Home India 2009 India – from services to innovation

India – from services to innovation

by david.nunes
Author's PictureIssue:India 2009
Article no.:8
Topic:India – from services to innovation
Author:Sanjay Nayak
Title:Managing Director & CEO
Organisation:Tejas Networks
PDF size:216KB

About author

Sanjay Nayak is the Managing Director and CEO of Tejas Networks, a leading optical networking product company from India. Mr Nayak is a technologist with over 20 years of industry experience in India as well as the USA. Prior to founding Tejas, he held senior management positions in globally leading electronic design automation companies such as Synopsys where he was the Managing Director of Synopsys-India and earlier at Cadence Design Systems. Mr Nayak holds a M.S. in Electrical and Computer Engineering from North Carolina State University, Raleigh and a B.E in Electronics and Communication Engineering from the Birla Institute of Technology, Mesra.

Article abstract

India, in the past, was principally a provider of low cost services. Today, this is changing. Many multinationals have set up R&D operations in India to take advantage of its highly skilled technical workforce. Companies in the US and EU now outsource their R&D to make their research budgets stretch further and this will increase due to the downturn. Members of India’s technical elite have increasingly become entrepreneurs and struck out on their own as producers of innovative high-tech products.

Full Article

India has established itself globally as a technology hub – both as a consumer of ICT products as well as a provider of services to the global ICT industry. The Indian IT services industry exports nearly US$50 billion worth of services annually. India has also created a large pool of highly talented professionals who have consistently delivered complex projects on time and with high quality. Over the past several years, many global multi-national ICT companies have set up operations in India, where they have started developing cutting-edge products for global markets. In addition, many professionals of Indian origin have returned to India. All this has created a large pool of technical talent and a superior managerial workforce, which has the skills, global exposure and a confidence to develop world-class products and solutions. The Indian economy over the past many years has been growing at a hectic pace and the Indian domestic market has become a large consumer of ICT products. The Indian telecom market, for instance, is now the fastest growing globally, with over ten million new users added every month. With the addition of broadband and 3G services, India will become one of the largest markets for telecom infrastructure products. Despite the recent global slowdown, Indian telecom is showing no signs of slowing down and India along with China is leading the world in telecom CAPEX (capital expenditures) and revenue growth (Source: Infonetics). The IT sector is slated to grow 14.1 per cent in 2009 (Source: Springboard Research). Vibrant ecosystem for driving innovation A number of factors have led to the present burgeoning of the technology industry in India. With a large talent pool and a large and fast-growing domestic market, India has the basic ingredients for driving innovation. The large domestic market has also started attracting global companies to set up manufacturing operations in India. In addition, the last few years have seen an upsurge in entrepreneurship, whereby successful professionals have decided to take the plunge and do their own start-ups. India has also seen the advent of many venture capitalists, mostly from the US/Europe who have had success with Indian-origin entrepreneurs in the west and are now looking at India as the next big opportunity. Organizations like TiE (The Indus Entrepreneurs) and NEN (National Entrepreneur Network) are also providing the coaching and networking needed to make such entrepreneurs successful. A supporting policy framework by the government and emphasis on exports has also contributed to increasing the velocity of business. All of the above factors have created a vibrant ecosystem in India, which breeds and contributes positively to the creation of innovation-driven companies from India. From technology outsourcing to product development While India has established itself as a technology services and outsourcing hub, it is not yet recognized globally for its technology product companies. However, the vibrant ecosystem of affordable innovation and the current global economic environment provide a great opportunity for Indian companies to develop products for the global markets. The recent downturn in the global economy and the financial challenges faced by many high-tech product companies has forced many global companies to reduce their investments in R&D to develop new technology and products. Over time, this will create an innovation crisis and result in a slowdown of technology advancement. In situations such as these companies have outsourced certain parts of their R&D efforts to India to get more bang for their constrained R&D budgets. At the moment, there is a need and an opportunity for larger companies to look at reconfiguring their business, by focusing more on strengthening their products in the core areas of their business. Instead of doing minimal R&D in non-core areas, seriously look at building long-term partnerships with best-in-class companies for those areas. This will give them a highly competitive, sustainable, end-to-end solution for their best-in-class products, which in turn will give them better leverage with their customers. Indian companies have an opportunity to become such long-term partners, since they have the ability to cost-effectively develop innovative, competitive, products and have a commercially viable win-win business model with larger companies. For instance, Indian telecom product companies can become OEM (original equipment manufacturers) suppliers to larger global telecom companies in selected areas of technologies. Even the venture capitalists, which traditionally fund companies that develop innovative technology and products, are looking at avenues for more affordable innovation for their scarce risk capital. Instead of funding fewer ideas, they would like to fund a lot more high-quality ideas while spending the same amount of capital. The fundamental cost structure of India gives Indian technology companies an ‘innovation leverage’ – they can take more risks to innovate and thereby address many more opportunities for better rewards. The proximity to the large consumer base at home gives Indian product companies a first-hand understanding of customer needs; it also helps pinpoint market trends and develop products which address the customers’ pain points. This market knowledge goes a long way towards developing products with cutting edge technology with prices that a cost-sensitive market like India is willing to pay. Given that many other high-growth emerging markets (for example, in Asia, Africa, Latin America, Russia/CIS etc.) have similar customer profiles as India, the same products and solutions will also have a significant relevance in these international markets. The focus on R&D in conjunction with the ability to manufacture products locally, has given a boost to the growing number of product companies in India. Product companies, which can gain significant business in the Indian market, have stronger prospects of global success. India is poised to become a large consumer of high-tech products as well as being a breeding ground for new technology and product development companies. Indian companies have the innovation leverage which gives them a long-term sustainable advantage to cost-effectively develop world-class products. The recent global economic environment provides an opportunity for Indian product companies to partner with global companies and create a win-win relationship. With this trend we expect Indian companies to become a significant provider of high-tech products to the global market in the years to come.

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