Innovation is the big IT buzzword in India today. Be it through global in-house centers (GICs) or "captive" BPM operations of multi-national corporations, stand-alone entrepreneurs, or the much-advertised 10,000 startups to be nurtured by NASSCOM, the need to generate intellectual property (IP) strikes a common chord.
When you add the government's announcement of a $1 billion India Inclusive Innovation Fund for the micro, small, and medium enterprises (MSME) to the mix you see why the IP bug is spreading across the country. As if to ensure that this bug reaches epidemic proportions, the finance minister, P Chidambaram, has also announced that all donations made to business incubators will be deemed corporate social responsibility (CSR). That's important because a new companies law makes it mandatory for all companies with revenues greater than $200 million or profits of more than $1 million to spend, in each financial year, a sum equivalent to 2 percent of its average net profits during the preceding three years on CSR activities.
There are nearly 800 GICs currently operating in India that employ about 500,000 to 600,000 people. While North American and European companies are the top "parents," 40 percent of the global work in this space is being carried out in India. According to estimates by the National Association of Software and Services Companies (NASSCOM), GICs currently contribute about 22 percent, or about $16 billion, of the $76 billion software exports revenue from the country. The segment was considered miniscule till 2003 but has been growing at a rapid pace and now contributes nearly one per cent of India's incremental GDP. Its impact is now being measured not just in terms of revenues and employment, but for its role in establishing "proof-of-concept" and an intensive engineering, research, and development (ER&D) and software product development (SPD) culture.
Companies using GICs have realized that it is not enough to look at India solely as a location for low-cost production. At the annual GIC Conclave in Bangalore in April, the evolving maturity curve of this community forced the companies to put their heads together on topics such as "why innovation must become hygiene" and the merits of a "socially responsible business." Enhancing overall IT and process capabilities is passé among the firms, and they prefer to pass lower-end services such as application maintenance and testing to vendors while focusing on complex product development.
Ironically, just when the GICs are waking up to a need to stick to strategic and core business areas, the entrepreneurial zeal has struck their workforce. Larger companies are losing top talent to the new startup culture that has also witnessed the formation of a new industry group for software products.
Krishnakumar Natarajan, CEO of Mindtree, is the new chairman of Nasscom and determined build a better business climate for enterpreneurs. In public statements he has said that his goals as Nasscom's chairman include spurring the
executive Council of the industry association to work with members to strengthen their innovation capacity and research capabilities, and to create an entrepreneurial environment. Nasscom, which hosts a GIC Conclave to "globalize, innovate and collaborate" to encourage production of global products from India at the beginning of April, will host a “Startup Roots” event in July to "create and grow" 10,000 technology startups.
Creating startups means creating funding opportunities. Recently, entrepreneurs got an opportunity to make 5-minute presentations to angel investors for "on-the-spot" early-stage funding. With 2,000 applications, engagement with 25,000 entrepreneurs, and 15 events across the country already done, the industry association is neck-deep in setting up an innovation ecosystem.
At the same time, Natarajan is a known MSME advocate. In a statement when taking over Nasscom's reins, he said:
I feel privileged and look forward to lead Nasscom in its next journey of taking the industry to achieve the vision and aspiration of $300 billion n revenues by 2020. Having chaired the emerging and SME initiative of Nasscom in the past few years, I firmly believe that emerging companies and start-ups are key growth engines for the future of this industry. With our collective vision, we aim to help this budding segment, along with the rest of the industry to make it a trustworthy, respected, innovative, and society-friendly industry in the world.
Will it work? Will captives, startups, and the small and midsized businesses in the Indian IT sector co-exist in a spirit of innovation and collaboration? Will innovation move out of slogans and billion-dollar fund programs to become a reality? More importantly, will innovation also move into the socially responsible sectors of health, educatione and environment? India's government and trade associations are making heavy bets that it will. What do you think?