India emerging as low-cost development hub

India is fast emerging as a hub where domestic and multinational corporations (MNCs) are busy churning out a host of low-cost, entry-level products for emerging markets.

"This is the biggest untold story about India," Rajdeep Sahrawat, vice president of Nasscom, told ZDNet Asia in a phone interview. Nasscom is India's trade body and chamber of commerce of the country's IT-BPO industry.

From laptops to mobile phones, and from cars--such as the US$2,500 Tata Nano--to motorcycles and consumer durables, India is now home to several low-cost innovations.

Both Indian and multinational companies are going the whole hog in utilizing India's talent pool for developing low-cost products. From mobile handset manufacturers such as Nokia and Motorola, to IT majors Hewlett Packard (HP) and Dell Computer, and automobile manufacturers such as General Motors and Suzuki Motor, manufacturers from various industries have set up research and development (R&D) centers that focus on developing entry-level products.

Sahrawat said: "The last time we took stock, there were some 650 captives operating in India." Even companies that do not have operations in India have also established R&D facilities in the country, he added.

Low on cost, high on technology
"From plain and simple cost arbitrage, India is today offering tremendous value arbitrage," Ravi Bhamidipati, executive director of performance improvement at PricewaterhouseCoopers India, said in a phone interview.

According to Bhamidipati, India's advantages emanate from the fact that the country's rich talent pool is able to span the entire value chain, from low- and medium-skill jobs to high and even intellectual skill jobs.

Sahrawat said: "Low cost does not mean low technology. Simple, low-cost solutions often require very complex technology." He added that the technology behind Tata Nano, for instance, is "extremely complex" and neither cheap nor simple.

George Paul, executive vice president of marketing at HCL Infosystems, noted: "We often underestimate the innovative prowess of the domestic players, and have so far been looking for technological innovations from the West.

"With the launch of innovative products like Tata Nano and HCL MiLeap, that perception is slowly but surely changing," Paul said in an e-mail interview. HCL has R&D centers, dubbed HCL Labs, across three locations in India.

"The HCL Labs serve as hubs of technological innovation and the design centers of future HCL products and solutions," Paul explained. The latest innovation from the HCL stable is the newly-launched MiLeap range of "Leaptops", or what HCL describes as mobile devices that are similar to laptops, with an ultra-small form factor. The devices are priced at US$331 (13,990 rupees).

Nasscom's Sahrawat said: "India is emerging as an R&D powerhouse. It's not that India is doing only simple, coding work for the global products. Indian captives are today a major source of innovations."

India's large and growing domestic market is helping both homegrown and multinational corporations. Bhamidipati said: "India has a very strong domestic market that is increasingly getting more prosperous. Unlike other economies, India is not dependent only on exports."

In addition, requirements of the Indian market are unique. "The solutions for India are very different from the solutions multinationals undertake for the developed world," Sahrawat said.

A small and midsize business (SMB) in India is very different from an SMB in Munich or Montreal. For this reason, several tech vendors have developed products especially for the Indian market.

For example, HP builds a range of desktops including its Compaq dx2000 Business Desktop PC series, Compaq dx2480 Business Desktop PC, Compaq dx290 Business Desktop PC and Compaq dx260 Business Desktop PC, out of its lab in Bangalore, India.

"These business PCs have a high-performance machine that has the ability to withstand harsh Indian working conditions and delivers productivity and efficiency consistently," HP said in a statement. "With a small form-factor, these desktops are ideal for organizations that struggle with challenges such as space limitations, data security and power consumption, especially in the ITES sector."

HCL also offers a desktop PC, Neutron, which features a compact design and offers power saving of up to 76 percent. According to the company, the system occupies 85 percent less space compared to other competing products and is available at US$393.

In 2000, Nokia developed its 3210 handset to support Hindi menu, and in 2003, the Finnish company unveiled its first handset--Nokia 1100--made for India.

Today, the handset maker has three R&D centers in three Indian cities: Bangalore, Mumbai and Hyderabad.

A Nokia India spokesperson told ZDNet Asia that the company's plant in Chennai, set up in January 2006, today manufactures over 125 million handsets and exports 50 percent of its output to over 50 countries across the world.

Another handset maker Motorola has two R&D facilities in India--located in Bangalore and Hyderabad--that are responsible for developing sub-US$40 cellular phones for emerging markets.

Sahrawat said: "The next set of [potential] consumers for MNCs are those that live in emerging economies of India, China, Brazil and Russia. Therefore, there is little sense in replicating products developed for the Western markets."

Indian companies, too, are looking to ride the low-cost wave.

Following the launch Tata Nano in January this year, Indian automotive company Mahindra and Mahindra (M&M) announced it is developing a platform for low-cost utility vehicles. Expected to roll out by end-2009, these vehicles will be available from US$9,400 (400,000 rupees), compared to prices of other utility vehicles in the market at US$14,000 (600,000 rupees). M&M also has plans to launch an ultra-low cost tractor for India's rural market.

Swati Prasad is a freelance IT writer based in India.