Why Startups, Not IT Giants, Will Define the Next Decade of the Indian Tech Industry

Every earning-announcement season, like the ongoing one, India’s IT giants step onto the stage with ritualistic predictability. They announce moderate revenue growth rates, talk about operational discipline, and reassure investors that the demand environment is stable. The script hasn’t changed in decades. Stability has replaced excitement. Growth has been replaced by guidance.

And while they repeat this performance for the umpteenth time, something far more dynamic is happening outside their orbit — in the Indian startup ecosystem. Here, the term “research and development” isn’t mentioned like an afterthought in annual reports; it’s part of every funding announcement, every pitch deck, and every hiring plan.


The Quiet Rise of R&D-Driven Startups

Just browse through the Tech section of the Economic Times or any major Indian tech portal. Most startups that raise multi-million-dollar infusions mention one specific use for that capital: research and development.

A couple of years ago, one could have smirked — “what R&D would fintechs or e-commerce players possibly do?” But that condescension no longer holds. These startups are building their own tech stacks, optimising AI workflows, securing data at scale, and designing proprietary integrations — all under the umbrella of R&D.

And they are not fringe experiments anymore. They are attracting venture and sovereign capital alike. They are increasingly serving both Indian and Western clients, giving them a rare mix of local scale and global relevance. And they are hiring in droves — especially fresh engineers — long after the pandemic hiring boom faded elsewhere (this has been testified again by the TeamLease H2FY26 hiring outlook, reported by ET today). 


Beyond Shallow and Deep: The R&D Mindset

Even the 'shallow' tech startups — fintech, SaaS, product aggregation, service aggregation startups — are now investing in R&D. It might not be as 'deep' as building quantum chips, but it’s an investment in technological independence.

Meanwhile, India’s DeepTech startups are going further — building India-specific AI models, edge devices, military drones, drone-destroyers, satellites, security stacks, and domain-specific automation tools. The result? An ecosystem that is collectively inventing India’s next layer of technological capability.

This is the essence of a sunrise sector: not merely chasing profitability, but continuously reinventing its own foundation.

It is worth recalling here that Israel too has built a world-class startup ecosystem on the back of R&D — even though its home market is comparatively tiny, and away markets face restrictions. If the Indian startup ecosystem can learn from the Israeli model, then India's technological and industrial growth will be much more durable and sustainable.


Why the Startup Momentum is Irreversible

There are reasons why this momentum feels irreversible: -

They build around technology, not workers: Their scalability lies in code, automation, and design — not headcount.

AI strengthens them, not threatens them: It multiplies their value instead of replacing their business model.

They offer flexibility and ownership: Freshers aren’t just employees; they’re often stakeholders through ESOPs and performance-linked pay.

They are policy-incentivised: Government support for 'indigenous' technology creation has never been stronger — from startup credit support schemes to R&D-linked tax incentives.


The IT Sector, by Contrast

India’s IT services sector — the proud workhorse of the past three decades — is now a stabiliser, not a stimulator. It will continue to employ lakhs of workers and contribute to service exports, but its model is fundamentally defensive: revenue through volume, not innovation.

While the startups build proprietary tech, the IT majors still mostly customise others’ tech.

While startups create equity-linked wealth, the IT majors distribute fixed (and stagnant) salaries.

And while startups experiment boldly, the IT majors celebrate predictability.


The contrast is no longer merely stylistic; it’s civilisational within the tech economy — a shift from execution to invention.


The Road Ahead

If India’s next technological leap is to be truly indigenous, it will emerge not from the glass towers of Bengaluru’s IT corridors; but from IIT research parks, incubation hubs, co-working spaces, and cloud labs — where startups are engineering the future.

They are not just the new sunrise sector — they are the first generation of Indian companies truly built around R&D. Their visible success marks a wider sociological transition: from applying other people’s softwares to designing our own future.


Conclusion 

Indian startups are now becoming the true growth engine of India’s technology story — driven by R&D, powered by AI, and aligned with national ambition. The IT service sector will probably continue to be a steady contributor, but the centre of gravity is shifting—decisively and irreversibly—towards experimentation, innovation, and ownership.

In other words, the startups are building; the IT giants are maintaining. The future belongs to the builders.

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