December, IT, and Y2K: How Indian Techies Seized an Opportunity of a Lifetime

The bug enabled Indian software companies and professionals to break through the walls of the global IT ecosystem.

(This is part four of a four-part 'December' series that revisits significant historical events and policies, and how the lessons learned from them continue to be of relevance in present-day politics and society. Read part one here, part two here, and part three here.) 

If India is now considered the services hub of the world (China is the manufacturing hub), a lot of the credit must go to the now-forgotten frenzy called the Y2K bug (Year 2000). The frenzy surrounding Y2K was hysterical and global. Many predicted doom and disaster for the global economy as the clock struck midnight on 31 December 1999.

For the first time, corporations and countries desperately seeking solutions to the Y2K crisis discovered the immense talent and manpower India had to offer in terms of software services. Since then, the Indian IT (Information Technology) and ITES (Information Technology Enabled Services) sectors have become a juggernaut that dominates the world.

Y2K:  A Brief Recap

Many must have completely forgotten what the Y2K frenzy was all about. In layman’s language, it was something like this. When computers first started being used, the pioneers had designed the clocks running on computers in a particular manner. For instance, if it was 15 August 1975, the clock would show 15:08:75. This was ostensibly done by scientists and computer programmers to save both space and money.

By the early 1990s, some people started raising red flags and coined the term Y2K. By the late 1990s, the early red flags had turned into a full-fledged global carnival of doom and destruction. How so?

It seemed that the clocks in all computers across the world would show 00:00:00 when 1999 came to an end. This would lead to all computers coming crashing down and becoming inoperational. The grimmer forecasts envisaged the niter banking system collapsing, transportation systems coming crashing down and virtually everything collapsing because computers were used to run everything.

As with most doomsday forecasts, this one too withered away as doom and destruction never happened. But it triggered alarm bells and frenzied media coverage convincing millions to stock up on food and withdraw all their money from banks.

The co-author vividly remembers the last few hours of 1999 when the IC 814 hostages were finally released and when TV channels continued anticipating an apocalypse as Y2K struck the world at the stroke of midnight. On 1 January 2000, the co-author, who was on a holiday in Puri, Odisha, went to a State Bank of India branch to encash a traveller's cheque. Everything was normal.

How Indian Professionals Benefited

Y2K might have turned out to be media hype of the most sensational kind. However, it has left a profound and lasting impact on the information technology sector in India. In many ways, the Y2K bug enabled Indian software companies and professionals to break through the barriers of the global IT ecosystem.

Tens of thousands of Indian software professionals working for firms like Infosys, Wipro, Satyam, and HCL, to name just a handful, winged their way to corporate destinations in Europe and North America to be of the spot physically to fix the Y2K bug.

The fact that these Indian professionals were proficient in English apart from computer science, and knowing programming is a big plus point. Besides, they were incredibly cheap compared to their peers in the West and were willing to put in (as Infosys founder N Narayanmurthy said in a recently controversial statement) more than 70 hours a week. A whole lot of them managed to get H1B visas and never came back to India. Technology companies in the United States realised that Indian software engineers and programmers with additional managerial skills were worth their weight in gold.

When you look at the technology landscape in the United States now, the legacy of Y2K is clearly visible. The CEO of Google Sunder Pichai is Indian by birth; the CEO of Microsoft Satya Nadella is Indian; the CEO of Adobe Shantanu Narayan is an Indian; the CEO of IBM Arvind Krishna is Indian; the CEO of Micron Technology Sanjay Mehrotra is an Indian; the CEO of Palo Alto Networks Nikesh Arora is an Indian; the head of Arista Networks Jayashree Ullal is an Indian; Parag Agarwal was CEO of Twitter till Elon Musk took over the company; the CEO of NetApps George Kurien is Indian…one could go on and on.

How Indian IT and ITES Companies Benefited

While scores of individual Indians have benefitted immensely, Indian IT and ITES companies too have struck a pot of gold. As Indian IT professionals toiled overseas, hundreds of thousands of their colleagues back home too toiled away in rapidly expanding offices being set up by the likes of Infosys and Wipro. Why Indian companies had to rapidly expand their office spaces is evident from the chart above.

When the Y2K frenzy was at its peak, IT and ITES exports from India were valued at just a few billion dollars. This year, despite global headwinds that have crimped Indian IT companies, exports are scheduled to cross $ 200 billion.

How big a success that is can be gauged from just one comparison: the value of IT and ITES exports is half the entire merchandise exports of India. It’s not just dollars that the sector has earned for India. It is also the incredibly high number of high to low-skill jobs that the sector has created for Indians in a country where getting a “decent job” has remained a challenge for educated youth.

According to data released by the Ministry of Electronics & Information Technology a few months ago, about 5.4 million people are employed in the sector. During the peak of the Y2K frenzy, just about 2,50,000 people were employed in this sector. The enormity of this can be gauged from the fact that stable government, public sector, and organised private sector jobs have grown at a snail’s pace during the same period in India.

Both the ministry and the industry body NASSCOM expect the numbers to grow to 10 million by 2025-26, out of which about 5 million would be very highly skilled. If one takes into lower skill support jobs in the digital ecosystem that is growing at a phenomenal pace in India, the sector is projected to support more than 60 digitally enabled jobs by 2025-26.

Opportunities Like Y2K Don’t Come Again

The authors have been intrigued by two questions: what are the reasons for the phenomenal success of information technology companies in India when the country has been a laggard when it comes to manufacturing? The second question is: what next?

The answer to the first question is both simple and complicated. One of the most profoundly insightful jokes goes something like this: Indian IT is a success story because it became a success before the government could make policies and stifle it! There is a lot of truth in that joke.

Socialist economic policies and discretionary powers given to political and bureaucrats since the 1950s had shackled and enslaved entrepreneurship in India. In many ways, it is still shackled. Almost all the information technology companies started taking their baby steps in the 1980s by which time all sensible Indians had realised that the old socialist policies of command and control had to go for India to grow.

Thanks to a balance of payments crisis and near bankruptcy in 1990-91, the government did dismantle the notorious “license-permit” raj in 1991. That kind of coincided with an explosion in technological advances globally in the information technology sector. But government “policies” did help.

For decades, successive governments have given tax breaks and a host of other incentives to IT and ITES companies. The unshackling of 1991 has also enabled Indian manufacturing to develop islands of world-class excellence. The tragedy is that it has yet to become a pan-Indian phenomenon on a scale that China has demonstrated since the 1990s.

What next? While many applaud the success of the Indian IT industry, there have been a lot of critics too. The uncharitable critics describe the Indian IT and ITES companies as later-day sweatshops that have been exploiting “digital coolies”. The basic thrust of the critics is that Indian IT companies have remained satisfied at the lower end of the value chain, supplying an endless number of skilled professionals willing to work at wage levels that are a fraction of what first-world professionals earn.

The related criticism is that no Indian IT company has been able to create a successful global brand. This debate has been going on for many years and will almost certainly continue for many more years. The authors do not have the expertise to judge or comment on such issues. But they do know one thing: opportunities like the Y2K don’t come again. As the world witnesses bewilderingly rapid technological changes in Robotics, Big Data and AI, Indian IT companies must become more ambitious and take more risks to ride this bandwagon.

(Yashwant Deshmukh & Sutanu Guru work with the CVoter Foundation. This is an opinion piece and the views expressed are the authors' own. The Quint neither endorses nor is responsible for them.)