This paper investigates the divisions of labour affecting the inter-nationalisation of software production, using the example of the Indian software industry. Two international divisions of labour are seen. First, a skill division in which only the less-skilled production tasks are usually undertaken by Indian workers. Second, a locational division such that most export work takes place outside India.

A number of dynamic factors - deepening of client-developer relations; protectionist pressures; new technologies - are encouraging change. While these findings do not deny the importance of ‘cheap labour, they do highlight the impact of other variables (skills, trust, risk) which make relocation of production back to developed countries unlikely.