[Via Bernard] There is an interesting article at AlwaysOn by Dan’l Lewin from Microsoft on the subject Is India at the Tipping Point?
There are some very interesting quotes in the article, some of which are:
Mention India and most people think of outsourcing or offshoring. But it is much more than that today. In sector after sector, from business processes and models to technology, Indian entrepreneurs and companies are delivering breakthroughs in cost-performance. And it’s not just about labor cost arbitrage anymore; it is about disruptive innovation in technology and business models.
Another good one, from the same article:
India must move from renting IQ to creating its own intellectual property, and move from serving clients overseas to thinking about how it will leverage technology to improve its own large-scale societal problems. India must go beyond labor arbitrage to creating a real, sustainable innovation-based economy. It must move from innovation from India to innovating for India.
My take on the subject is very much similar to Dan’s. The primary reason for the boom in the Indian IT industry is undoubtedly outsourcing - and it has been discussed so many times before that it’s more than redundant for me to talk about the same.
I feel that India is moving in the exact same direction that Dan points out. And I believe that the logic applies not only to India but for any developing economy with a substantial lower cost of living than the developed countries. I feel that the move from ‘innovation from India’ to ‘innovating for India’ is trivial and will not even require extra effort. Let me present my case and elaborate it further.
It’s very natural for most of the people to do things that are easier - yet beneficial for us. Actually, it is in the other order - first it should be beneficial and profitable and then the tendency is for people to choose the shorter and the easiest route. And my claim is that it is much easier to start a software service company in India (note that I mentioned ’starting a software service company’ and not ‘running it’ - that is another discussion altogether), even now when the wages have increased a lot and there are already so many companies doing similar work. It is because of the availability of local talent, knowledge of English language, abundance of product companies in the US and Europe and the cost benefits that India has. So - it is very natural for Indian services companies to come up and fill the supply part of demand-supply chain.
To extend that further - let me go on saying that it’s easier in the US to create product companies - because of the returns associated, the availability of a broader and a more matured pool of investors, a more matured audience and the cost factor that makes it very unattractive for a startup to venture in the services space .
But now the situation in India is changing - the costs are increasing, there is a lot of competition in the services sector, the Indian audience has matured and are asking for new products and are ready to pay for it, there are lot more investors willing to spend in India - essentially making it much easier to create product startups targeting Indian market and increasingly the difficulties for services startups.
My bet is that the coming few years will see a lot more software startups - innovating for India - but will continue to provide services around not only their product but also in the space they specialize in. Jobs, Matrimonials, News and now Travel are the domains that is big with the software companies providing value in India - there is a scope for further innovation in a lot of areas including these four.
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May 21, 2006 at 11:16 pm
Very interesting post. I found it particularly interesting because so much of what you say here could apply to China as well.
May 22, 2006 at 12:48 am
On the point of lot more investors willing to invest in product companies in India, I disagree. Till now there have been no investments made by a VC firm in a pure tech company. All product startups from India have been funded because of the “godfather” factor, rather than innovation. No that there is a dearth of startups who are innovating. The prevailing mindset is that making an end to end product out of India is difficult.
I guess right now everyone is just surveying the scene. It will take a google for them to get real serious about it.
May 22, 2006 at 1:16 am
Rajiv - I wasn’t just talking about tech startups, but others too. You are right - that it will still take time before VCs will invest purely based on the innovation - but that is true anyways of most companies, even in the US. You need a strong advisor - it gives the VCs the required comfort, particularly if they dont want to involve themselves actively in the venture.
This is especially true of 1st generation entrepreneurs - with 2nd generation, the VCs will be far more receptive. And I feel that it’s fair too.
May 24, 2006 at 8:13 am
This topic is always of great importance for me, as I eventually want to return to India. And I am very optimistic about India’s youth and its future.
However timing of this post by Ashish makes it even more interesting read. Today’s Wall Street Journal has a Front Page Article on Doubt about India’s Growth. Title is “Gandhi Influence Raises Doubt About India’s Growth Strategy”.
In this article it is stated that Gandhi’s Clout Raises Doubt About Reforms. Sonia Gandhi remains India’s most powerful political figure but her growing influence is causing worries among investors about the pace of the country’s economic reforms. Several top industrialists, such as Azim Premji, founder of outsourcing giant Wipro Technologies Ltd., have spoken out against the government’s urging private companies to hire more people belonging to disadvantaged and lower-caste groups.
Wall Street article is interesting.
However, no matter what the article says I remain very optimistic about India’s future.