India outsources outsourcing

Interesting article in the Guardian, India outsources outsourcing. Wage inflation and talent shortage, coupled with growing demand from non-English speaking markets, means that Indian software companies are opening up bases in newer locations.

The article mentions two interesting dimensions of the growth of Indian software firms,

"The ability of an industry in a developing country such as India to export "managerial and entrepreneurial capital" to wealthier nations is unprecedented, say economists. Arvind Subramanian, of Johns Hopkins University in Baltimore, says that India exports 1.2% of its GDP ($12bn) in foreign direct investment. Professor Subramanian says this is part of India's "anomalous pattern of development". Countries typically specialise in industries such as IT only when their income per head passes $15,000 and they do not export investment until per capita GDP touches $45,000. The comparable figure for India is only $900. "India finds comparative advantage in skills and managerial capital ... how precocious is that?" he wrote this year.

The other strange feature is that the Indian economy, booming at 9% a year, is not driving the growth of India's software firms. Barely 2% of Infosys's income comes from India. Instead Wall Street banks asking for "Spanish language support" or China's booming economy sway investment decisions. Mr Gopalakrishnan says Infosys's "non-English-speaking revenues contribute about a fifth of the total. It is growing fast and we have to build up expertise in languages.""