Kavita Nair Posted online: Friday, June 18, 2004 at 1133 hours IST Updated: Friday, June 18, 2004 at 1305 hours IST
Mumbai, June 18: There is a new eco-system being put in place even as the Indian IT services and ITES sector continues to lure global companies. The seeds have been sown and the results are expected to manifest in the next 3-4 years.
India’s role in the original formation of a company’s DNA can no longer be questioned. And the activity in the product and technology services is now gaining momentum.
A Nasscom-McKinsey analysis indicates that the product and technology services opportunity is poised for rapid growth and could reach $8-11 billion by 2008. Statistics aside, there are today a new breed of entrepreneurs who are bringing their global experience to the table. Moreover, industry observers indicate that while the failure rate for a technology startup is high, success when it comes is huge. They say, “What is being played out is a combination of two factors — many Indians coming back and reasonable capital being available. Ten years from now, we do see great product companies taking shape in India.”
Norwest Venture Partners (NVP) venture partner Vab Goel says, “India is at its infancy stage wherein we are yet to see companies who would begin to deliver complete enterprise software products or complete hardware and software systems. Is there potential? I would say ‘yes’. Is it happening —‘yes’.”
Both Mr Goel and WestBridge Capital Partners managing director KP Balaraj clarify that even though there are visible signs of the accelerating momentum in the technology space, it’s yet to become a trend. There aren’t as many examples of success stories which is what is required as has been demonstrated in the IT services space.
The players seem optimistic nonetheless.
The immense research and development activity that the country has witnessed in the past couple of years has helped engineers gain confidence in undertaking high-end work. There have been instance of Indians in MNCs relocating to the country to help set up their company’s operations here, or set up their own operations or join a company at an early stage. This is also paving the way for India to take its place in the IP market.
Echoing this sentiment is The Carlyle Group director Kanwaljit Singh. He says, “It is apparent that cross-border funding is mainstream now. Within this, what is now taking shape is in the kind of work that is currently being undertaken here. The work has clearly graduated from low-end maintenance support and evolved into core development of the intellectual property done in a seamless manner along with the US counterpart.”
Companies, explained Mr Singh, have realised the opportunities in this virtual R&D and have begun cashing in on it. The development work being undertaken by the multinationals in India and the patents being filed from here have been a major influencing factor. Mr Singh added that cost-advantages aside, even the startups in the US have begun to taken note of this. Both the comfort level as well as the confidence level in the work being undertaken in India is high.
TSJ Media editor Arun Natarajan pointed out that one of the quarters last year witnessed VC funding of $4 billion in startups. Out of this, $400 million was invested in companies which had one Indian founder. And 80 per cent of these investments were driven by the fact that the investee companies had an India story weaved into their respective business plan.
The confidence in research and development here has also made way for outsourcing of a different kind.
Based on the services model, some of the Indian companies have been undertaking the product development work for US companies. A clear example of this is Symphony Services which is a company focusing on technology-based outsourcing services. Other instances of this trend are the companies funded by NVP in the past couple of years. These companies are either present in India directly or have partnered with an Indian firm in outsourcing their product development.
The time-frame for India emerging as an IP leader can be debated. India’s date with a homegrown Microsoft can be debated, but not ignored. As Mr Goel says, it is only in the past two years that there have been attempts to move from the regular IT back-end work to the development of an entire product. Most of the products are slated to hit the market this year.
It will be a lot clearer once they begin competing in the global marketplace.
Mumbai, June 18: There is a new eco-system being put in place even as the Indian IT services and ITES sector continues to lure global companies. The seeds have been sown and the results are expected to manifest in the next 3-4 years.
