siliconindia

The time is ripe for Indian product firms

Author: Syed Ali
President & CEO, Cavium Networks.
The time is ripe for Indian product firms -By-Syed Ali
While the transformation of India’s economy over the last few years—fueled mainly by the burgeoning IT sector—has been heartening, our policy makers and companies have continued to focus on services rather than products. A slew of tax holidays and other sops have been extended to existing services firms and new players seeking to set up office in India, but there remains a clear lack of similar attention to the products arena. The services sector, which is showing healthy growth today, will face more challenges in the long term as Indian wages increase and the rupee appreciates in value. To continue India’s growth in the technology sector it is critical that corporate India starts taking the next obvious step: build end-products.

And the products argument is not just something that applies to the IT space; it is all-encompassing. There isn’t a single Indian brand today that has achieved global recognition. One can talk here of the rising M&As by Indian companies in the last one year—but even none of those have enabled the players to become household brand-names, like say Nokia, Samsung, or LG.

The fact is, the product space has the potential to generate far greater employment than services. While the latter has provided jobs for many, the opportunities have been limited to the technically-trained elite, a miniscule portion of the county’s population. Products and their design, development and manufacturing—whichever vertical or industry they are in—can create jobs on a mass scale. It has the potential to have a larger, and broader, impact on the economy and living standards of the people, reaching out to a much wider swath of Indians than the slice whose fortunes have been changed, arguably, by the IT boom.

There have been some efforts on the government’s part recently, in terms of setting up SEZs catering to manufacturing, but that in itself is not enough. The focus has to be on building Indian products, and not just manufacturing foreign-branded ones—the latter is not very different in its impact and role in the economy from providing services.

It is common knowledge in the industry that service businesses run at a 20-30 percent margin, while building and shipping products can offer margins of up to 60-70 percent. Also, a product company can succeed with a small team and setup—as you can see from the case of many Taiwanese firms that provide basic consumer electronic products to global markets.

Thanks to the boom in Outsourced Product Development (OPD), India stands well-prepared in the race to build products of our own. Engineers in India now have the necessary know-how, for example, for developing products, and need only step in and respond to market requirements on their own, and avail of market opportunities for themselves, rather than designing to someone else’s specifications, and benefiting their clients rather than themselves. As an industry, a culture needs to be developed that nurtures the development of innovative products. And this needs to be done at all levels: from college curricula, training courses, innovative workshops, internships, and the like, through to incentives like subsidies and preferential access to capital given to companies that develop products for the global market.

There are also things that must be done to leverage the assets that have been developed as the recipients of outsourcing business. Given the experience and expertise our services firms now have in developing intellectual property (IP), we need to try to retain as many rights as we can, to the IP that we develop, and then capitalize on it, either in the form of licensing and royalties, or in the form of building products ourselves. Similarly, the issue of product businesses eating into the services pie can be looked at as an opportunity, starting companies in areas where major clients do not have a presence.

My main point here is that, with the Indian economy in the position it is today, the time is right to take charge and define every aspect of a product. India no longer needs to be subservient to the demands of other global players. It’s time Indian product companies stepped up and became global players themselves.
Previous  article
Next article
 
Write your comment now

Email    Password: 
Don't have SiliconIndia account? Sign up    Forgot your password? Reset
  Cancel
Reader's comments(5)
1: From: Mrs. Mary David

This mail may be a surprise to you because you did not give me the permission to do so and neither do you know me but before I tell you about myself I want you to please forgive me for sending this mail without your permission. I am writing this letter in confidence believing that if it is the will of God for you to help me and my family, God almighty will bless and reward you abundantly. I need an honest and trust worthy person like you to entrust this huge transfer project unto.

My name is Mrs. Mary David, The Branch Manager of a Financial Institution. I am a Ghanaian married with 3 kids. I am writing to solicit your assistance in the transfer of US$7,500,000.00 Dollars. This fund is the excess of what my branch in which I am the manager made as profit last year (i.e. 2010 financial year). I have already submitted an annual report for that year to my head office in Accra-Ghana as I have watched with keen interest as they will never know of this excess. I have since, placed this amount of US$7,500,000.00 Dollars on an Escrow Coded account without a beneficiary (Anonymous) to avoid trace.

As an officer of the bank, I cannot be directly connected to this money thus I am impelled to request for your assistance to receive this money into your bank account on my behalf. I agree that 40% of this money will be for you as a foreign partner, in respect to the provision of a foreign account, and 60% would be for me. I do need to stress that there are practically no risk involved in this. It's going to be a bank-to-bank transfer. All I need from you is to stand as the original depositor of this fund so that the fund can be transferred to your account.

If you accept this offer, I will appreciate your timely response to me. This is why and only reason why I contacted you, I am willing to go into partnership investment with you owing to your wealth of experience, So please if you are interested to assist on this venture kindly contact me back for a brief discussion on how to proceed.

All correspondence must be via my private E-mail (dmary4love1@yahoo.fr) for obvious security reasons.

Best regards,
Mrs. Mary David.
Posted by: mary lovely david - Monday 26th, September 2011
2: tataosah@yahoo.com
Hello.
My Name is Tata I was impressed when i saw your profile at ww.siliconindia.com and will like you to email me back to my inbox so that i can send you my picture for you to know who i am.i belive we can establishe a long lasting relation ship with you.In addition,i will like you to reply me through my private e mail box (tataosah@yahoo.com).
This is because i dont know the possibilities of
remainning in forum for a long time.
Thanks,waiting to hear from you soonest.
Tata.
Posted by: tata tatababy os - Friday 30th, October 2009
3: Good thinking... No its on paper.. How do we accomplish it. Several ideas scattered all over. We should make effort to put all of them together and work towards to achieve it.
Posted by: Jose Jacob - Tuesday 29th, September 2009
4: Mr Syed
In addition of your valuable suggestions, I think pattern of education should also be Retooled from school level to Uni. Objective should be to develop the skill of Creativity and leadership qualities from the beginning, We must develop more potential Engineers on our land. Moiez
Posted by: Moiez Khan - Monday 15th, June 2009
5: Hi Syed!

Very Nice Article. It is unfortunate that most of the brands known as World Brands are made by some of the Indian Skilled Product. But branding going to?????
Posted by: roja reddy - Monday 01st, December 2008
More articles
The retail industry is witnessing an increased migration of customers ... -By-Kaushal Mehta
by Kaushal Mehta - Founder & CEO, Motif Inc..
The retail industry is witnessing an increased migration of customers from traditional brick and mortar retail to E-commerce (online retail)...more>>
Its 1 AM. Do You Know What Your Offshore Team Is Doing? -By-Samir Shah
by Samir Shah - CEO, Zephyr .
You probably do because you are on the phone with them! For all of you working in some technical management capacity here in Silicon Valley,...more>>
Disconnect: The Root Of All Execution Evils -By-Raj Karamchedu
by Raj Karamchedu - Chief Operating Officer, Legend Silicon .
These days are a mixed bag for me. Of late I have been considering "doing something bigger and better," in my life, perhaps seriously though...more>>
IT Services Rise Of Tier II Companies -By-Madhavi Vuppalapati
by Madhavi Vuppalapati - CEO of Prithvi Information Solutions .
IT Services Rise of Tier II companies The Indian IT outsourcing industry is going through very exciting phase in its business life...more>>
DLP, Prevention Is Better Than A Cure -By-Bhaskar Bakthavatsalu
by Bhaskar Bakthavatsalu- Country Manager, India and SAARC of Check Point Software Technologies.
Data loss occurs every day through corporate email. In fact, given the sheer number of emails an organization sends every day, data loss inc...more>>