Summary:The software sector's focus is shifting from one motivated by scale and cost toward knowledge leadership and execution, as global in-house centers collaborate more with the rest of the ecosystem.
India's crowded technology landscape has fostered new types of collaboration and innovation, which benefits enterprise customers locally and globally.
According to Nasscom, India is home to about 500 offshore software product development (OSPD) centers, generating US$1.2 billion revenue in the year ending March 31. In FY2010, there were over 750 IT-BPO multinational captive centers in India. Meanwhile, in FY2012 engineering research and development exports were expected to exceed US$10 billion.
Nasscom vice president K.S. Vishwanathan said over 350 tech companies had their R&D facilities in India. "There's nowhere that you can find such a conglomerate of corporations," Vishwanathan said in an interview. The close proximity of key technology players in India was also the major theme of Nasscom's recent global captives conference in Bangalore.
"For a global corporation operating in India to be successful they must not only collaborate with the parent company but also the surrounding ecosystem of other global in-house centers (GIC), third-party service providers and research and development facilities," said Vishwanathan.
Transforming India into an innovation and R&D hub
Vishwanathan said that multinational corporates were collaborating with software developers via their shared technology presence in India. As head of Nasscom's GIC forum, he recently facilitated conversations between executives from nine of the largest tech R&D companies based in Bangalore. The aim was to raise the bar for innovation in India.
To encourage more cooperation between participants, Nasscom selected one vendor from each market segment.
It's very early days, according to Vishwanathan, who is reluctant to even label the initiative. However, he did say that early discussions have proposed that Nasscom identify around five different engineering disciplines. These could eventually host joint centers of excellence.
He offered mechanics, thermodynamics and simulation as examples.
"When you look at the tech companies involved, at the core is physics and mathematics. How can we create centers of excellence around this?," said Vishwanathan. "Nasscom can identify the know-how and institutions and fund projects."
Once centers of excellence are established, then more companies will want to come to India, he added.
Closing the feedback loop
India's enterprise software landscape has changed dramatically over the past few decades, according to Pravin Agarwala, the vice president of SAP's Business ByDesign.
He joined the company over a decade ago as a developer in SAP's R&D organization and now leads the development of the cloud ERP application, which was largely developed in India.
"When I joined the industry my first observation was that R&D facilities were mainly about scale versus cost. It was about sitting in the back and coding. But the change is happening from being focused on execution as a resource; to being a knowledge powerhouse where you are driving the direction," said Agarwala.
One of the big factors driving this is cloud computing, said Agarwala, which has dramatically shortened the feedback loop between the customer and the developer.
The regular feedback allows them to fill in the gaps in the application faster, he said.
This "farm-to-fork" effect has also trickled down to the on-premise world, where customers--who previously waited years for a response to their feedback--demand more frequent releases and updates.
Although Agarwala said the close proximity made it easier to engage with neighboring companies, location doesn't preclude the R&D centers from servicing the immediate needs of foreign customers.
"In the past it was all about development. Today it's about owning the product and taking it to a global market," he added.
India is still a low-cost tech hub
However, the amount of collaboration is limited, according to BMC APAC CTO Suhas Kelkar, who leads the organization's local R&D team based in Pune. However Kelkar has not received requests to work with the GICs of large corporates to create new products, services or features.
He said innovation is a low priority when companies established operations in India, which can be run completely independently to the parent company.
According to Kelkar, the GICs get formed with certain goals in mind and most likely those goals are around cost arbitrage or access to market. "This is how almost every company sees India in the beginning," he added.
Over time, some Indian satellite setups start to slowly push back against the parent company, but there are only a few examples of this. Ultimately, India still offered a perfect triangle of collaboration linking customer, outsourcing partner, and software developer, said Kelkar.
"In this situation, I have seen that partners will drive innovation to improve company processes by collaborating with vendors," he said.
Mahesh Sharma earned his pen licence in his homeland, where he covered the technology industry for ZDNet, SMH, Sky Business News, and The Australian--first as an FTE, and later as a freelancer. The latter fueled his passion for startups and empowered a unique perspective on entrepreneurs' passion to solve problems using technology. Armed...