The Globalization of Indian Firms from Steel to Software
Appendix B: Indian software industry: historical background
The diﬀusion of information technology (IT) into all other industrial and service sectors makes it one of the most critical technologies aﬀecting economic growth in developing countries (World Bank, 1992). Failure to introduce new information technologies is likely to result in ineﬃcient administrative and production methods. While IT includes both hardware and software technologies, software is vital because other technologies cannot function without it. Software is an important component of overall value within information technologies and is becoming a pervasive technology embodied in a vast and diversiﬁed range of products and services (Gaio, 1989). The development of a local software industry is seen as a necessity for developing countries to be able to adapt software technology to suit their particular local needs. Software production is also seen as the best entry point for developing countries into the IT production complex because of lower entry barriers and capital intensity, greater labor intensity and a lower rate of obsolescence (for some types of software) and fewer economies of scale. Labor intensity of production oﬀers an opportunity to developing countries compared with other production processes. Thus, developing countries’ production and use of software is becoming more intense and India, China, Brazil, Mexico, Singapore, Hong Kong, Taiwan, South Korea, and the Philippines all have software industries of note with annual growth rates of 30 to 40 percent not being uncommon (Heeks, 1996). Other interesting features of software include the fact that it is intangible, modiﬁable after initial production...
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