Mar 8, 2022
Hi all, we’ve been a bit quiet on the newsletter front working on something behind the scenes that we hope to share more information on soon. We are also looking forward to getting back into a regular cadence of writing and posting, and thought we’d start with an article I wrote last year, but that wasn’t posted on the newsletter.
When I wrote about Reliance, there was a lot of interest in the article and the history of the company. The historian in me has always been aware that business history in India is very poorly documented and given that we’ve been writing about start-ups and the tech sector in India, I thought it would be interesting to explore its origins.
The good people at fiftytwodotin, who by far and away produce the best long-form stories on India asked me to do so, using the lens of the original poster child of the tech sector — Infosys. In writing this article, Source Code, I was lucky to have access to Infosys’ founding team and NRN Murthy himself, who was incredibly generous with his time. It felt very much like documenting a little documented chapter of Indian history.
We also want to acknowledge doola — who are bringing you today’s newsletter.
If this story highlights a theme it is that incorporating and running businesses in India has been and continues to be ... painful. Registering companies is hard but shutting them down is close to impossible. And with more Indian companies choosing to incorporate and run their companies in the US for several valid reasons (proximity to users, capital and more), doola is the perfect partner. Not only do they help entrepreneurs incorporate a US LLC or C Corp, they also help with keeping the business compliant, get a business bank account and start accepting payments with Stripe or PayPal in days, not months. They also do all of the required state + IRS filings to keep your business compliant in the US.
Hundreds of founders use doola to run their companies, and unlike other services entrepreneurs don’t need a US Social Security Number which makes doola perfect for founders from India. Readers of Keeping Up With India also get a $100 discount on starting their companies on doola so get started today!
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Liberalisation became the impetus that made India the world’s software capital. This is what it looked like to the men who built its most successful company, Infosys.
One January afternoon in 1990, a few years after they’d relocated the headquarters of their small software company from Pune to Bangalore’s Jayanagar, four men sat down to lunch at an inexpensive neighbourhood restaurant called Shalini. N.S. Raghavan, K. Dinesh, Nandan Nilekani and Narayana Murthy were four out of the seven founders of Infosys.
They had spent the morning debating a momentous decision. A well-known conglomerate had offered to buy out the founders’ shares for $1 million dollars (then around ₹2 crore). Just a year earlier, the company had been on the brink of collapse. Its joint venture with an American firm called Kurt Salmon Associates had fallen apart. They had regained their footing only slowly. All the more reason that the offer was not to be scoffed at.
Infosys had been founded nine years earlier, to provide outsourced software development services to companies in the US and Europe. It was a decade in which the rise of microcomputers had decoupled hardware and software completely, and it had transformed the computing industry. Gone were the days of expensive mainframe systems that required entire rooms to store and a battery of specialists to operate. Now, firms could buy cheap hardware, and develop their own software applications to run on the machines. Infosys’ business proposition was that it could help its foreign clients develop software at a fraction of the cost, deploying equally skilled but cheaper talent available in India.
The four men sitting down to lunch at Shalini had been through the wringer together. Neither the time nor the place made it easy to set up and run a technology business. The company began life with an initial capital of ₹10,000 (roughly $1,000 at the time) borrowed from friends and family. From that start, by all objective measures, the company had come far. Most of the founders were comfortable with the idea of selling, but Murthy, nearly a decade older than the others, wanted to hang on.
“We had lived a life of austerity and become masters of our habits rather than slaves of our greed,” Murthy said, 40 years later, over a Zoom call with me this summer. “We owed it to our families, youngsters in the company, the industry, society and finally, to ourselves to run this marathon to its entirety.” Within an hour, he had convinced the others about turning down the juicy offer.
With the benefit of hindsight, it was the right decision. Infosys is one of India’s most valuable companies with a current market capitalisation of nearly $100 billion. Its success is representative of, and sometimes synonymous with, the overall trajectory of India’s Information Technology (IT) sector. In 1990, at the time of that fateful lunch in Shalini, the size of the country’s entire IT industry was $100 million. By 1996, it was $1 billion.
The industry’s exponential growth was hardly ever a foregone conclusion. “In the 1980s, India was a loser country, we were bottom of the pile,” Saurabh Srivastava, one of the co-founders of the National Association of Software and Service Companies (NASSCOM), told me. “We had a 2 percent Hindu rate of growth”––the term commonly used to describe India’s slow economic progress between the 1950s and 1980s. “We exported junk. We had no voice. At that time, to export something that was intellectual and considered top of the heap in the West from India was an attractive and challenging proposition.”
It’s now widely acknowledged that the fortuitous turn India’s economy took 30 years ago changed the game for information technology. In 1991, faced with a balance of payments crisis, the government of P.V. Narasimha Rao took a series of measures to liberalise the economy. The reforms marked India’s re-assimilation into the global economy for the first time since the 1960s.
“In the 1980s, India was a loser country, we were bottom of the pile. We exported junk. We had no voice.” — Saurabh Srivastava
But slow changes on this front were already underfoot in the latter half of the 1980s. They were less dramatic, perhaps, but vital to set the scene for the Big Bang of July 1991. Changing foreign policy equations, forward-thinking bureaucrats, a visit by a legendary corporate leader—all these nudged India and its IT sector on a path to success that might otherwise have looked very different, if it existed at all.
There’s now some academic agreement that India first began moving away from its socialist posture in the 1980s through these relatively quiet changes. The story of Infosys, and its founders, is a part of the story of India’s move to a more capitalist path of growth, or at least one less hostile to business. From this lens, the Infosys story is one of economic philosophy and realpolitik as much as it is a narrative of entrepreneurial bootstrapping and triumph. Now, it is clear that Infosys’ journey is entwined with the story of an India that first slowly, then all at once, changed.
Independent India, which wanted to build itself a planned economy and an industrial base, was an early, and perhaps unlikely, adopter of computers. Influential institution-builders such as P.C. Mahalanobis and Homi Bhabha pioneered India’s use of modern computers. IBM established a presence in India as early as 1951, and became the dominant player in the market, catering to customers ranging from research institutions and oil companies to public utilities and airlines. Its big competitor was the British company International Computers Limited (ICL).
At independence, the country’s educational institutions had capacity for only 2500 engineers, largely trained to work on civil construction. The Indian Institutes of Technology were conceived because India needed universities that could produce a diverse, well-trained technical workforce that could be employed by both the government and the private sector.
They began to fulfil their purpose quickly. A consortium of nine US universities helped set up the IIT at Kanpur. The equipment package included a high-speed IBM 1620 computer. It was installed in 1963, and it was here that a whole generation of India’s software writers learned their skills on commercial machines. One of these Indians was Nagavara Ramarao Narayana Murthy. Born in the small town of Sidlaghatta, Karnataka, he got his engineering degree at the University of Mysore. He wanted to become an electrical engineer. But after he started his master’s degree at IIT-Kanpur, he got hooked to computing.
After graduation, unlike many of his peers who took their first step into high-flying corporate careers, Murthy chose an unusual path. The Indian Institute of Management at Ahmedabad was setting up a new computer centre at the time, under Professor J.G. Krishnayya, an MIT alumnus. He had decided to import an HP 2100A time sharing system (TSS). This made IIM-A the first place to install a TSS in India, and only the third business school in the world, after Stanford and Harvard, to do so. It was here that Murthy decided to work as Chief Systems Programmer. “It was about the kind of work I could do at IIM-A—producing computer-aided instruction software for teaching accounting, production methods, inventory management, and even management games to bright young students,” Murthy told me.
Murthy’s stint in Ahmedabad opened up new opportunities. In the early 1970s, he received a job offer from a software company in Paris. “The opportunity of being a part of an 18-member team that built an operating system that would be used in a highly developed country like France was tempting,” Murthy said. “Living in Paris, the liveliest city in the world, was tempting. **The salary was very good. I was young!” He picked the Paris job over a PhD.
The whole experience turned out to be transformative. “I had not taken a flight till I went to France. I took a Syrian Airways Bombay-London-Paris flight that cost ₹800,” Murthy told me. “When I got out of the plane at Heathrow to get into the airport, it took me some time to understand that the glass door had photoelectric sensors to open and close automatically.”
Europe provided Murthy a broad exposure to the world and its ways of doing business and politics. “The country was so clean. The city was beautiful. There was so much prosperity,” Murthy remembered. Until that point, he considered himself a leftist, schooled in the Nehruvian vision of nation-building, with its grand state-sponsored infrastructure projects. “From 1961, I started getting a national scholarship for education. At IIT, every department had two or three professors from the US. They were liberals and had high admiration for Nehru and his policies.”
Paris provided an intellectual environment to challenge that world view. Murthy began listening to and joining in the ideological debates at the Sorbonne and cafés on the Left Bank. By the time he left Paris, he had picked his side. Now, he felt that India could only become prosperous through high-value job creation––and it was the role of entrepreneurs in the private sector, not the government, to spearhead it. This realisation and the desire to “conduct an experiment in entrepreneurship” brought him back to India in 1976.
The first experiment was a company called Softronics, which Murthy set up in 1976. But the timing wasn’t quite right: fear-mongering about computers taking away jobs was at its peak. Within a few months, the Janata government would boot IBM out of the country. Additionally, computer adoption in the country was nascent at best: Softronics just didn’t have enough clients to sell to. Within a year of its launch, Murthy had to shut shop.
At the same time, however, things were very different in the United States. Access to business technology was rapidly democratising, helped by the launch of affordable super minicomputers by companies like DEC and Data General. There was a sliver of opportunity for Indian businesses to be a part of this story, and it lay in a government rule that allowed computer import as long as the importer committed to exporting 200 percent of the value of the machine. It was far from ideal, but a bunch of companies leveraged this rule to become pioneers of the industry: Tata Computer Systems (now Tata Consultancy Services), Hinditron––and Patni Computer Systems.
Though now a somewhat forgotten name, Patni, founded by a graduate of the University of Roorkee (now IIT Roorkee) and MIT named Narendra Patni, played a key role in both India’s IT history and the Infosys story. At the time, a number of US-based companies were creating the kind of electronic tools that we now take for granted. Legal Exchange Information Services (Lexis), for instance, was building an electronic database for court judgements and legislations.
It was cheap to outsource the data entry. Typists in India input the text into paper-tape punching machines, which were then shipped to the US to be uploaded into a computer. As the work scaled, Patni was convinced that it would be more efficient and profitable to directly typeset the information on computers in India.
In 1976, he reached an agreement with microcomputer manufacturer Data General. Not only did he buy their machines; Patni also became Data General’s distributor in India; and, to fulfill the 200 percent export rule, the company would also undertake to write software for DG.
To build out its operations in India, Patni hired Narayana Murthy. Murthy had just burnt his hands with Softronics, and Patni offered a strategic opportunity. He had already identified software as an area to play in, but needed to better understand the international market. “I realised that the export market was viable since there was going to be a huge explosion in demand for computer software in the US,” Murthy told Professor Joe Fuller of the Harvard Business School in 2019. “There was engineering talent available in India looking for jobs, and India had a huge shortage of hard currency.”
At Patni, Murthy took on responsibilities over and above writing software. He also sold Data General computer units to Indian customers and oversaw the operations of Softronics’ data centre. As his responsibilities increased, he built out a team of programmers to support him. The core team he hired included Nandan Nilekani, an electrical engineer from IIT-Bombay; S. Gopalakrishnan, an MTech in computer science from IIT-Madras; S.D. Shibulal, an MSc in physics from the University of Kerala; K. Dinesh, a postgraduate in mathematics from Bangalore University; N.S. Raghavan, an engineer from Andhra University, and Ashok Arora, also from IIT-Bombay.
In 1979, Patni signed one of the largest software outsourcing deals in India at that point: a $500,000 contract with the software vendor Data Basics Corporation to develop a Comprehensive Apparel Manufacturer’s Package (CAMP). That deal marked the beginning of the outsourcing industry as we came to know it. Instead of developing dedicated software for minicomputer firms, Indian firms began working with vendors who would then sell customised software to end-user clients. The Data Basics deal vastly improved India’s visibility amongst US software vendors: they now knew about the calibre of engineering talent on the other side of the globe.
The success of the deal also made Patni’s software developers more confident and audacious. In 1981, Murthy and his team quit Patni to start their own company. That company was Infosys.
This new company was neither a spin-off or an arm of an established family conglomerate, like TCS or Wipro; nor a company founded by Indians based in the US, like Patni. In the 1980s, entrepreneurship would have been a risky choice for these engineers. They had elite degrees but they were not from business families. Running an ambitious business in India meant having to grapple with bureaucratic red tape and legislative roadblocks.
“At that time,” Murthy told me, “it took years to get a telephone connection. The banks did not understand software. They wanted a collateral that they could touch and feel, for their loans. Importing a computer required 20 to 30 visits to New Delhi.”
To set up a business that relied heavily on clients based abroad presented a unique challenge. “We were just emerging from the limit of $8 a day when you went abroad,” Srivastava of NASSCOM said. “Foreign exchange just didn’t exist—the country probably had a few months’ foreign exchange at any given time.” Every single trip abroad required approval from the Reserve Bank of India.
Infosys kicked off its business by poaching Patni’s most important client: Data Basics. The small catch was that it didn’t have the money to buy and import a computer to work on. This was why Infosys adopted what would become the initial model for Indian software exports: its engineers went to work “on site” in the US. “Body shopping became a derogatory term,” said Srivastava, “but at the time it was the only thing software exporters could do. We would tell the customer: here is a CV, please interview this person on the phone, we’ll pay for their airfare and Indian salary and you pick up all the local expenses.”
In those days, Srivastava recounted, the Indian salary was about ₹2000-3000 per month. The real cost was living expenses in the US: $1000 or so. Instead of billing the client after a month or two, Indian companies would ask for an advance in lieu of a discount on the service cost. “And that’s how we basically got clients to finance our business,” Srivastava said.
“The banks did not understand software. They wanted a collateral that they could touch and feel.” — N.R. Narayana Murthy
Infosys signed a six-year contract with Data Basics to customise, install and support CAMP for a variety of apparel and shoe manufacturers across US, Europe and Japan. The scale and span of the work “became our passport to the US market in other domains,” said Murthy. The company also struck a partnership with Kurt Salmon Associates, a consulting firm in Atlanta, and signed on a few more customers like Digital Equipment Corporation and Reebok France. In 1987, it set up a pair of US offices—one on each coast—to take a more active role in pursuing clients.
Then, in 1989, Jack Welch, the celebrated CEO of General Electric, visited India. He came to pitch GE’s aircraft engines but found himself receiving a pitch to outsource his company’s software development to India. The proposers were Sam Pitroda and Jairam Ramesh, Prime Minister Rajiv Gandhi’s technology advisers.
“Welch’s trip was a seminal moment for Indian IT,” Nilekani explained. “He was one of the first American CEOs to realise the potential of Indian brainpower.” GE became a big driver of Infosys’ growth between 1989 and 1994. It was a learning experience: working with a company at the top of its game also made Infosys think strategically.
Infosys and India’s IT industry were coming of age, it turned out, as broader shifts were shaping India. The country’s economic trajectory may have touched a high watermark in 1991, but there were several policy changes in the 1980s that led up to this big shift. The change was led by a chastened Indira Gandhi, who returned to power in 1980. As always in India, it was politics that dictated the economics.
The political scientist Atul Kohli has observed that “the two packages of secularism and socialism and Hindu chauvinism and pro-business have tended to offer two alternative legitimacy formulae for mobilising political support.” In a bid to counter the Janata Party threat, Gandhi abandoned the first formula for the second.
Winds of change were blowing in foreign policy too. In the 1970s, India’s tilt towards the Soviet Union had appeared more pronounced in the context of Gandhi’s frosty relationship with President Nixon of the US. The US’ decision to side with Pakistan during the 1971 war hadn’t helped. But the 1980s were different. The Soviets had invaded Afghanistan, and the Americans’ relationship with Pakistan had cooled off. Additionally, Gandhi got on famously with President Reagan. There was a marked change in the tenor of the relationship between the two countries, especially when it came to matters of technology.
After her assassination in 1984, her successor and son Rajiv took over the mantle of pushing the technology mandate. Already, under his watch, colour televisions and computerised ticketing had been introduced at the 1982 Asian Games. When he became prime minister, computers were installed in government offices. “A lot of civil servants didn’t want to go through the hassle of learning how to code and operate a computer, but as a symbol, the computer was suddenly on everyone’s desk,” K. Roy Paul told me. Roy Paul is a former IAS officer who was Joint Secretary in the Department of Electronics in the late 1980s.
It is common to attribute the IT sector’s success to the fact that it largely stayed under the radar and out of the notice of bureaucrats. But that is not the whole truth. “When people say the government had no role in the rise of the IT sector, that is not quite right,” Srivastava said. “We had some excellent officers who saw the sector’s potential and gave us support, taking personal risks and going out of their comfort zone.”
There’s one bureaucrat whose name comes up repeatedly in discussions: Nagarajan Vittal, a Gujarat cadre IAS officer who was Secretary at the Department of Electronics. Along with a team of advisors, he worked from the inside to shake up the status quo. “In our industry, he is a legend,” Srivastava said. Murthy told me that he hadn’t “come across another industry-friendly bureaucrat like him.”
“When I was told by the Cabinet Secretary to take charge of the DoE, he mentioned that Arun Nehru thought software was a sunrise sector for the Indian economy,” Vittal, now 83, told me when I spoke with him––referring to Rajiv Gandhi’s close advisor and former home minister. It was enough of a signal for the technocratic Vittal.
By the late 1980s, IT services firms were looking to move from body shopping to a remote delivery model, to reduce costs and time lags. But advanced telecommunication networks were prohibitively expensive and logistically complicated. Access to high-speed bandwidth required setting up an earth station, something almost no Indian company could afford.
“At that time, VSNL controlled satellite links and they’d ask why do you need so much capacity and act all high and mighty,” explained T.V. Mohandas Pai, former CFO of Infosys. “The procedure basically was that you would apply for bandwidth, and VSNL would say we can’t tell you the price or when you’ll get it,” Srivastava said. “What customer would give us an order based on this?”
It took an American company to show the way. In 1985, Texas Instruments set up a dedicated satellite link to connect its Bangalore software development centre to offices in the US and the UK. “A guy called Mohan Rao at Texas Instruments took a real leap of faith, and pushed to set up India’s first Earth Station,” Nilekani has said. “It was in a building called Sona Towers on Millers Road. They had engineers sitting in Bangalore connected to their centres in Dallas and Houston, and doing software over the satellite.”
Texas Instruments had provided a model for the industry. Under Vittal, the DOE pushed the idea of state-operated Software Technology Parks, which would operate as autonomous bodies under the ministry’s ambit. To solve the issue of bandwidth, the DOE agreed to aggregate demand on behalf of industry and pay VSNL an advance fee to provide high-speed data links at the parks through satellite earth stations.
This was also the time that the industry was lobbying for financial incentives, including tax breaks. Vittal pressed his colleagues for these concessions. At a meeting in August 1990, finance secretary Bimal Jalan asked for a commitment that the industry would hit $400 million in exports by the next year—a nearly fourfold increase. Vittal assured him that it would. “I was stunned. I got out of that meeting and asked him what he had done,” Roy Paul told me.
When Vittal relayed the news to NASSCOM, its members were similarly shocked. “But I reminded them of the story of Akbar, Birbal and the flying horse,” Vittal said. “Akbar was angry with Birbal. He told Birbal he’d get to keep his head only if could find a flying horse. Birbal agreed. His reasoning was that who knew what would happen the next day—the Emperor might forget his ask, or he might indeed find a flying horse. My view was similar. The industry wanted certain things, and we got it for them.”
Now, companies based in the parks could import computers licence-free and duty-free. Profits on software exports would be tax exempt. The liberalisation of the software sector had begun.
Then, the 1991 reforms took the industry to a different level. Current account convertibility eased foreign operations—it was now far less complicated to travel abroad and open up international offices. Capital market reforms went a long way to help companies raise equity from public markets: before 1991, the office of the Controller of Capital Issues used to fix initial IPO prices.
“This was an officer who determined at what price we would list on the stock market,” Murthy explained to an interviewer from Yale University in 2006. “This officer had no idea of capital markets. And he would rarely allow you to list your stock at anything better than your par value.”
After the rules changed, in June 1993, Infosys became the second software company to go public. Murthy told me he was initially disappointed by the response to the listing. “Most investors had not heard of software,” he said. “The banks, too, did not understand software.” The shares were a hard sell even within the ‘friends and family’ quota. “Most of the upper-middle-class friends and relatives I went to sell to were sceptical. They asked umpteen questions and even guarantees of return,” Murthy said. “In the end, none of them invested.”
Despite the scepticism of Indian retail investors, the issue allowed Infosys to raise nearly $4.4 million. This was largely thanks to yet another liberalisation reform: the arrival of foreign investors. Morgan Stanley Asset Management, one of the first reputed financial institutions to heavily engage with the Indian market, was an early and enthusiastic backer of Infosys. “They had seen tech in the US, and they drove a lot of the Infosys story in the early years,” Nilekani said.
It was good timing, as changes in the US were once again playing their part in Infosys’ trajectory. In 1990, President George H.W. Bush signed the Immigration Act, which launched the H-1B visa programme. The H1-B was intended to help American firms deal with labour shortages in rapidly growing fields that demand specialised skills: research, engineering, computer programming.
The US economy was also in a period of high-growth after the relative sluggishness of the 1970s and 1980s. The gains were driven by massive technology investments by US businesses, which had greatly improved productivity. Infosys’ market was booming, and that reflected in its share price. A large part of the money Infosys raised in its IPO went towards setting up training facilities on a 335-acre training campus in Mysore.
For years after liberalisation, India did not produce nearly enough computer science graduates. To get around the problem, Infosys worked directly with engineering colleges and pioneered “learnability tests” for engineers from streams other than computer science and electrical. Those selected were put through a rigorous 32-week residential training program.
In this period, Infosys doubled down on scaling operations. One of the things it famously did was offering an Employee Stock Option Programme (ESOP). “We offered ESOPs, good salaries, good amenities and good opportunities,” Pai said. “There are all these stories about how drivers at Infosys became lakhpatis because of the value of their shares. This was all true.”
An IT sector job at a company like Infosys became the aspiration for young Indians looking to enter the workforce. Liberalisation meant that a number of private engineering colleges were mushrooming around the country. “Governments were quite liberal, especially in the southern states, to open up a lot of engineering colleges, so engineering capacity in the country went up dramatically after 1990,” Nilekani has noted.
In the run-up to the millennium, Infosys hit the jackpot. To save storage space and cut down on costs, many computer programs abbreviated four-digit year data as two-digits. In the late 1990s, there was genuine concern that the programs would be unable to recognise the “00” and differentiate between 2000 and 1900. There were wild rumours about the havoc to be unleashed at the stroke of midnight on 31 December 1999. Corporations turned to India and its cost-effective software programmers to fix the Y2K bug. Twenty two percent of Infosys’ 1998 revenue came from Y2K contracts.
The problem was important enough to raise the profile of the Indian IT sector, and Infosys capitalised on this by listing on the Nasdaq in March 1999. Infosys had started the decade with a top-line of $100 million. In 2004, Wired magazine ran a cover image of a woman with computer code written in henna on her hands. The strap said: “Tech jobs are fleeing to India faster than ever. You got a problem with that?”
2004 was also the year in which, with the impact of Y2K settled, the company’s revenue grew to $1 billion. In another couple of years, it doubled to $2 billion. Infosys, like a certain section of Indian society, seemed to have won the sweepstakes of globalisation.
A well-known chronicler of that buoyant era was the commentator Thomas Friedman whose 2005 book The World Is Flat gained enormous currency in corporate India. The book gave pride of place to Bangalore and Infosys. It was Nilekani, then CEO of Infosys, who had given Friedman the visual of a flat world. “Tom, the playing field is being levelled,” Nilekani had said.
Infosys’ history, set against the broader international backdrop, is particularly interesting to revisit now. There were concerns about jobs being outsourced to India in the mid-2000s, but we hardly hear that anymore.
The launch of the iPhone in 2007, Android in 2008, and the shift to cloud have definitively transformed the technology and business landscape. Outsourcing decisions are now more complicated and not simply left to the IT department. Enterprises have chosen to set up their own subsidiaries in India to tap into the large technical talent pool.
Politically, too, the era of Friedman’s Flat World is obsolete. The 2008 recession changed the mood around jobs in the United States. Blue collar jobs lost to China became more concerning than the white collar jobs that were being lost to Bangalore. American politicians began to speak the language of manufacturing again, to appease rust belt workers who had been excluded from the economic conversation.
In our interview, Nilekani acknowledged the pushback against globalisation. “Still, our industry has come out more unscathed than most, because India is not in the firing line the way China is,” he said. To adapt to changing global dynamics, Infosys has focused on building deeper talent pools in the countries in which it operates.
“Infosys is now playing a big role in job creation in the US. We have set up training centres in places like Indianapolis, which is something even American companies don’t do today,” Nilekani, who has been non-executive chairman of Infosys since 2017, said. “We’ve made Infosys visa-proof in some senses, with more visa-independent employees—so Americans and Green Card holders—than employees on visas for the last two years.”
“Our industry has come out more unscathed than most, because India is not in the firing line the way China is.” — Nandan Nilekani
But this shifting model has had domestic repercussions. For a long time, for many Indian engineers, a job at Infosys meant access to an upper middle-class existence, enticing opportunities to work abroad and ultimately a path to a Green Card in the US. These avenues have narrowed significantly.
A glut in engineering graduates has meant that entry-level salaries in the Indian IT sector have stagnated. In 2005, trainee engineers at Infosys earned an annual salary of around ₹2.8 lakh. Today, more than 15 years later, the figure is around ₹3.5 lakh. The arrival and relevance of Big Tech companies like Google and Amazon has also shifted perception. For many millennial engineers, Infosys is a hark back to the Old Way—an assembly line of vanilla engineers churning out routine code. More recently, ‘rockstar coders’ are increasingly attracted by the VC-funded riches of the made-in-India unicorns.
But India is also a country where jobs are few, with unemployment hovering at nearly 7 percent. The IT sector is one of the few that can continue to absorb some of the millions of engineers graduating every year. (Even so, data from the All India Council for Technical Education for 2019-2020 suggests that almost 36% of engineering graduates in the country failed to find placements.)
Unless faced with a real crisis, the IT services firms might have little incentive to fundamentally shift their approach. Revenue per employee has remained fairly stagnant over the last decade, but the sector has continued to thrive not just because of low wages, but also because the rupee has devalued nearly 70 percent against the dollar during this period.
Even as the landscape of technology evolves rapidly, some observers believe the old IT houses will continue to have a role to play. “The fact of the matter is that the work companies like Infosys, TCS, and Wipro do is not going to become irrelevant,” said Prakash Chellam, industry-watcher and former Infosys executive. “The more tech overhead any company has, the more resources they need to maintain that, especially over time. This is true even for big tech companies.”
The men who went to lunch at Shalini and decided not to sell their little firm inspired a generation of professionals to make the leap to entrepreneurship. The company created real value for its stakeholders, and it did so while championing the profile of the nation’s IT industry on the world stage. In no small part, India’s strength in STEM education is because of the opportunities India’s IT sector, and companies like Infosys, created. Today’s young engineers stand on their shoulders: the unicorns owe something, after all, to a group of upstarts who wrote software for the world when their country was still known as the land of snake charmers.
First, I am grateful to N.R. Narayana Murthy for speaking with me at length about Infosys, and his own life story, the two being so deeply entwined. This article would not have been possible without his generosity. I owe thanks to Nandan Nilekani, who not only introduced me to Mr. Murthy but also spared time to speak to me. Mohandas Pai, Nagarajan Vittal, K. Roy Paul, and Prakash Chellam were gracious with providing their perspectives—all this helped me piece together the story. Manish Sabharwal read an early draft of this story and I am thankful for the feedback that he provided.
Over the years, I have had many conversations with Saurabh Srivastava about his entrepreneurial journey, and the beginnings of India’s IT services sector. The chats made me wish that those stories were better chronicled. I am grateful that he was willing to speak with me at length for this article, and contextualise and bring to life many of the events that shaped the industry in its nascent years.
I would not have attempted to write about Infosys had it not been for Arun Mohan Sukumar’s initial suggestion. I am thankful to him for always nudging me to keep writing, for talking through my ideas, for reading my drafts, and for providing feedback.