Breaking Out of Lock-In: Insights from Case Studies into Ways Up the Value Ladder for Indian Software SMEs

Small and medium enterprises in the Indian software development industry, like their larger counterparts, are mostly low on the value ladder. This paper examines the difficulties confronting them in moving up the ladder and the strategies and circumstances conducive to success, drawing on three case studies. Human resource development emerges as central. Though SMEs have meager resources for moving up, compared to large firms, they have a greater incentive to do so, and this organizational interest accords with the interests and motivations of their employees for career development. It is found that the keys to success are to treat employees as co-investors in their own human capital in order to form an effective community of practice across the firm and to find market opportunities that stretch the firm in the right direction and to the right extent. For the last of these, the main contribution is made by existing clients, but an important role may be played by venture capitalists, particularly those that are US-based.