The Outsourcer: The Story of India’s IT Revolution by Dinesh C. Sharma (review)

Some years ago, the cover page of The Economist depicted India soaring on a flying carpet. This was in celebration of India’s success in information technologies. The book under review here chronicles a great transformation from “being in the backwaters to the frontlines of global technology business. … It is a story of converting skills and knowledge into capital and wealth” (p. 2). What a story and how lucidly recounted! The Outsourcer is relevant from both history of technology and economic history perspectives.

The introduction sets the tone and raises significant questions. What made this transition possible: government policies, technical training, or a new kind of entrepreneurial spirit? Why did India miss the hardware “bus” but excel in software? How long can India retain its competitive edge? It is a saga of foresight, individual skill, and an elephantine government providing some cushioning to several bumps. Chapter 1 understandably begins with the spirit and debates of the national movement which gradually crystallized as Nehruvian vision. Several competent scientific men of the time contributed to this. J. L. Nehru, the first prime minister of independent India, had the benefit of an exceptionally talented pool.

The author provides useful background without getting into unnecessary details. P. C. Mahalanobis, who founded the Indian Statistical Institute (ISI) in 1932, worked diligently for scientific instrumentation, and it was his institute that fabricated the first analog computer in the country in 1953. Chapter 1 gives instructive insights into the trial-and-error experiments that took place at the major scientific institutions in India, such as the ISI, IISc, TIFR, and the IITs. Students received good technical training but limited opportunities made them migrate to the United States, causing a severe “brain drain.” But this “migratory human capital” was of great help when the Indian economy opened up in the 1990s.

The Indian government always recognized electronics as “the nervous system of modern technology” and wanted to “leapfrog” ahead, but given the constraints of both finance and technology it was no easy task. Its technocrats were obsessed with an “inward-looking import substitution” policy. An innovative export-oriented electronics development came much later. Dinesh Sharma discusses the ups and downs in chapter 2 and in chapter 3 illustrates it well with the engagement of the American electronics giant IBM. The 1980s saw the dawn of the computer age in India. It began with the traditional dictum of “national control” but soon gave way to a New Computer Policy (NCP) under the leadership of a young prime minister, Rajiv Gandhi. He would listen less to the old bureaucrats and more to his “computer boys.” He was probably the first to redefine self-reliance in terms of technological breakthroughs and shift the emphasis from import-substitution to far more open assimilations. New experiments were initiated with the railway reservation system and telephone digitization despite vocal resistance from the trade unions. Help came also from the World Bank, which insisted on computerization as a precondition for the required loans. In 1992, the government led by P. V. Narasimha Rao opened the economy to market forces. Indian firms caught the whiff of change and reaped an unprecedented harvest.

In the next three chapters the author tells the story of the emergence of Indian companies like Patni, Wipro, TCS, and Infosys. It is a gripping story of what Sharma calls the birth pangs of a garage start-up that gradually became a global giant. Entrepreneurs who sold textiles or vegetable oils took to the computer industry. This is where one can see some sort of triple helix of the industry, academia, and the government coming together in a kind of working relationship. Scientific institutions played the desired role. Wipro was incubated at the prestigious Indian Institute of Science in Bangalore, with this city later becoming the software capital of the world.

But … India had missed the hardware bus. The author could have given more thought and...