The competition in the domestic labour market between Giants and Majors initially induced the Indian Majors to move up the value chain. [...] the Majors had long since settled on informal anti-poaching agreements amongst themselves, acknowledging that the costs of poaching far outweighed the gains. Second, the Giants, who could in theory, reap all the benefits of poaching while facing none of the costs (given their superior ability to attract and retain talent), also refrained from such practices during this period. They were just beginning to enter India, had not yet secured NASSCOM, and did not want to trigger any antipathy to their expanding presence.

Without poaching, competition took place in graduate-level recruitment [...] the Majors were forced to raise their entry-level salaries. The commercial imperatives of ensuring they then got 'their money's worth' from such graduates impelled the firms to embark on significant organisational efforts to improve productivity. In particular, serious investments were made in staff training, quality control and other human-resource practices. [...]

These changes transformed the Indian software services firms, catapulting them up the value chain [...]