Brand India: The shining star in the world of business

Author: Krishnakumar Natarajan
CEO & Managing Director, MindTree
The Indian IT Industry has had unprecedented success in the last two decades. The Industry is recognised today as a World leader and one of unique characteristics of the Industry has been its ability to reinvent itself and build on its success. The Industry has also had a very collaborative mindset and the role of Industry associations like NASSCOM is a lesson in Industry building at a Global level. Some of the success achieved which are worth highlighting are as follows.

The Indian IT services Industry has grown from USD2B in 1998 to USD 52B in 2008 (including USD 12B in domestic)- Source NASSCOM McKinsey Perspective 2020 Report.

The Industry’s contribution to GDP has quadrupled from 1% to 4% from 1998. More than that it has helped increase the foreign exchange reserves of India and has helped create about 2m direct jobs and almost 8m indirect jobs resulting in 10m job creation in a economy where jobs are an important need.

The Industry has become critical to the Global customers it serves. 75% of Fortune 500 companies leverage the Indian IT Industry and it is estimated that in 2008 alone the global savings for customers amounted to USD 20 to 25Billion ( source NASSCOM McKinney report).

The Industry has grown beyond traditional services. New services like R&D outsourcing, Independent Testing, Remote Infrastructure Management have contributed to more than half of the Industry incremental growth. Success in new service lines indicates the strength of the Industry to reinvent itself.

The Industry has been a role model in promoting corporate social responsibility and has led the way in sharing wealth generated with employees. Both these leading edge practices have raised the overall awareness in the Indian Industry for promoting social responsibility.

Having had unqualified success in the first two decades the Indian Industry is poised at an interesting stage. The initial differentiators like cost competitiveness, higher quality etc are no more compelling differentiators. Global companies like IBM, Accenture, HP have enlarged their operations in India and are able to match Indian companies on these parameters. So the next decade of outsourcing is going to be fought on very different parameters namely- Deep Industry knowledge, Access to Frameworks and solution accelerators, Global delivery model, Ability to built culturally diverse organisation etc. While some of these may play to the advantage of Global players there are areas where Indian companies will gain significant advantage.

One of the areas where Indian companies can focus on is the emerging area of R&D outsourcing. The Duke offshoring Research Network (ORN) in a recent report have found that more than half of US companies have corporate initiatives to outsource innovation activities and this is up from 22% in 2004. Of the people offshoring R&D activities 60% want to adopt this more aggressively which is a reflection that outsourced R&D from India is becoming an integral strategy for Global corporations.

While earlier cost saving may have been a motivation for Global companies to outsource R&D but increasingly they are getting work done in India to tap the high quality talent pool available and also the ecosystem which supports high quality R&D. There are already areas like semiconductor, Medical electronics, Consumer electronics etc where a lot of leading edge work is being done in India.

Another factor, which is driving R&D to developing countries like India, is the shift in market. For many Global corporations revenues outside US is becoming a bigger piece of their business and with customer centricity becoming a key factor for success forward thinking organisation are moving research and development closer to the customers to serve them better. These changes in the business environment present huge opportunities for the Indian IT Industry. R&D offshore market in India is expected to grow at a CAGR of 23% from FY09-12, from USD 9.4Billion in 2008 to USD17.5Billion in 2012,according to industry experts Zinnov Consulting.

The growing acceptance of offshore R&D services is also resulting in innovative business models between product companies and service vendors. Service vendors are also moving up the value chain by building their own IP and licensing it to product companies to help them get their products into the market faster, cheaper and better. At MindTree we have made significant investments into short range wireless technologies and we are amongst the top 2 players in Bluetooth technology based licensing.

The future opportunities in R&D are numerous. Customers based on confidence they have with vendors will be willing to co-innovate in building new products and technologies. This gives service providers truly the position of being a partner and trusted advisor.

Apart from some of emerging services lines like R&D outsourcing which I talked about earlier there are a whole lot of new opportunities in the horizon. India has taken a lead in IT enabled services but clearly customers want to get into newer services like analytics, Knowledge services etc. Apart from these there are new segments which are now becoming more open to outsourcing. These are segments like Public Sector, Govt, Defence, and Energy & Utilities. New Geographies like the BRIC countries also present a huge opportunity. With the dynamic changes in business the small and medium enterprises which till now has not looked at outsourcing has started to look at this as an option. Newer technology paradigms like SaaS/Cloud computing are making access of IT at affordable cost to SME’s a reality. The market opportunity for services to Small and Medium enterprises is around USD 250Billion as per the NASSCOM McKinsey report and this is an area which has till now not been tapped and the Indian Industry should evolve appropriate strategies to address this.

We are in an Industry, which is expected to treble in size to USD 1.7 trillion in the next 10 years. The Indian Industry till now has grown with emphasis on entrepreneurship. According to STPI there were 3000 new units registered in the period 2001 to 2006 and the ecosystem to encourage entrepreneurship like Venture capital, Industry association support etc have evolved very well. With this ecosystem in place I see that the energy on entrepreneurship will enlarge and we will continue to have focussed, differentiated companies make a mark at the Global level.

While there is adequate activity on entrepreneurship what needs to be urgently addressed is the mind set of people to take risks and aim to be a global leader. As the Industry evolves to become more completive, Entrepreneurs need to take bets and build their organizations as specialist organizations, which can be globally competitive.

What does the next decade hold for us? I see a number of opportunities where Indian companies can compete and build successful and globally admired companies. Access to Capital market or talent will not impede Indian companies to ambitiously achieve global success. My vision is that in the next decade we would have a ten fold increase in the number of companies which can be successful on a global scale compared to the 4 or 5 companies today. It is an aspirational thought but highly achievable with proper strategy, execution discipline coupled with a passion and commitment to be the best. As this scenario unfolds Brand ‘India” will be shining star in the world of business.

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