India 2.0: From service provider to innovator

The country's tech industry has ambitions beyond just servicing the needs of foreign companies
Written by Adrian Bridgwater, Contributor

In October, Yahoo ran an Open Hack Day event in Bangalore, hosted by one of the company's co-founders, David Filo. Two hundred local developers were invited to a 24-hour code-a-thon to combine their own ideas with mashed-up services from Yahoo's own library of APIs. The winning entry brought together Yahoo's mapping tool with a handwriting function to allow users to give travel directions to each other.

This kind of innovation-focused event is symptomatic of what some commentators are claiming is a fundamental shift in the focus of India's tech industry. "Innovation was always there, but the right conditions, ecosystem and critical mass did not exist from 1947 until the early 1990s. Now, venture capitalists are more willing to venture forth in emerging markets and back entrepreneurs — and India's universities have helped create critical mass in terms of skilled workers. So, as these factors start to coalesce, innovation and entrepreneurship are now much more evident in many different parts of India," said Kamla Bhatt, acclaimed Indian podcaster and presenter of The Kamla Bhatt Show.

To some observers it might appear that India came from nowhere to attain its current position as the dominant hub for technical skills and outsourcing. But the development of the country's technical skills base actually has its roots in the end of World War II. From 1947 until 1992, India followed a socialist path to development, with heavy emphasis on the public sector, in a somewhat misguided attempt to fuel growth. In 1992, when the country was on the brink of running out of hard currency (ie dollars), the prime minister at the time, Narasimha Rao, assisted by his finance minister, Dr Manmohan Singh, unshackled the Indian economy and freed it from its sluggish growth rate, which for years had hovered around the four to five percent mark.

PricewaterhouseCoopers estimates that India has roughly two thirds of the global business-process outsourcing (BPO) market, with a value in excess of $7bn (£3.4bn) last year. However, it appears the country has ambitions beyond outsourcing; the Indian technology sector seems to be changing as it develops a new self-belief. Google's labs in Bangalore conceived the initial engineering for the company's Google Finance offering in less than 18 months. This type of development has created the momentum for venture capitalists to propel further developments and invest in an increasingly skilled workforce.

The Indian Institute of Technology is widely regarded as the sub-continent's premier technology school; its seven locations churn out many of the ultra-keen software engineers that are starting to make headlines. Commentators claim there are visible signs that a shift towards higher-value work is occurring.

As the foundations of a wider and more diverse Indian technology market continue to spread, both local and international firms are conscientiously taking a step back to look at the enterprise infrastructure they have in place, to gauge its suitability for supporting an expanding business base. Given this fact, Bangalore is just one of the locations in which global infrastructure layer, systems-integration (SI) and networking companies are setting up office.

"BEA has seen its training volumes in India rise from hundreds to thousands of students a year. Big systems-integration firms in many of India's industrialised cities now demand tailored courses and even train over the web, live linked to instructors in the US. The latest trend is for these SIs to become authorised trainers in their own right, so they can train in BEA's technologies to their own timetable in-house," said David Toso, senior vice president of BEA EMEA services.

If they are smart, Bangalore and other technology-rich regions of India — including Chennai, Mumbai and Delhi — can take advantage of the IT foundation laid down to service overseas BPO demands and use it to jump-start indigenous projects. Sunnyvale in California will always be a convenient 12 hours behind India's west coast, so BPO is highly unlikely to disappear, but what India does next may prove extremely interesting.

"Where India has suffered in the past was [in its] reliance upon our services heritage that was anchored in cost arbitrage," said Sharad Sharma, chief executive of Yahoo India Research and Development. "But things are changing; capital intensity for entrepreneurs is reducing and this will make a big difference here in India. You can now be a YouTube without owning your own data centre. Our Bangalore development centre is responsible for a large chunk of the global research that drives 500 million users to Yahoo each month, and we have a string of Indian-originated services that are being localised for other markets and rolled out globally."

Among the Indian team's development highlights is the internet portal Yahoo Our City. Conceived, designed, built and launched from Bangalore within six months, this dynamically updated service provides a perspective of a city as seen and experienced by its natives. Content is generated by users for users — and the site incorporates other Yahoo services, such as Answers, Groups and Maps. Also hailing from the Bangalore team is...

...the Yahoo Kids learning and entertainment portal. Made in India in the English language, it has already been localised for both Japan and Korea. Yahoo India has also produced underlying technology developments such as Vertex, a cross-vertical information-extraction platform that scrapes websites and pulls in information from them so that the information is extracted according to a pre-specified schema and stored in a database. In short, it's a quantum leap forward from call-centre work.

How these innovations manifest themselves in reality is a different and harder question to answer. "There are signs of emerging niche technologies emanating from India, such as developments to provide persistent security and network access control, or design work on the next generation of microcontroller chips. However, this is at a relatively early stage and the scale of such exports is still small, but the growth is accelerating much faster than more mature services exports," said Brian Stones, executive vice president of Mumbai-headquartered Patni.

"We are starting to see the creation of technology as a direct revenue generator — not merely as an enabler for making some service delivery faster, better or cheaper. Much of this is still driven by global organisations that originally set up captives to exploit the cost advantages of the Indian skills market, but [which] have graduated to becoming a strategic part of the global technology-development capability of these organisations — truly contributing to the creation of their products and technologies, including product management. For example General Motors R&D in India is developing next-generation electronics and materials for cars of the future," added Stones.

Of course, growth creates growth and a virtuous circle of proliferating expansion for complementary and supporting technologies is emerging. With an explosive growth of mobile-phone users in India and other parts of Asia, Symbian — which has over 70 percent market share of the smartphone operating-systems market — is working to ensure new units are supported with foundation-level technology. The company's own Bangalore office was opened in 2006 with an initial remit to provide core Symbian OS application technologies and product development to meet customer and product requirements.

Now, with a more fully evolved role within the organisation, Symbian India fits into the company's international operating-system engineering base to provide a research and development unit with specific responsibility for multimedia, networking, messaging, user interfaces and graphics, including significant technical contributions to the company's Posix layer.

"India is certainly witnessing a secondary stage in the economic growth it derives from its technology sector, as it channels its workforce towards home-grown projects targeted at a global market," said Bruce Carney, head of developer programmes and services for Symbian. "In the past month, two leading Indian universities have joined our Academy programme and this type of knowledge-base expansion has created the momentum for venture capitalists to propel further developments and invest in an increasingly skilled workforce."

However, despite this optimistic attitude, the jury is still out on whether there really is a new dawn for Indian IT entrepreneurialism coming. Critics of the Indian technology sector's ability to be inventive and entrepreneurial have accused it of being an "instruction-led" society — that is, workers don't "do" until they're told to "do". Similar negativity has been voiced over the country's big but seemingly shallow labour pool. There are also still enormous divides within Indian society; according to estimates, more than a third of India's population of more than one billion people lives on less than $1 a day.

India wants to be seen as the perfect test bed for technologies suitable for emerging markets, as it is now a "veteran" emerging market itself. With this pedigree and the new streams of investment being channelled into the country's technology sector, it would appear that the rapidly expanding skilled labour pool will be scooped up and put to full use in the India 2.0 world. As to when the country will reach India 3.0, when Western workers migrate to the sub-continent as their location of choice for work, it is hard to say, but it will surely happen.

Editorial standards