| Linking up with the global economy: A case study of the Bangalore software industry |
| Chapter 2: The Global Software Industry: From Silicon Valley to Bangalore |
  
The software development activities that occur in Bangalore feed into the wider range of activities that constitute the global software industry. In order to understand and to be able to situate these activities and the specific role that Bangalore plays, it is necessary to briefly explore the characteristics of this industry. By understanding the various stages of software development, the skill requirements, the geographic spread of these activities and the linkages between the many players, a more dynamic analysis becomes feasible when considering the industry in Bangalore.
 2.1 Some definitions
First and foremost, it is necessary to assign a working definition for the term "software". Schware provides a comprehensive definition:
The term software refers both to the instructions that direct the operation of computer equipment and the information content, or data, that computers manipulate. There are two general types of software: systems software, which is used to manage the components of a computer system -for example, computer operating systems that control input and output operations - and applications software, which is designed to apply computer power to the performance of tasks such as materials and facilities in hospitals, budget and payroll administration or computer-aided design of turbines and pumps....systems integration...is the process of identifying and bringing together various technologies in order to define and deliver a complete information package, including large and small computers, packaged and custom-designed software (Schware, 1995, p. 416).
It is also necessary to clarify the definition of a software professional. For the purposes of this monograph, a person who enters data or who is a user of software is not considered to be a software professional. That term is reserved for people engaged in systems analysis and development, programming and coding, database administration, and project management (Rajeswari, 1995, p. 286).
The process of developing a final software product involves a series of steps. Figure 1 endeavors to present these steps in diagrammatic form, with the caveat that software production is more complicated and the actual steps are not so clearly defined.
The value addition in this process comes at the early stages in identifying the problem and the solution, and designing the system. Programming or coding, testing, installation and maintenance are at the lower end of the value chain (Heeks, 1996, pp. 81-83, and interviews). Furthermore, the processes that are involved at each stage need not occur in the same geographic location because of the different skill requirements for them as well as because of the major breakthroughs in telecommunications technology. For example, the software design for a particular project may occur at the location in which the project is going to take place or at a separate location, using software design consultants. Contract programming is when software developers are either provided with general guidelines about the functions that the software is required to perform or are given the exact specifications by the client. They then either have to design and complete the project or simply implement the specifications as given (Kopetz, 1995, p. 300). This type of work can be carried out on-site or offshore, and most often, at a rate covering what is called "time and materials" (Heeks, 1996, p. 82). Onsite work has, in the Indian context, been referred to as "body-shopping".
The implementation of the design, i.e. the actual programming and testing may also be undertaken in another location, depending on various us factors including the availability of capable people, the cost, the ability to deliver on time and access to high-speed satellite links. Installation, however, has to occur on site. Software maintenance includes troubleshooting, upgrading and improving existing software. It "requires a good understanding and smooth co-operation between the organization utilizing the software and the organization providing the service" (Kopetz, 1995, p. 300) and can take place on site or off shore depending on the situation and needs. New technologies are increasingly allowing maintenance to be provided from remote locations.
Figure 1: Steps of Software Development 
Source: Patane and Jurison, 1994, p.9 and Heeks,1996, p.81
2.2 How the software industry went global
The $400 billion global software and software services industry is a growing industry with new applications constantly being developed for a variety of sectors (Economist, 1997, p.8). The presence of the Internet has produced an additional focus for software developers in recent years, as it made possible a whole new range of products and applications, which included networking, and videoconferencing. The software industry, however, was not always global. It has taken a series of events, technological, political and socio-economic, to lead the industry, as with many other industries, into the global arena.
The software industry got its start in the late 1960s. Until then software was considered to be an integrated part of the whole computer package i.e. the hardware came with built-in software. When "it became evident that software development and maintenance costs had become equal to, and were beginning to exceed, the hardware cost... (i)t... became essential to assign a commercial price to software and "unbundle" the sale of software and hardware" (Narasimhan, 1993, p. 7). In 1969, IBM became the first computer company to see the value in launching a separate software unit, whereby the customer was for the first time charged separately for hardware and software (Heeks, 1995, p. 108 and Narasimhan, 1993, p. 7). This move in a way led to the creation of what is today recognized as the software industry. The industry got an additional boost in the 1960s from the extensive needs for software by the defense industry and space research in the United States. Much work was farmed out to independent, small software companies that worked on a contractual basis (Narasimhan, 1993, pp. 7-8). This stage in the evolutionary process of the software industry is what Schware calls era 1, the shift from software being an integral part of hardware to the "unbundling" of software (1995, p. 419).
The late 1970s saw a transformation in the industry, marked by soaring growth rates of software revenues and outsourcing of software development jobs, both in domestic and foreign locations. This change was due to the standardization of job activities, programming languages and hardware environments, whereby "the technology and skills within software production became sufficiently stable to allow internationalization of software services" (Heeks, 1996, p. 108). At this stage, era 2 in Schware's topology, customized software was becoming the norm, as companies needed to have software to address specific functions (1995, p. 419). This is primarily application software development, which Koppetz terms "intelligent product software development", whereby software is used to customize the user's computer system so that it can fulfil particular user needs or functions (Kopetz, 1995, p. 300). This type of work can also be referred to as a fixed price turnkey project, whereby a firm takes charge of certain stages of software development for a project and charges a fixed fee for the entire contract, which also has a specified length of time. A large part of this type of work is carried out offsite and it makes use of a wider variety of skills and experience (Heeks, 1996, p. 82).
Next came era 3, which was "(D)ominated by `shrink wrapped' software packages. Pre-packaged or "shrink-wrapped" software, which is used on personal computers and allows the user to work independently, needs to contain certain elements: genuine user need, ease of use, flawless documentation to allow the user to be self-sufficient, quality and support (Koppetz, 1995, p. 298). Some examples of packaged software include operating systems like Windows, spreadsheets like Microsoft Excel or Lotus 1-2-3 and word-processing programmes like WordPerfect. Software packages can be mass-market or can address niche markets. These packages offer economies of scale to vendors, who can focus on market niches and meet the growing demand for more sophisticated technical and support services related to the product. Demand for packages increases because of the scarcity of experienced human resources and the risks in custom development projects" (Schware, 1995, p. 419). Marketing is an essential aspect of success in this area, and therefore, so is access to funds to be able to finance large-scale marketing. This becomes a significant barrier to entry (Narasimhan, 1993, p. 10). Within the industry, the market for software packages will grow the fastest in the future, while the market for custom software and consultancy services is projected to grow at 10 per cent in real terms (Heeks, 1996, p. 110).
More recently, there has been widespread recognition of the importance and use of information technology. It is increasingly being used in all aspects of business. Companies are making large investments in computer technologies for what Koppetz calls key element or embedded software development, "where the software contributes the key element to a complex industrial product, e.g. the software for a telephone switching system or an operating system for a new computer. A typical example is where an existing ind industrial organization with an established home market tries to improve or enhance its existing product by new functionality based on software" (Kopetz, 1995, p. 299). This Schware calls era 4. Tasks are increasingly being subdivided and some, primarily the lower value added ones such as data processing and programming, are increasingly being outsourced. Systems integration has become the required service. This includes "project management, requirements analysis and design, contract programming, subsystem integration, education and training, and ongoing system support and maintenance" (Schware, 1995, p. 419).
According to Schware's topology, it seems that countries go through the various eras in the evolution of software development activities at different times, depending on factors such as their level of development, and on the technological advancement of countries, evidenced by the presence of high-tech sectors. At any given time, there are, therefore, overlapping eras. The time sequence presented above reflects the experience of developed countries which are now in eras 3 and 4, but in Schware's view, most developing countries are between eras 1 and 2, and are about 5 years behind in technology and skills (1995, p. 417).
2.3 The size and spread of the global software industry
Some figures will provide a sense of how much the industry has grown and how important the United States is in this industry. From being a less than $30 billion dollar industry in 1980-81 to a $100 billion dollar industry in 1987, the software goods and services industry is estimated to have grown to over $400 billion in 1995 (EXIM Bank, 1992, p. 3, Schware, 1995, p. 416, and Heeks, 1996, p. 109). The global software ind industry is currently growing at about 20 per cent per annum.
The OECD estimates that in 1994, the OECD countries accounted for 94 per cent of the global market for software packages and 95.5 per cent of the global market for software services. The United States accounted for more than half the OECD expenditure on software services. Five OECD countries, the United States, Germany, the UK, Japan and France account for 80 per cent of total expenditure on software (OECD 1995, pp. 26-28). The United States has the largest market for software, accounting for nearly 50 per cent of all software sales since the late 1980s (Heeks, 1996, p. 126). The high-tech companies in Silicon Valley alone amassed sales of $200 billion last year. It is abundantly clear that the OECD countries, the United States in particular, are very important in this industry and wield a great deal of power in defining the direction in which the industry heads.
It is only in the late 1980s that the developed countries began entering era 4 and the industry became more internationalized. Companies now are increasingly focusing on core competencies and are outsourcing part or all of their software development. Software firms in Silicon Valley are also focusing their efforts on research and development and have begun to outsource the lower value added activities. This is partly because of the shortage of programmers and software professionals in the United States and because of financial savings at having these tasks undertaken in less costly locations. "Many firms are finding offshore software development a viable alternative to in-house development because of lower cost, inability to hire and retain qualified programmers at home, and the growing need to move swiftly from project initiation to systems installation" (Patane and Jurison, 1994, p. 7). Outsourcing has been made practicable by technological advances in telecommunications which have "effectively remov(ed) traditional geographic boundaries for firms" (Patane and Jurison, 1994, p.7)
Indeed, the demand for software professionals in the industrialized countries, which has increased quite significantly in recent years, far outstrips the supply. Heeks estimates that in 1992, the gap between the supply of and demand for programmers in the United States was 37,000 (1996, p. 108). More recent estimates suggest that this has risen to 190,000 and that world-wide there are over 900,000 programming jobs waiting to be filled (Baker, 1997, p.46). There are, therefore, a large number of projects that need to be completed or that have not been initiated because of the lack of manpower. The percentage of these projects that have been and will be outsourced has increased tremendously (Heeks, 1996, pp. 109-110).
It has been estimated that in 1994 the global outsourcing market in the information technology industry was around $240 billion (Patane and Jurison, 1994, p. 7). Furthermore, the number of firms world-wide that are involved in the software industry is growing at a healthy rate. Among the reasons given for this include low barriers to entry in terms of initial investment costs. This is due to access to PCs at a low cost; the increasing accessibility of high speed telecommunications links; the lowering of trade barriers; and the relatively higher labour and overhead costs in the developed countries (Patane and Jurison, 1994, p. 7). In a survey conducted by Patane and Jurison, only 17 per cent of the respondents, executives of large American IT companies, outsourced software development activities internationally. However, more than 54 per cent indicated that there were plans to outsource or increase outsourcing activities in the near future (Patane and Jurison, 1994, p. 8).
Not all steps in software development activities can be outsourced. Some, like the specification, preliminary design stages and maintenance, need to be undertaken fairly close to the final user. Furthermore, not all products can be developed offshore. For example, for the most part, the development of packaged software for the international market is still dominated by the United States, which is also the largest consumer market. As was stated earlier, success in the packaged software market requires large investments in marketing and the barriers to entry are in market access. In this segment of the industry, it can almost be inferred that the proximity to the final market matters. "Only those tasks which require low user contact are subject to outsourcing" (Patane and Jurison, 1994, p. 9). These include the final details in the design, and coding and testing (see figure 1). Customisation and software solutions are also readily outsourced.
India and Ireland have been main beneficiaries of increased outsourcing by mainly American firms of software activities. Among the other countries that are popular destinations for the outsourcing of software development work are Israel and Hungary. These countries provide a wide range of services for the industry, including doing some of the more sophisticated of the software development tasks outside the United States. The activities that are being outsourced to these countries include contract programming and the execution of segments of or entire projects. Other developing countries, such as China, Vietnam and the Philippines are increasingly getting involved, particularly at the lower end of activities. Proficiency in English is still a key asset in this industry as most of the consumers of software are in the United States. This stands in the way of many countries.
2.4 India's role in the global software industry
The Indian software industry has been active since the early 1970s, but it was only in the mid-1980s that it became visible in the global software services market. In 1985, Citibank established a 100 per cent foreign-owned, export-oriented, offshore software company, (Citicorp Overseas Software Ltd, COSL) in the Santa Cruz Electronics Export Processing Zone (SEEPZ) in Bombay. Indians working at Citibank were particularly keen on creating this subsidiary, which initially undertook software development work for the parent company and later diversified. Soon after, Texas Instruments and Hewlett-Packard established subsidiaries in Bangalore, in 1986 and 1989 respectively.
By doing so, these three companies drew attention to the possibilities available for offshore software development in India. This increased awareness of the capability of Indian programmers and engineers coincided with the severe shortage in the supply of programmers and software developers in the American software industry. American firms, however, were reluctant to relinquish creative control and direct input into decisions related to the projects that they wanted to outsource. "In order to reduce the risk, many clients (chose) to retain as much control as they can over production, only contracting out the relatively unproblematic tasks of coding and testing, and having the work carried out onsite. Work can only go offshore if there are fairly tight, formalised specifications but exporters are caught in the bind that such projects are then more amenable to automated software tools" (Heeks, 1996, p. 122). As a result, the main form of software export work that Indian programmers could participate in was on-site work or body shopping.
According to Lakha, in 1990 over 95 per cent of Indian software companies were involved in body-shopping activities and of the 3,000 programmers who were working in the software export sector, the majority of them were on assignment abroad (1990, p. 54). Lakha suggests that "the practice of `body-shopping' is of questionable value because it does little to upgrade the technical skills of computer professionals who are often assigned tasks requiring relatively limited skills input". He goes on to argue that "(W)hilst this practice offers immediate financial gains to the companies involved, it has little potential for enhancing the competitiveness of the Indian software industry" (1990, p. 54).
While it is true that body-shopping does not allow for the amelioration of skills, many industry leaders feel that it was a necessary first step for the Indian industry. For one thing, the exposure that Indian software technicians received through body-shopping activities helped establish India's reputation in the United States. Moreover, when it was difficult and expensive to import the latest hardware and software technologies, the opportunity to travel abroad was the only way that many of the Indian programmers and engineers were able to use and understand these advancements (interviews, March 1996).
Body-shopping, however, is not a sustainable activity, a fact that many companies have come to understand and an activity that they are increasingly distancing themselves from. There are a number of reasons for this. First of all, Indian body-shopping firms regularly risk losing their best people, as clients frequently offer the highly skilled programmers sent on short-term assignments regular employment. Many employers turned to "employment bonds" to ensure that their labour force remained with them at least for a contracted period of time. This, however, was somewhat exploitative. Lakha gives the example of Indian software professionals in Australia.
The data processing industry in Australia provides employment to about 100,000 people in application and systems development, maintenance and technical support. Of these almost 10,000 are Indians. Most of them are employed at the middle/junior level management which includes the development staff-assistant programmers and programmers. Many initially came on contract assignments with companies like TCS...However, for several reasons, connected mainly with working conditions, they left their employers. Their dissatisfaction arose from lack of servicing and welfare activities at client sites; failure to take account of career ambitions of the staff and the type of jobs they would prefer to work on; payment of salaries at rates lower than the prevailing market; the nature of "Employment Bonds" which were restrictive; and an overall sense of exploitation (1990, p. 53).
Secondly, in the business of software development the money is in software packages and turnkey projects. The residual value of body-shopping is a lot less. Because the barriers to entry are so low in body-shopping, there is a lot of competition and the margins are reduced (interviews). Thirdly, body-shopping firms are susceptible to factors that are beyond their control. For example, the United States Government in 1989 and later in 1993 placed visa restrictions on Indian programmers. These restrictions made it harder for Indian programmers to obtain visas and stipulated that Indian programmers were to be paid according to the prevailing wages in the United States and were to be taxed on their United States income (Heeks, 1996, p. 124, and interviews). The result was that body-shopping became logistically more difficult and financially less viable.
With the rapid advancements in telecommunications technology, the increasing difficulty of exporting programmers and the growing reputation of Indian programmers and their ability to handle fairly sophisticated projects on time, Indian firms were soon able to offer the contract programming services offshore, in India. This process began in 1989 but it was not until 1993 that the Indian software industry began to reduce its involvement in body-shopping activities quite significantly.
Bombay, Bangalore, and Delhi quickly emerged as the key locations for software development in India. NASSCOM survey of the headquarters of the top 200 software companies revealed that 68 were located in Bombay, 56 in Bangalore and 30 in Delhi. The remaining one-quarter of the companies were distributed between Hyderabad, Madras, Calcutta and Pune (NASSCOM, 1995, p. 19). There seems to be no specific division of labour between the three main cities involved in this industry. The firms in the second tier of cities, however, may suffer from a lack of exposure to the international market and to international competition, as a result of the clustering of top firms in the three bigger cities. The primary locational advantages of these cities comprise infrastructure including transportation and telecommunications infrastructure; the presence of export processing zones, such as the SEEPZ; access to a skilled pool of labour; in the case of Delhi, proximity to government; and the quality of life.
By 1994-95, the Indian software industry's revenues amounted to about $835 million dollars, not including in-house software development. Exports accounted for $485 million or 58 per cent of software revenues and the domestic market accounted for $350 million or 42 per cent. The domestic software industry has been losing importance relative to exports. In 1990-91, it accounted for 47 per cent of total software revenues while exports accounted for 53 per cent. Also interesting is the decline in the share of hardware in the revenues generated by the entire Indian IT industry. In 1990-91, hardware accounted for nearly 50 per cent of total IT revenues while software's share was 22 per cent, by 1994-95, hardware share had fallen to 38 per cent while software's share had risen to 41 per cent (NASSCOM, 1996, p. 102). This may reflect the changed import policy vis a vis hardware imports, which may have led to a substitution of imports for domestically produced hardware. Hardware is, in any case, produced in India for the domestic market, with less than 20 per cent of revenues during the 1990s coming from exports.
In 1995-96, the software industry grew by 61 per cent. Since the early 1990s, the software industry has been growing at a compound annual growth rate of over 46 per cent, with exports growing at up to 46 per cent in rupee terms and 30 per cent in dollar terms during the same time period (NASSCOM, 1996, p. 49). According to NASSCOM, these rates are substantially higher than the global software industry growth rates, which are between 15-18 per cent. In fact India was the only country to register software industry growth rates in the order of magnitude of between 40-50 per cent between 1990 and 1995. The domestic market has been growing at a CAGR of 38 per cent since 1990-91, but has achieved significantly higher growth rates in the last 2-3 years, 42 per cent in 1993-94 and 55 per cent in 1994-95 (NASSCOM, 1996, p. 42).
The fact that the industry is growing faster than the world market shows that India is increasing its share of the global market, but so far its share is fairly small. In terms of the global output of computer software and services, Indian software exports accounted for only 0.15 per cent in 1994/95. However, of the total software development activities that are internationally subcontracted out, India's market share was about 20 per cent in the early 1990s. This suggests that there is a great deal of room for growth and that there is a large market still for the Indian software industry to capture.
Until the mid-1970s, Eastern Europe was the main destination of Indian Software exports. But that has since changed, with the United States taking over as the main export market in the early 1980s with 75 per cent of the Indian exports geared to that market. This was because of the sheer size of the United States market for software, which is much larger than any other market, as well as the long history of Indian engineers and computer personnel working in the United States. Some of them came back to India to set up their own companies but maintained their contacts in the United States and were able to use these to penetrate the market. Indians who worked for large American IT multinationals also played a role in attracting attention to the software development work that was being done in India and to the level of skill and expertise. Furthermore, India enjoys an advantage in English, the main language used in the development of software.
During the 1980s, the software export market started to be more diversified. In the late 1980s, the United States share of Indian software exports was down to 60 per cent (Heeks, 1995, pp. 83-84). In 1994-95, the break down of markets for India's software exports was as follows, 58 per cent of exports went to the United States, 20 per cent to Europe, 6 per cent to Southeast Asia, 3 per cent to Japan, and 4 per cent to West Asia. Exports to Australia and New Zealand which had been at 10 per cent in the late 1980s were down to 3 per cent (Heeks, 1995, p. 84 and NASSCOM, 1996, p. 15). NASSCOM estimates that the United States, Japan, the UK, Germany, France and Italy account for 75 per cent of the market share of the global software market. India's software exports to these countries accounts for 81 per cent of its total software exports (1996, p. 15).
It is important to underscore that the Indian software industry is still very much a provider of professional software services, where custom services are the primary function. Although body-shopping or on-site services have declined significantly, they still account for over 60 per cent of industry revenues. While many multinationals have established subsidiaries in India aimed at meeting their parent company's software development needs, many of the Indian-owned companies undertake projects that involve a great deal of on-site work (Heeks, 1996, p. 81). This may reflect the difficulties that Indian firms face when trying to establish their credibility in the export market. Offshore services now account for 30 per cent of revenue generation, and software package development for 10 per cent, but NASSCOM estimates that the proportion of on-site work will decline rapidly due to improvements in telecommunications, and the provision of infrastructure and facilities through the Software Technology Parks scheme (see Box 1) and because of visa restrictions in the United States and Europe.
There is a great difference in the types of activities that occur for the domestic market and for the export market (see table 2). NASSCOM estimates roughly one half of software exports are in the category professional services and one quarter in the area of consultancy. Some 11 per cent of total software exports were software products and packages. Whereas for the domestic market, 38 per cent of software revenues came from products and packages, a further 38 per cent from turnkey projects and only 7 per cent from consultancies. In 1994/95 there were 92 software products introduced in the Indian market by domestic companies and 104 products launched by foreign firms (NASSCOM, 1996, pp. 14-15). Nearly two thirds of software firms represented by NASSCOM develop "end- user application products and services ranging from straight forward accounting systems to specialised niche market products or customised services. The rest obtain their revenues from consultancy, systems integration, supply of specialised software systems, such as software tools, communications software and software dedicated hardware devices" (NASSCOM, 1996, p. 15-16).
2.5 Labour market trends in the Indian software industry
India has a very large English speaking, skilled labour force. According to NASSCOM, with over 4 million people with technical backgrounds, 1,670 educational institutions and over 55,000 graduates in engineering and the sciences every year, there is a rather large "trainable" technical workforce (1996, p. 53 and interviews). The industry currently employs some 140,000 people, (up from between 2,500 and 6,800 in 1985), of whom, approximately 27,500 are involved in the export sector (Heeks, 1996, p. 93 and NASSCOM, 1996, p. 54). Discrepancies in data may be explained by differences in definition of what constitutes software activities. Furthermore, the figures for software exports are for the number of people who are "available for export work...(B)ased on interviews, it can be estimated that the total active export workforce at any given time is very roughly 75 per cent of the numbers available" (Heeks, 1996, p. 93). The rest are awaiting contracts and working on training or domestic market projects. Over half of those working on exports are working overseas. By the mid-1990s, the software industry employed about 8 per cent of the total electronics industry workforce and about 0.5 per cent of total employment in the manufacturing sector in India. The number of software professionals working for the export sector (approx. 20 per cent of the total) combined with export revenue figures (about 58 per cent of total revenues) reflects just how skill intensive the export side of the Indian software industry is.
India became an attractive source for software development initially because of its talented labour force but also because labour was so inexpensive (see tables 3 and 4). Studies suggest that in the mid-1990s, salaries for programmers and systems analysts were 4-5 times lower in India than in the UK and 6-8 times lower than in the United States (Heeks, 1996, pp. 115-16). However, wages in the software industry in India have been rising consistently at over 20 per cent a year since the early 1990s. NASSCOM estimates that the average basic salary rose by over 23 per cent in 1995. These rates are not very different to the software industry in other countries. Much of the rise in wages can be explained by the tight labour market in this industry and the very high turnover rate of 16 per cent (Heeks, 1996, p. 116 and NASSCOM, 1996, p. 55).
These wage increases may present a problem for India in the foreseeable future as lower cost locations begin to enter the market and to compete for similar projects. Some interviewees felt that the industry could not go on raising salaries at rates that do not reflect increases in productivity. Others felt that until now the increases in salary were warranted as importers of Indian software and services were willing to pay these rates and because as soon as the industry begins to feel that it can no longer support such rises, wages would come down (interviews). Other charges, such as overheads, transportation costs, telecommunications costs, office space, travel allowances etc. are not that much lower than in other countries. This weakens India's advantage, although it still figures as a low cost location (Heeks, 1996, pp. 116-119).
The software industry in India, like in other countries, is highly male dominated, with about 86 per cent of the labour force being men. In terms of remuneration, women are paid at an equal pay-scale. It is also a very young labour force, with a median age of 29.3 years. As the workforce is largely made up of professionals, unionisation is very low.
To sum up, the improvements in communications technology; the growing use of information technology in the industrialised countries, the increased outsourcing of certain IT activities by companies have led to the globalization of software development activities. India has benefited from the outward expansion of the industry. The alliances that have been forged by the Indian software industry and foreign firms are based on the performance of complementary activities in the software value chain. Forces outside govern software development activities in India, as business strategies in the industrialised countries have been important in shaping the industry. In addition to business strategies, government policy both in India and elsewhere has played an important role in this. This is the subject of the next section.
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