Indian tech moves up the value chain

By By Probir Roy | 05 Oct 2006


Indian technology companies are not going to be just about services and labour arbitrage; they will become known for intellectual property and "productised" services.

It is a well-known fact that many of the world's great innovations have come from Asia. Inventions such as the compass, paper, as well as gunpowder and rockets were first invented in this part of the world. The first compass was invented in China 2,000 years ago and it took the West 1,000 years to start using it.

The Zero was 'invented' by Indian mathematician and astronomer Aryabhata in the 6th century but came into mainstream use in the West only much later.

It is small wonder then that the iconic Red Herring magazine chose Hong Kong as the ideal setting for recognising Asian ingenuity, feting 100 young technology companies with the prestigious Red Herring Top 100 award for innovation, and the industry changing and disruptive nature of their technologies ('Oscars' for young technology companies). India and China dominated the winners list from over a few hundred companies that had sent in nominations.

India with 24 and China with 33 winning companies made their presenc felt; with India having moved beyond the usual IT services and BPO hoopla.

In an earlier piece in domain-b  in 2002, I had argued that India needed to move up the value chain and become innovation-centric, rather than be the world's favourite sweat shop.

It was clear that would not happen merely by scribing a few words, sitting back and waiting for it to happen. Something had to be done about it. That something was an innovation and a paradigm-shifting product idea for the global marketplace, and its subsequent successful commercialisation. Therefore, we did it in the eclectic area of wireless technology.

On checking with the publisher of Red Herring and 'Venture Professor' Yoshito Hori on the sidelines of the show, I was told that the US continues by far to be the leader in recognition of new ideas and businesses, while Japan (with an economy half that of the US) consumes one-twelfth the venture funds. Singapore, suprisingly, accounts for 10 times as much as Japan!

Clearly, the country that has led the consumer electronics revolution for the better part of two decades, is the least innovative, measured by successful new companies and ideas coming out from there. Essentially, that is because of its none-too-friendly entrepreneurship culture and an inbuilt fear of failure borne out of centuries of a rigid and stable society.

Contrast that to India, where the flow of funds chasing new ideas, business models and markets is running at four times that of Japan, and the current MBA programme at the elite Indian School Of Business, Hyderabad (ISB), has more than half of its students enrolled at courses at the School's Wadhwani Centre for Entrepreneurship Development (WCED)! Moreover, the recent TiE-ISB Summit had over 800 delegates drawn from across the Indian diaspora.

It's a very different scenario from just 20 years ago, when Indian entrepeneurship was the preserve of longstanding industrial families and state-run companies under a controlled Nehruvian model of economy. If one were to extrapolate for a moment, and hazard a guess as to the total Indian contribution in the Global Top 300 companies chosen by Red Herring across Asia, Europe and the Americas this year, then perhaps a good one-third would have one!

So clearly, this is a punctuation point in our experiments with a free economy. We have a new entrepreneurial ecosystem evolving by way of business schools, IITs and some other leading institutes of technology, a few government laboratories and Indiaco (India's largest private incubator), all of whom are silently nurturing innovation, entrepreneurial activity, risk taking and fresh IPs. Coupled with its overall R&D cost advantage at one-eighth of that in Western countries and a large pool of intellectual resources, India is gaining respect as a potential breeding ground for innovation. All this without much hype.

Therefore, India is now not going to be just about services and labour arbitrage; it will become known for its intellectual property and productised services. Certainly, there is a long way to go before it catches up with Israel (for a country roughly around the size of Bangalore, it has the second-largest number of companies listed on the NASDAQ, and attracts twice the amount of venture funds as Europe), but it is already ahead of Japan!

The probability of an original business idea hitting $1 billion in revenues is one in 20,000 (29 NASDAQ listed companies have hit the magical $1-billion revenue mark). Clearly the stakes are high and loaded against the everyday Joe quickly striking gold.

Nevertheless, innovation will still come out of mavericks with high self-belief, skills, focus and a nurturing ecosystem, and not out of a plethora of associations, committees or commissions entrusted with 'stewarding' innovation. The latter constructs are better suited for building Brand India on the competitive advantage of the moment — IT, ITeS and BPO.

New paradigms will entail new mechanisms to catapult them into mainstream life. Old economy constructs, like soldiers, will fade away.

The author is a co-founder of Coruscant Tec, and mobile commerce solutions provider PAYmate.

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