipped to handle a basic BPO job profile, there is no question of them being able to handle a profile that requires advanced skill sets and training. Again, it is simpler to set up widespread basic operations rather than build expertise in specialized fields, since that requires an investment of time, money and talent and offers visibly quicker returns. But in the long-term perspective, this is not a sustainable model. While the traditional pyramid structure can still work (see dig.), what we need to do is concentrate on growing the top of the pyramid - the high-value zone, rather than further widening the low-value base.
Where is the point to producing wheat when you can bake breads or even cakes and earn much more in terms of reputation, skills and yes, money... Horizontal expansion is palling and it is time to climb the ladder.