The Indian IT industry has been one of the finest examples of global entrepreneurship development in the last 50 years and more. Sadly, the success story has been largely in the area of IT and business process management (BPM) services with product companies still remaining few and far between, and the unicorns in the digital and e-commerce only recently beginning to rear their heads. Let us understand what has driven success in one area and struggles in the other, and what are the policy and other initiatives needed to set the entrepreneurial wheels in motion in the new land of opportunity.
The Indian IT services sector had humble beginnings in the 1980s and 1990s, and it took a great legitimizing event like the Y2K date-change problem to create the vast offshore, outsourcing opportunity that saw a 100-billion-dollar industry emerge by 2010, now expected to hit US$160 billion this year and grow to over US$250 billion by 2020. Entrepreneurs like Narayana Murthy of Infosys, Azim Premji of Wipro and Shiv Nadar of HCL and intrapreneurs like F C Kohli and S Ramadorai in TCS and to a smaller extent, Pramod Bhasin of Genpact and the author of this article through APTECH and Zensar managed to create and build global leaders in IT services while a follow-on success story emerged in BPM through the success stories of firms like WNS and eXL.
However, in the area of digital and e-commerce, while the opportunities seem enormous, Chinese entrepreneurs like the creators of Alibaba and Baidu – and in the larger electronics space, Lenovo and Xiaomi – have overtaken their Indian competitors and built much larger and much more scaled companies. There are a number of reasons for this, one of which could well be that the easy success in services did not create a burning need for product firms to succeed though a few like iFlex did get a modicum of global recognition. Moreover, the sluggish norms for starting and closing down companies in India and the uncertain tax environment have seen many software start-ups prefer to list in Singapore rather than India. However some green shoots have been seen with the huge valuations of firms like Snapdeal and Flipkart in recent times, and an environment is slowly but surely being created for large product, digital and commerce firms to emerge in India and conquer the world.
Digital India is a powerful concept and opportunity in this area. The launch of this mission by the Prime Minister and the subsequent announcements can spawn a number of large investments and firms to capitalize on this space. Three key initiatives need to be understood here.
First is the country-wide coverage of the National Optical Fiber Network, which will be the core infrastructure needed to ensure access to all citizens in the country and named Bharatnet. A new commitment is apparent to make this happen and ensure broadband availability in every village and to every citizen of the country. Second is a national movement to digitize every document that contains information needed by citizens to truly enjoy the benefits of a fully digital economy. The innovative approach of crowdsourcing this massive digitization effort using software that enables this work to be done securely by citizens all over the country is a major breakthrough by the Department of Electronics & Information Technology (DeitY) and will create significant employment opportunities all over the country.
The third initiative is what will really make the Digital India program come to life. Multiple applications that connect citizens to citizens, citizens to public services and businesses, and educational institutions to each other and their customers, will have to be developed and deployed – an imperative with huge opportunities for the government to collaborate with the vast network of product creators and small domestic firms in the IT sector as well as the traditional large systems integrators.
One of the most encouraging announcements in this category has been the establishment of Centre of Excellence for Internet of Things (IoT) on a Private-Public Partnership (PPP) model between the government and industry members with DeitY providing up to 50 percent of the project costs for the first five years. IoT is the single largest innovation of the Industrial internet and will connect up all data in a seamless manner to create a new generation of connected manufacturing and related activities. This partnership has the potential to create a new revolution in and for India, and Education and Research Network (ERNET) has also been roped in to provide the academic connection for the program.
For the IoT initiative to be truly successful, each center, particularly those in manufacturing and IT destinations like Chennai and Pune will need to have a healthy mix of manufacturing firms and IT majors. The manufacturing firms will provide a laboratory through their shop floors and supply chain operations to validate the effectiveness of sensors and beacons and the big data integration to their Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) systems. The expertise that IT firms bring to the table, particularly those with global competence in building and supporting Business to Consumer (B2C) and Business to Business (B2B) e-commerce platforms, can be used to strengthen the value proposition of the industrial internet and build use cases that can be transported to other locations in the country and eventually to the world.
On the corporate front, all companies in the manufacturing as well as services space are embarking on four imperatives:
The conversion of physical product and service outlets to experience centers where the product can be seen in action through breathtaking simulation and audio-visual imagery with the buying experience itself being from the comfort of an armchair at home. Many clothing retailers globally are already thinking of turning their stores into 24X7 fashion shows and creating B2B and B2C e-commerce and m-commerce sites that enable seamless transactions through mobile phones and mobile internet. Every B2C and B2B producer in western India should get back to the drawing board and rethink the organization design for the digital future.
The related area is to cope with seamless anytime anywhere connectivity. Bharatnet and the planned ubiquity of National Optical Fibre Network will be a boon for 250,000 Gram Panchayats (village councils). At the same time, these will also create an environment where a billion consumers will have the power, through their smart phones, to complain frequently and vociferously about the failure of brand promises. The ability to “listen” socially and design responses based on patterns of user feedback will be essential for the marketing and customer relationship management teams of every organisation.
Customer-centric manufacturing with a potential lot size of one and the ability to have flexible and connected shop floors powered by sensors everywhere will lead to the concept of “lights-out” and fully automated factories. The successful manufacturers of the future will integrate shop data bubbling up from production units to information flowing through supply chain, enterprise and customer-focused systems and provide new products and services at a quick pace to increasingly demand and notoriously fickle customers.
Data-driven decision making where the large volumes of data emanating from internal as well as external sources will be quickly captured, sliced and disseminated in decision-oriented formats to actors throughout the firm. Big data and analytics will be the new knowledge management science, and the winners of the future will be those who master the ability to handle bigger and bigger data warehouses and respond faster.
While these are legitimate transformation initiatives for incumbent firms, if there is one announcement that has caused the greatest excitement in recent years, it has been the announcement of the ‘10,000 Startups’ initiative by the National Association of Software & Services Companies (NASSCOM). With thousands of applications received since then and the start-up eco-system in the country flourishing as never before, it can be said that entrepreneurship has really come of age as an occupation that is foremost in the mind of any person, young and old, in the country. The recently minted Ministry of Skills and Entrepreneurship, the announcement of CSR benefits for investments in incubators for start-ups and the burgeoning coffers of angel networks and venture capitalists in the country are other indicators of an entrepreneurial engine that is ready to move to high gear.
Mobility and e-commerce has caught the fancy of many Indian youngsters, and the runaway valuations of Flipkart and Snapdeal have brought the dollar glint to the eyes of millions of young people. The glittering launch of Digital India by the Prime Minister at the beginning of July showed that new opportunities will emerge in this segment every day.
The interesting part of today’s entrepreneurship opportunity is that there are opportunities beyond IT, digital and e-commerce as well. In the US, 10 out of the 20 fastest-growing occupations are related to healthcare, and this industry will generate more than three million jobs by 2018. The aging population there is expected to create opportunities galore for entrepreneurs targeting geriatric healthcare (Protea Healthcare is addressing this opportunity in India), services for retirees in areas ranging from nutritional and psychological counselling to real estate and recreational services planning and wellness and natural health. Alternative energy, genetic research, biotechnology, stem cell research and security services will continue to attract venture capital dollars.
And, what are the new realities of entrepreneurship? The biggest opportunity and also the greatest challenge is the extent to which marketing has moved to “pull” from “push”. The days are over when big bucks spent on front-page ads in frontline dailies or successive 30- and 40-second spots on major TV shows would attract the desired spending. A push of loud advertising can get some brand recognition, but the real pull to purchase will get generated and maintained only through a sustained ability to attract and excite audiences who want to search and come to their own conclusions rather than be bombarded with messages. Irrespective of whether it is a new product idea or a new service being launched, knowledge about new materials and processes, market dynamics and customer preferences and new knowledge which builds refreshed understanding of how to drive and succeed in the business will be essential for the success of the new entrepreneur.
At a policy level, there are high expectations that the “Start-Up India Stand-Up India” announcement will be followed by a slew of initiatives that make it truly attractive for companies to start and scale companies, particularly in the internet and e-commerce space. India needs not a handful but hundreds and eventually thousands of unicorn companies, creating shareholder value, and jobs; and millions of smaller and successful companies to emerge in their wake. India awaits the success of this new wave of entrepreneurship.
The author is chairman of NASSCOM Foundation and the National Committee on Knowledge Management & Business Transformation for Confederation of Indian Industry (CII), and president of Harvard Business School Club of India. He is also vice chairman & CEO of Zensar Technologies Ltd.
Published in the INAUGURAL ISSUE of CHINA-INDIA DIALOGUE