How Social Upgrading Drives Economic Upgrading by Indian IT Majors: The Case of Telecom IT Services

Abstract

The paper deals with the dynamics of change in IT service provision in the telecom global production network (GPN). It deals with two main questions: why did the Indian IT majors not get the Managed Services contract to provide IT services for the major Indian telecom companies? And, how did the Indian IT majors respond to the shrinking margins in their traditional IT applications’ development and programming tasks? In answering these questions, the paper looks into revenue per employee and remuneration of IT professionals in India, which are not only higher than for those with similar qualifications in other industries but also have risen substantially in the past decade. The paper argues that the social upgrading of IT professionals, which resulted in shirking margins, forced the Indian IT majors to change their strategy and enter both end-to-end services and software products. The US IT service majors (IBM and Accenture) have adopted the Indian IT innovation of the Global Delivery Model (GDM), and moved to integrate low-end tasks in order to provide full Managed Services. As they move in opposite directions, the difference between the US and Indian IT majors is now narrowing.