Saturday, September 15, 2012

Next Wave Strategy for Indian IT Industry

I felt honoured to be a part of the panel discussions on Indian IT Industry at Communique 12 organized by Symbiosis in Pune.

The viewpoints put forth by me covered how Indian IT can move towards a product based model as opposed to a people based revenue model, challenges to Innovation and opportunities for diversification.

Moving towards a Product oriented model
  • We can take some lessons from what made the services model such a huge success for Indian IT Industry
  • It was no doubt a perfect example of private initiative backed by government policy which made IT in India a priority sector
  • IT in India is engaged in the services model by design since the IT policy in the mid-1980s stressed on Electronics and Software as a solution for unemployment
  • That policy definitely succeeded as we see the number of people in India today employed in this sector with education institutes churning out almost 400k candidates in the market every year
  • There are indeed IT companies in US one example which comes to mind which generate $700 mn revenues with less than 50 people
  • This model may not be suitable for India. It may be great for one or two companies but in the larger national interest of serving the lowest of the low, the utility of this model in really helping India raises more questions than it answers.
  • Putting the social aspects aside, let us see how do we make this model work for moving to a product based model
  • There are several challenges which have prevented this model from being adopted so far
  • We are often found lacking in India in terms of facilities and infrastructure required to encourage product based model
  • It is indeed easier for me, sitting here in India, to register a company in Delaware US and get a server procured and installed in a US data center rather than India
  • Existing product expertise is sitting on foreign shores. Indian IT has excelled in the routine, but when it comes to core product architecture issues we need to depend on outside expertise
  • No doubt Indian IT has resourceful manpower. This manpower is dedicated and career oriented and has a focus on self development.
  • But this mindset may not augur well for innovation and product creation. To innovate you need a maverick and not a career climber
  • From a policy point of view, we need to encourage this product expertise to come and reside in India. Existing product innovators among organizations should feel encouraged to set up India based Product Innovation and Development Centers. Mind you, not just Offshore Development Centers where you hire code jockeys while retaining the architecture skill set in home country but Product Innovation and Development Centers where product is created from the ground up in India
  • In order to get the government think tank on the job of how to make India a home for Product Innovation and Development, they must be made to see what is in it for India. Industry need to go back with the answer on how does becoming a product development center instead of a services based industry which generates employment for millions, really favor India?
  • This thinking about Indian interests has to become foremost for Indian IT industry which can then result in directional changes in policy to make product based model a success as the services based model has done.
  • We touched upon the manpower resourcefulness and mindsets required for innovation.
  • For innovation to succeed there has to be a tolerance for failure (1/3000 ideas are successful)
  • India is a nation in a hurry. We are playing catch up with the rest of the world. We feel that 40 years of socialism has left us behind. What we are seeing happening in society today is an acknowledgement of the existence of a better way of life and an awakening and a revolution of the masses towards the need for a better life.
  • In this social milieu of speed and change, we have to see where innovation fits in. Innovation cannot exist by itself. Innovation has to fulfill a need. Innovation is made successful not by the innovator but by the users.
  • For organization be innovative, we have to realize that innovative organizations are made up of innovative individuals. While the organization can provide a platform for individuals to innovate, it can also result in shackles for innovation.
  • Organizational innovation programs are often linked to corporate imperatives plans, markets for growth. There is limited scope for a philanthropic approach to innovation within organizations.
  • Individuals can also be organized. Individuals can be agile. Individuals can be innovative. Most innovation comes out of garages rather than corporate R&D labs.
  • What organizations can do is provide a platform for innovation. They cannot attempt to control innovation and can perhaps channelize innovation by setting up the right environment, posing the right questions, encouraging risk taking thus empowering the innovators.
  • Organizations can ENABLE while leaving it to individuals to ENACT
  • Organizations also need to think in terms of what are the right measures for innovation - investment and resources spent or ideas nurtured, patents filed.
Diversification and geographical growth
  • I will acknowledge the work of Prof Rupa Chanda from IIM-B for the next section where I pick up three themes for diversification, very roundly covered in her article - US protectionism - An opportunity in disguise?
  • The need for diversification comes from saturation of existing markets, economic slowdown and protectionist measures adopted by countries. The situation described for the US applies as well for any other countries adopting such measures
  • Market diversification
  • Indian IT industry is largely an exports based country and there is a definite need for diversification, competitiveness and exploring new areas of growth.
  • Indian domestic market is largely ignored, even though Indian economy is seeing comfortable levels of growth as compared to other markets.
  • Foreign investment in India is on the rise because of the opportunities here in India. What about Indian IT investment in India? The investment here has to be for market creation and market growth. Margins similar to those earned for exports cannot be a key focus in Indian markets.
  • Local presence in target markets
  • Local employment creation in the markets that IT industry operates in should be made a key priority. For sure, countries where Indian IT industry is seeking to create a market would welcome them if they are seen to be solving unemployment problems of those markets.
  • As contributors to the local economy, the industry will also gain in lobbying strength
  • Government support in foreign policy
  • Government can help in creating a safe environment for Indian IT industry and Indian professionals in the markets they operate in.
  • There is a need for engaging with these countries at diplomatic levels to ease the entry of Indian IT industry and preempt any protectionist views.
  • Just like in the success of services model, private and government initiative and partnership can go a long way in influencing and investing in bi-lateral and multi-lateral commercial agreements
  • Lastly the focus of industry can be turned towards Nation Building within India - there are indeed opportunities in e-governance, e-auctions, e-learning which can be explored towards achieving the goals of sustenance, growth and national benefit.