With so many startup founders, CTOs, high-level engineers, and ­ven­ture capitalists in Si­licon Valley tracing their roots to India, why doesn't India itself boast a booming high-tech innovation sector? One reason, of course, is that many of the best-trained Indian engineers still find it more exciting to work in the United States and other Western nations. But another, more controversial reason could be the type of business that is booming in India: information technology outsourcing. Some analysts worry that information technology professionals in India are too busy serving their well-paying foreign clients to risk time or capital on developing their own products for the Indian or U.S. markets*.

But the impact of outsourcing on in­dige­nous innovation may not be so clear cut, as is shown by the experiences of two very different Indian companies, Infosys Technologies and Ittiam Systems. Big outsourcing providers like Infosys may not be fountains of innovation, but their presence will have—in fact, is already having—trickle-down effects. Outsourcing, many Indians argue, is training India's next generation of tech entrepreneurs.