Some thoughts based on personal experience about IT product company vs IT services company issue for Indian IT (software) companies of 1980s & 1990s

Last updated on 11th March 2021

This post has my views based on my experience as an employee and later as a consultant in Indian software export services companies, for most of my software industry career from 1984 to 2002. I started my software career as a trainee programmer in Datamatics in March 1984 and was with Datamatics till 1990 by which time my designation was 'Project Leader'.

The post is based on my part of some correspondence with others with some appropriate modifications for a general post like this. The post also has some later additions from me (not part of the original correspondence). There is some level of repetition and some lack of cohesion which the reader will have to kindly tolerate.

Overview

Datamatics and similar other Indian software consultancy services (IT services companies) did not have the advantage of a good domestic market for software products that USA and European software companies had, allowing the latter to create stable software products using domestic (their own country's) customers, before launching those products internationally. So Datamatics and other such companies in India had to focus on being IT services companies especially for foreign customers (USA, Europe etc.) offering manpower (body shopping) as well as turnkey customized software development solutions. Many customers were very appreciative of Datamatics' turnkey customized software development solutions. As per wikipedia, Datamatics had a revenue of $160 million in 2019, and has over 10,000 employees. Those are respectable figures - the business value figure and a number of jobs created figure.

To take the case of the premier software services company of India, in October 2020, Tata Consultancy Services (TCS) became the highest valued IT company in the world, valued at $144.73 billion, with Accenture valued at $143.4 billion and IBM at $118.2 billion. Surely, such figures are very impressive. I think the reality is that there is a software products business sector and a software services business sector, with each sector having its significant contribution to the software industry. I think TCS has done some of the major software projects in India as customized software solutions that have been of direct benefit to Indian citizens at large.

But IT services companies do not pay as much attention to individual employees as software product companies do. IT services companies typically have much larger number of employees than software product companies. Note that in the 1980s and 1990s, some technical staff preferred to be with Indian IT export services companies than foreign software product companies' offices in India, as the former enabled them to stay in foreign countries like USA and Europe for long periods, make extra money while on these assignments, and also gave many an opportunity to find ways to settle down and become citizens of those foreign countries. Lots and lots of my Indian software techie friends and colleagues did that - some in USA, some in Europe and some in Australia.

Details

In the 1980s, Datamatics was selling Wang Computers in India, hardware and also software services for it.  Datamatics was offering financial accountancy services using Wang Computers to Indian clients as well as managing public issue of shares and other related work for companies (using Wang computers Datamatics had and software packages it had developed on Wang). Some of my initial COBOL programming work in 1984-85 (after my training period was over) was for such software done in Datamatics' Nariman Point, Bombay/Mumbai offices (in Embassy Center building) which catered to Indian (domestic) clients. This Datamatics Nariman Point office had a Wang VS minicomputer on which all this work was done. Datamatics also sold time on this minicomputer to some company-customers. If I recall correctly, at that time Hoechst India (noted multinational chemical company) was one such customer who bought time on a regular basis on this minicomputer.

Datamatics was not able to progress into software products. I think that was the case not only with Datamatics but many other leading software companies of India at that time, including Tata Consultancy Services. Further, my view based on my own experience not only with Datamatics but also with an Indian export software company startup called Boshu Technics Corp. whose software team I led after I quit Datamatics and was with them for around two and a half years (mid 1990 to end 1992), is that the big problem for Indian software companies at that time was that the Indian (domestic) market was generally not good for software product sales then. Directly creating software products for export markets like USA and Europe without having a domestic customer base (and no foreign customer base as well) was a very difficult proposition then, as I learnt directly in Boshu Technics Corp. Also note that in early 1990s Indian economy went through a serious crisis. I think that some USA and European software companies could develop its initial software products using customers from their own countries and bring the software products to some level of maturity. Then they were able to launch those software products internationally. Indian software companies at that time did not have the advantage of a good domestic market for software products that some European and US software companies had.

The other point is that from a business point of view, I think Datamatics and other companies then including Tata Consultancy Services, did very well offering manpower services as well as turnkey customized software development services to customers worldwide. https://www.business-standard.com/article/news-cm/tcs-ranks-37-among-top-100-software-companies-of-2020-120073001400_1.html states, "Tata Consultancy Services has been ranked #37 among the Top 100 Software Companies of 2020 by The Software Report, the same year that its flagship software ignio celebrates its fifth anniversary."

https://economictimes.indiatimes.com/markets/stocks/news/tcs-surpasses-accenture-in-market-cap/articleshow/78558794.cms informs us that in October 2020, TCS market cap. stood at $144.73 billion, with Accenture valued at $143.4 billion and IBM at $118.2 billion. So in Oct. 2020, TCS became the most-valuable Information Technology company globally. Surely, that is a very impressive achievement. Note that TCS did develop some software products somewhere down the line (perhaps that started in 1990s/2000s) but I think even today TCS is known more for its software services work than for its software products. Its wiki page, https://en.wikipedia.org/wiki/Tata_Consultancy_Services , states that it "specializes in information technology (IT) services and consulting". 

Datamatics certainly did not do as well as TCS. But its wiki page, https://en.wikipedia.org/wiki/Datamatics , informs us that Datamatics had a revenue of $160 million in 2019, and has over 10,000 employees. Those are quite impressive numbers.

However, I do agree that individual technically talented employees in Datamatics (and perhaps similarly in other Indian software consultancy firms at that time) were not paid much attention as I guess the IT services business model was like that with large number of technical staff being employed as against smaller numbers of technical staff in product companies. So foreign product development companies could attract such technically talented employees of Datamatics (and other consultancy companies) to join them to work in software product development at higher salaries. However, many technical employees in these Indian software consultancy companies also liked being sent on foreign assignments on regular basis where they not only got to live abroad (USA, Western Europe, Australia etc.) but also make good money while being on foreign assignment, with many deciding to settle down in those countries (becoming their citizens). Lots and lots of my colleagues did that. Some of them may not have grown as much technically (in-depth) as they could have if they had joined a foreign software product company's India offices but then they grew in breadth of technology (as they would typically move from one project to another after some months or a year or so) and in management skills as higher positions in their IT services companies typically demanded that.

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IT product development vs. IT services has been a hotly debated area right from the 1980s with me being an active participant while I was in the software industry, in informal debates within the companies I was associated with as employee/consultant. I personally have worked for product development companies as a contractor ('body shopped' person) and so had close inside view of product development work. [I don't have any issues with the 'body shopped' phrase even though I know that from a higher level business perspective it is a pejorative word but then I am just a free service social media writer now and don't have to worry about customers having negative views.] I gained immense amount of knowledge and experience about software development in general, including product software development, through these contractor ('body shopped') assignments with Wang Laboratories software development centres/Headquarters in Belgium and in USA. Some of my best recommendation (appreciation) letters are from the Wang Labs. bosses and colleagues I worked with then, as a contractor from Datamatics. Readers may view them here: https://ravisiyer.blogspot.com/2018/12/documenting-my-part-auto-bio-with-pics_27.html . These contractor-assignment trips to Wang Labs. in Belgium and USA in the second half of 1980s for a total period of over 30 months, when age-wise I was in my twenties, gave me fantastic exposure to life in these materially well developed countries. I had a very good time overall as I was treated very well by the many European and American colleagues I interacted with then, and I was treated decently by most Europeans and Americans I interacted with outside of the workplace. I also had a lot of enjoyable sight-seeing trips, many of which I recall easily even today and are happy recollections 😃. So such contractor ('body shopped') assignments were a great boon to me both from a software developer professional perspective as well as from personal life experience perspective. As I have become a social media writer over the past few years, I have written in support of the values of democracy, freedom of religion (including to not have faith/religion), rule of law, free market, business entrepreneurship, orderly town/city life, civic sense etc. that I was exposed to directly in Western Europe and USA during my life there while on assignment stints, and also later indirectly in various other roles I played based in India and in my later readings about Europe and USA. In general, I am a supporter of Western Europe and USA due to the many positive experiences, directly & indirectly, I have had of them.

Getting back to software product development topic, I also attempted to develop software products in the startup company whose software team I led but we had absolutely dismal marketing skills and lacked big money for USA & Europe markets and so we really struggled leading to me quitting the company after I was burned-out (stressed-out) with my health being rather badly affected.

IT product development vs. IT services is a legitimate and interesting debate and I think it attracts a variety of views.