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March - 2008 - issue > In My Opinion
Evolving Domestic Market Growth Driver For Indian Electronics Industry
Azim H. Premji
Monday, April 1, 2019
A graduate in Electrical Engineering from Stanford University, Azim Premji turned what was then a $2 million cooking fat company to an $8 billion Revenue IT, BPO and R&D Services organization. He took over the company as its chairman almost half a century ago and made the company one of the India's largest publicly traded companies. In 1979, Indian government expelled IBM from the country, and Premji tapped Wipro into the emerging computer hardware and software market and began moving Wipro into the computer business. Azim Premji's Wipro has a revenue of 840 crores USD now and with 160,000+ workforce serving clients in 175+ cities across six continents. He believes that ordinary people are capable of extraordinary things when organized into highly charged teams. Currently, Azim Premji is the Chairman at Wipro Technologies, Founder at Azim Premji Foundation, and Owner at PremjiInvest.

Electronic product evolution in India:
In the 70s and early 80s, the public sector companies such as Bharat Electronics and later private firms like Wipro, HCL and a few more filled in the gap for electronic products when the economy was controlled. Though the end consumer had limited choice, quality expectations were never lowered. Developing computing and telecom products for the local market, Indian firms learnt the nuances of product development and continued to innovate the overall product development cycle. During this time, a small workforce put together robust foundations for what was to come.

These foundations proved to be of tremendous assistance when the economy opened up in the 90s. By this time, the Indian engineer had acquired skills to develop products around the latest architectures and with a high degree of quality.

Since then, the Product Engineering industry has never looked back. Growing at an incredible pace and expanding the expertise areas beyond the telecom and computing domains to automotive, medical devices, industrial electronics, consumer electronics and of course, mobile devices. What's more these firms in India have learnt to leverage the best practices from across the domains they operate in. Example: the learning from a high-reliability product in automotive are deployed in security applications to ensure a fail-safe environment.

Over the years, as India developed as an IT hub, the product design centers have been a crucial component of the industry. Both in terms of outsourced third party design centers and India development centers of MNCs. The Indian Development Centers of multinational firms and India based service providers have been stepping up their efforts in the recent years. We have seen the overall embedded exports growing at close to 40 percent CAGR for the past 6 years. Working across multiple domains, India's name has now become synonymous with offshore product development.

Three key aspects of eco-system in India required for future growth
The success of the product-engineering firms is clearly visible when we see the contribution they provide to global product engineering. India already has about 100,000 engineers contributing to the global electronic engineering team of about 1 million. We are already contributing 10 percent of the global electronic engineering value from our country. While engineering value is 10 percent, domestic electronic product consumption is about 2.5 percent (assuming $25 billion in a trillion dollar industry). As we continue to focus on increasing design value to about 25 percent, the question is how can we get the domestic consumption to more than 10 percent of global spends in the next decade.

With India supplying innovative products to firms and geographies across the globe, the Indian subcontinent seems to have largely not been impacted by the product innovation cycle. Considering the highly optimized processes and having understood product architecture requirements, the Indian engineer is more than capable of delivering what's required for the local markets here. In recent years, the pace at which semiconductor and systems companies have established their own design centers in India has accelerated. The design services industry will continue to play a role in India's emerging semiconductor ecosystem and contributing to the growth for India's electronics industry.
So what can be done by firms with successful products worldwide to extend their success to the Indian markets?

What can be done to succeed in the Indian Market?
I would like to describe three key aspects that firms need to address to be able to bridge the gaps between consumer needs and products being sold to them.

First, one of the main aspects to increase consumption is increased localization of products. For designing products for India, the level of involvement of firms needs to be more. The designers have a tough ask of meeting the targeted costs while ensuring the seamless integration of applications and having the right user interface, preferably localized. I understand the Indian mobile phone market is poised to touch 450 million in the next 10 years. This is incredible and primarily due to the fact that the cell phone vendors and service providers have studied the local market well. There are phones at price points and with features that cater to almost all individual requirements. From high-end, PDAs to simple phones for the technophobe. They have even introduced products and services in regional languages.

Second characteristic is the need for supported adoption that is required by the users here. We have seen the PC industry post excellent growth numbers this year. The first half of the year (according to MAIT Manufacturers Association for Information Technology) registered a growth of 11 percent. The annual sales are expected to be more than 7 million units. As we see this momentum in the Personal computing industry, I would like to reflect on what made this all possible. It was the small training center in small neighborhoods across the cities, whether big or small, that introduced the PC to the common man. This small yet significant impetus taken by firms and their franchises helped the SMEs and households see the benefits.

For years, the PC industry has worked hard to educate and enable schools, colleges, and government offices. Even though this effort is still needed, the results are starting to show.

Supported adoption goes beyond end consumers. Unlike users of mature markets, many Indian businesses need support in selecting the right products and solutions for their problems too. Many of the small office workspaces are not wired for IT. It takes time and money to install UPSs, wiring for UPS power and for network cabling. Wipro Infotech has helped many such customers save effort and costs on network and power infrastructure by using WiFi enabling the networks and using low cost laptops instead of workstations.

The question we need to ask is what is the investment we can make to enable the market? It would be naive to expect a new technology to sell by itself.

Third opportunity I see is the need for evolved business models. We are also seeing a managed services model emerging here, where the design services partner goes beyond just co-engineering the product The partner is also responsible for overlooking the manufacture of the product. Thus, his success is dependant on the products success. The value that the partner brings to the table is his knowledge of the local, market, his presence in the ecosystem and his experience in global product

Innovation as the underlying theme:
We need to realize approaches outlined above were not brought about instantly by industries that have been successful. Most of these practices were realized by firms with deep understanding of the end consumer with feet on the ground. Practices that worked in other markets did not always yield the same results here. They listened to their consumers moreover they observed their functions and then moved the ideas back to the drawing board. In other words, they went beyond the usual to bring in innovation to their daily business practices.

We know that innovation is not always big, transformational or revolutionary. It's the incremental changes made to better a product or process or business that finally adds up to success. Innovation is a key pillar for any organisation's success. Innovation is applied creativity. In today's context, it's not unanticipated that innovation plays an extremely important role. However, we need to understand the following basic essential guidelines.

First, we must ensure that technological and managerial innovation go hand in hand. When technology innovations outstrip management innovations, the benefits fall through the crack. It is like a car with a powerful engine but a wobbly chassis. It cannot get far. It is therefore important for companies to have the managerial depth and sound understanding of customer's product requirements.

Second, work on creating an entrepreneurial spirit within the organization (within business units and project teams) that allows natural innovators the space to grow. Organizations need to build a culture that rewards risk, encourages entrepreneurship, celebrates success and upholds the rule of law more than any other. Only this will enable the teams to come forward and innovate

Third, collaborate and co-innovate in the evolving ecosystem. Just like the day of the isolated innovator in a forgotten laboratory is over. The ecosystem is absolutely necessary to take a brilliant idea off the ground. Remember, businesses are good at getting better but poor at getting different. It is very difficult for successful organizations to develop disruptive innovations that would threaten the basis of their success.

The market for electronic products in India is huge in almost all domains that the firms here are specializing in. In this context it's important to show the world that we have the infrastructure and the capability for sustaining the complete electronic product lifecycle i.e. from design, develop, test and manufacture.

It is time that the firms today take up the mantle, collaborate within this ecosystem and apply innovation to design products for the Indian subcontinent.

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