The phenomenal growth achieved by the Indian IT industry in the last decade has become a global success story. Fuelled by the thousands of engineering graduate and postgraduate students emerging from the higher technical education system, it is on the verge of significant change. This paper examines the issues facing the Indian IT industry and makes a case for institutionalizing and sustaining educational innovation at the higher technical education level. It also examines in detail the challenges that lie in the way of achieving this objective and how some of these issues can be addressed in the long run. (Contains 2 tables and 1 figure.)