[...] Having secured their control of NASSCOM, and through NASSCOM the IT policy agenda, the Giants felt suitably emboldened to change tack in their recruitment. They stopped employing entry-level professionals and started poaching experienced employees of other software firms, in particular from Indian Majors. An unofficial feeder system quickly materialised whereby the Majors and other Indian software firms trained their employees only for the best and brightest to be poached by the Giants after a number of years.

The impact of this on the Majors was catastrophic. In their quest to compete with the Giants in the top tier of the software services industry, the retention of staff was vital. [...]

The effects played out in the wider competition between the Majors and the Giants. The Majors, wracked as they were with already high and growing attrition rates, struggled to move into the highest echelons of the software services market. In contrast, the Giants successfully entered the product market in lower-end IT services previously monopolised by the Indian Majors [...]

This change from domestic to transnational ownership [...] is a concern for the long-term development of the industry, as well as for India more broadly.

[...]

Second, a captive-dominated industry primarily exporting ITES is far less embedded in the economy and therefore less developmental as well as more unstable. [...] TNCs are likely to see their captives in India - no matter how large - as peripheral to their core, higher-end service operations. They would thus not think twice about closing or downsizing their operations in India and moving them to another destination (off-offshoring) [...] The risk of off-offshoring is increased by TNCs primarily being engaged in ITES exports. As ITES requires labour with fewer skills and less training, there are far more destinations for TNCs to recruit to. With software services, the pool is far more limited. [...]

Third, the shift from local firms to TNCs has a number of deleterious effects on the wider Indian economy. Due to the repatriation of profits by TNCs, there will be considerable leakage from the economy of the foreign exchange generated by the industry. In addition, due to the intra-firm migration practised by the Giants, such an industry will exacerbate the brain drain, leaving an acute shortage of highly skilled persons in India. And finally, the Indian state and Indian firms will be forced to rely on Giants rather than local firms for their large IT projects. This will significantly raise the costs of such projects, possibly to prohibitive levels, and thereby further impede the diffusion and adoption of IT across the country.

[...] FDI in ITES and It will not automatically lead to greater IT diffusion [...] part of the 'business-friendly environment' allegedly required to develop an Indian-style software industry is the strong enforcement of anti-piracy software laws. [...] As NASSCOM became dominated by TNCs (including Microsoft) the state zealously began to clamp down on software piracy [...]

[...] the pursuit of better access to visas for short-term skilled migration has led the Indian negotiating team at the WTO to side with the developed world in promoting full-scale liberalisation of services. Such liberalisation measures are not necessarily in the interests of the rest of the Indian economy, nor indeed of any developing economy. This is why India was the only major developing country to side with developed countries in these negotiations. [...] Access to H1-B visas is now being used by the US government as a key bargaining chip to gain better access to the Indian market in industrial and farm goods.