Sunday, March 28, 2010

On innovation by Indian IT firms - comment to TechCrunch

There was a TechCrunch post about workforce education where the author claimed that India does it better. I posted a long comment which is posted below. The main point is that India has a lot to learn from America on playing in the right part of the value chain. Training people to be better cogs in a wheel will get India nowhere (fast or slow).

You need to read the original post first.

Here's my comment:


IMO there’s a huge fundamental flaw in your analysis. Firstly, I do agree that companies train less now and expect people to produce immediately. That’s simply reality globally – and the reason Indian companies train a lot up front is often because most new hires are unable to produce much (any?) without such training.

But that’s not the main issue I have with your analysis. You write:

“Additionally, the Indian R&D industry has been moving into the higher realms of innovation. In the aerospace industry, Indian companies are designing the interiors of luxury jets, in-flight entertainment systems, collision-control / navigation-control systems, fuel-inverting controls, and other key components of jetliners for American and European corporations.”

Well the R&D industry may be moving into “higher realms of innovation” but *whose* problems are they solving? Did they think of those problems and say they’re going to find a solution? As you yourself said they’re doing it “for American and European corporations.”

Therein lies the rub. All they’re offering is low cost paid labor. They are not scratching an itch they have. They are not innovating – they are simply delivering value to someone else in raw form so that they can refine it and make the real money.

That is what we in old colonial countries do so well – take our raw material and export it so that someone else can refine it and send it back as value added products for us (and the rest of the world to consume). I don’t need to tell you where the real value lies in that chain.

All you’ve described is that Indian now not only answer phones and transcribe documents (essentially low skill labor) but that they also solve hard analytical problems and do lab research for “American and European corporations”.

That is not innovation – that is just slave labor. Yes that’s right – to me that is simply selling bodies at whatever margin the Indian bosses can make something at.

Of the areas you mentioned, how many Indian brands exist in the world? How many products have Indians thought of and take it all the way to market in the west? Until India starts doing that, there’s nothing for America to learn from India. Right now, there’s TONS for India to learn from America.

India needs to stop selling its people and start finding problems and opportunities and start addressing them and competing globally with innovative products and services. That is the beauty of the US – that there are always new entrepreneurs who pop up with brilliant new ideas who go on to challenge & change the world. With every 100 of those there is one winner. If you don’t have hundreds popping up every year, the winners won’t be there. Of course there are a few exceptions in India but those numbers won’t be enough to really become a global player in the innovation driven IT world. (I know nothing about other industries so I am not going to comment.)

The real problem is that the Indian bosses are happy with their 30% margin. They’re happy because they can make billions more by hiring a few million more Indians to scale up. Ah but have you done a study of per-employee revenue generated by Indian BPO & services companies vs. major IT companies? My understanding is that its in the range of $30k/year. IBM does about $250k/year ($100B by 400k employees), Microsoft about $500k/year ($60b by about 120k employees) and Google about $1m/year ($20B by 20k employees). Do you think that doing R&D for “American & European corporations” will ever get Indian companies to the Google levels? Not a chance.

I’m a Sri Lankan who lived in the US for 16 years and returned home 8 years ago. In WSO2, the company I started with Paul Fremantle, we don’t treat our Sri Lankan team as “cheap labor”. They are part and parcel of the innovation engine we have created. In fact, they *are* the innovation engine we have created. We are now the only truly 100% open source alternative enterprise middleware platform to IBM, Oracle & Tibco. And a lot of the innovation came from young kids in Sri Lanka. We’re about to launch our entire middleware platform as a “Platform as a Service” offering – totally out innovating and going ahead of everyone.

Pretty much the only difference between us and a bunch of Indians in some Indian company is the mindset we bring to the table. We don’t view anything as “someone else will define the problem and we have to solve it”. Rather we look at it as “how do we do MUCH better than IBM/Oracle/Tibco and all the little guys out there”. We encourage and support people in thinking disruptively. We teach each other. We listen to the world. We reward risk taking. We give the freedom to work and think in a way that enables innovation.

With all due respect Vivek, you and other business school types are doing Indians a huge disservice when you tell them “bat on” with what’s going on. If India wakes up and starts challenging the world with innovation that originates from India then there will be something to talk about. Telling the world that India has cheap labor from low skills to PhDs is something I’d personally be ashamed to talk about rather than be proud of.

Sanjiva Weerawarana, Ph.D.
Founder, Chairman & CEO; WSO2, Inc.
Founder, Director & Chief Scientist; Lanka Software Foundation
Member; Apache Software Foundation
Director; Sahana Software Foundation
Visiting Lecturer; University of Moratuwa