Innovation Drives Indian IT

It is true that the 'IT revolution' in India started with cost
and labor arbitrage as our strengths, but today IT is driven by innovations

Over the
past decades IT in India has grown in all dimensions. On the supply side,
institutions-particularly IITs, IIITs, NITs and IIMs along with university
colleges have continuously stepped up their production of engineering graduates
from 30,000-300,000. Indian software firms saw growth at a compounded rate of
more than 50% y-o-y over the period 1995-2000; today, they have grown into a
size of $30 bn and well on their way to $50 bn by 2008 as per McKinsey Nasscom
study. BPO industry is a relatively late entrant and has been growing even
faster in the past five years. Together, IT and BPO have created a healthy
employment of nearly one million jobs. If we keep up the pace, by 2010 we would
have created another five million jobs, particularly for youngsters, with all
its attendant advantages of growth in housing, automotive, hospitality and
travel industry-in short, a booming economy.

Prompted by Cost

It is true that the 'IT revolution' in India started with cost and labor
arbitrage as our strengths. In early eighties, when companies such as Infosys
started to look at the export market, the only advantage they could bring to the
table was the 'low cost' and a 'large number' of our engineering
graduates. Naturally 'body shopping'-sending young engineers in large
enough numbers to countries such as the US at short notice to work on 'client
assignments'-and charging for 'time and materials' was the best business
model. Cost advantage provided the 'entry strategy' for the nascent Indian
software industry. The 'low cost' PC and its ability to 'emulate' all
the expensive computers made our value proposition viable.

Quality Mantra

It is to the credit of the Indian software firms that they did not stop at
the cost-led entry; they quickly leveraged the quality mantra to provide a
growth strategy. Using the quality model Capability Maturity Model (CMM)
developed by Carnegie Mellon University (CMU)-the leading engineering School
in the United States-and attaining the highest level (Level 5) in CMM, many of
the Indian IT firms could ride the quality bandwagon. Soon, we found that the
largest number of SEI Level 5 companies were in India (this holds even today).
The arrival of the Internet and the Government of India providing high-speed
links to destinations outside with a single 'Inspector' in the form of
Software Technology Parks of India (STPI), made it possible for the Indian forms
to grow. By the turn of the twentieth century 'billions of dollars' was
within the reach of the Indian IT firms. Y2K provided the tipping point.

The global delivery
model perfected by Infosys and quickly adopted by many other Indian software
firms led to the birth of IT services companies from India by early 2003. By
March 2006, Indian software export would cross $25 bn. TCS, Infosys, and Wipro
together will have a combined strength of nearly 200,000 people and $7 bn in
revenue, impressive by any standards!

Niche Products

While our primary growth has been in IT services, we are witnessing the
arrival of products already. Products need a 'risk taking' mindset, which
comes only when we achieve the first stage of growth and the attendant 'wealth
cushion'.

• i-flex
  Solutions has a product Flexcube that has already been rated as the global
  No 1 product for four years (since 2001). i-flex Solutions was recently
  bought out by Oracle (world's No 2 software company) for nearly $1 bn!

• Tally
  an accounting software product is expected to grow into $150 mn size by
  2008.

• Finacle,
  a core banking software product from Infosys is another $ 100 mn opportunity
  created out of India.

• Encore
  and PicoPeta have developed Simputer, which made it to the Global Innovation
  100 as per New York Times in the year 2001. 

• Midas
  Communication designed companies developed corDECT phones are used in 20
  countries around the world

There are many niche
products happening too.

Adopting New Technology

There are many interesting technologies and solutions that are getting
developed in India and being deployed globally. These include:

• Companies
  such as Ittiam have started licensing technologies to major hardware vendors
  around the world; Ittiam engineers can be proud of 'powering' millions
  of personal video players.

• Sasken
  engineers can proudly claim that there are million pieces of devices powered
  by Sasken Technology.

• A small
  company ImpulseSoft even unwired Apple iPod (add-on to Apple iPod from
  NaviPlay was designed by ImpulseSoft). Recently BBC featured ImpulseSoft in
  their 'Click Online Program'.

• The
  technology behind GyanX, a tool for online program execution from Likwid
  Krystal, is being used by millions of students around the world through
  Thompson Learning.

• Acado,
  the tool and technology developed by Transversal Networks is powering
  Borland University.

Global Tech Players

An innovation ecosystem is developing around the Indian IT companies. Many
global players are setting up their R&D centers in India. This includes HP
Labs, IBM Labs, Microsoft Research, Intel Labs, Motorola Labs, SAP Labs, Google
Labs, Yahoo Research, and Huawei Technologies. It is spreading to other
industries too-where IT will play an increasing role- Philips, Siemens,
Emerson Electric, APC, Honeywell, ABB, GM, Volvo, and Daimler Chrysler.

Innovating...

• A BPO
  company like Progeon is innovating in “back office” and “call
  center” operation to provide “end-to-end” solution rather than
  offering “point” solutions.

• Another
  BPO company B2K is using analytics to develop a USP that no ordinary call
  center can provide.

• A-mantra
  from SatNav Technologies provides a far better way to manage “people
  logistics” for the BPO industry.

• QuickRules
  BRMS from Yasu Technologies provides a unique way to manage business rules
  of any organization.

Global Leadership

There are many companies founded in India that are able to play the global
card well; they compete with the established players who are much larger in size
(and still manage to win). These include:

• Subash
  Menon founded Subex Systems focuses on fraud management for the mobile phone
  industry. Within ten years Subex has attained global No 1 position
  surpassing established leaders like HP.

• Ittiam
  has already got the No 1 position in “Best Companies to work with” in
  the Semiconductor space.

• HiCal
  Magnetics supplies Magnetic Components for Nokia handsets!

• STEX
  has a “best in class” document management engine developed right here
  for the global market

• Portal
  Players supplies the Audio Codec for Apple iPod

Grabbing the
Opportunity

The influential thinker Professor CK Prahalad has articulated the promise of
emerging markets and designing products to address their needs. There are many
companies (both Indian and MNC companies) in India that are influenced by this
thought.

• Infineon
  in Bangalore (along with others) has developed the prototype for $20 mobile
  handset that is powered by AAA batteries that are easily available even in
  rural India

• Areas
  like Micro would be the next engine of growth.
  A focused product Matrix from Java Softech addresses this need.

It's Happening!

There are many more upcoming companies that are innovating in unusual ways.
Some of them include:

• e-Government
  Foundation is developing very high end robust solutions for Municipal
  Governments (financial management, property management and project
  management) using GIS & Web-based Process Monitoring that are made
  available free of cost to Municipal governments in developing countries;
  hopefully, the additional resources generated by the Government departments
  would lead to larger social benefits justifying such investments.

• Robosoft
  with a razor sharp focus on developing device drivers for the global leaders
  is innovating even in location! Being located at a small town Udupi (near
  Mangalore and away from Metros like Bangalore), Robosoft is even talking of
  “Silicon Beach” and building a six-story tech park to house 2,000
  engineers in a “temple town”

• Spinfo,
  a company focused in GIS is trying to provide GIS/GPS based solutions for
  the Indian market that includes simple maps, driving instructions, thematic
  maps, and automotive navigation.

• HCL
  developed a low cost PC (costing sub Rs 10,000 including monitor); Encore
  has low cost hand-held mobile; Emergic is working on a mobile thin client;
  Intel is launching soon a “community PC”; and the list goes on

In short, the Indian IT
industry is at a tipping point where the engineers are not afraid to think
different or take risk with new ideas. We will witness exciting times in Indian
IT in the next decade that will be powered by innovation.

This
article is a part of an exclusive series with NASSCOM on 'IT Innovation in
India'

Authored by: Professor S Sadagopan director, IIIT Bangalore