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:

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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

14 comments:

Soma said...

It is fair to say large number of Indian companies are happy with their 30% revenue. But there are few small companies do invest in innovations and come up with new products for the Indian consumer market. The US companies in India like Google, Microsoft, Yahoo, EMC, Sybase invest lot in research and innovation.

However, as you mentioned the giants like Infosys, Wipro are happy with service or "body shop" business. It is shame, but it is the reality. It could be the managers in those companies don't have visions or may have "don't rock the boat" mentality or it could be the pressure from the investors. No matter what these companies should invest at least 20% of their profit in new technologies and open source projects.

Your story is very inspiring to me. I am from Tamil Nadu and I can understand the struggles your country had gone through. But you still were able to pull through large project like Axis2.

Hi10 said...

Well, there is a difference between patriotism and defining innovation.You returned back to your home country after serving many years in US - good for you. In your view, it looks like innovation happens only in IT :). That's a perfect example of closed-mindedness. There are thousands of people like you and in fact much more better than you in India. Your company cannot be on the comparison board of what Reliance, Tatas, Infosys, etc strive for innovation and growth and their contribution to their home country. Other important point, do not always embrace the nagging habit of always relying and learning from WEST. Let Western countries learn from others too. Have you ever seen how much Indian companies not just IT invest in R&D's and innovation. Are you aware of Indians driving the innovation at companies like NASA and same at ISRO. Only difference - they are working for different countries for different reasons. Innovation still continues regardless. On the other point, I know that some companies do not treat their people well as you take up the point with Indian managers - well this happens everywhere might as well in Sri Lanka. If not on your company then again good for you and same for every company, you cant make a general statement. Posting views like you did only makes you look closed minded and creating mockery of yourself.

Raphael Alwin Kalathil said...
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Raphael Alwin Kalathil said...
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Wathsala Vithanage said...

@Raphael Alwin Kalathil, yeah give us 10 years not only WSO2 there will be many more Sri Lankan ventures kicking your Indian butt.

Wathsala Vithanage said...

@Raphael Alwin Kalathil you want to know where Sri Lanka stands? Find it here compared to MOTHER India and rest of the South Asia -> http://www.newsweek.com/2010/08/15/interactive-infographic-of-the-worlds-best-countries.html

Manoj Mallawaarachchie said...

WSO2 done big change in mind set of Sri Lankan IT community, it's only place create world class products and show Sri Lankan talents to world. Thanks Sanjiva for initiation.

Satish said...

I never thought a person of such calibre would brag about himself while do not give even credit to other successful people. Obviously you need to learn people skills in building a brand image for your company. You should be ashamed that you got a venture capital investment from India and then write blogs against them. There are lot of product development companies in India that solves the various business needs of companies. Infosys, for example, has built a banking software product that is widely used by many banks across different countries. I am sure there are many more companies that are creating innovative products that are not visible to you.

You say that you studied in the west but obviously you did not learn their culture i.e to appreciate others.

sanjiva said...

Satish FYI WSO2's VC funds were raised in the US and not in India. I have in fact tried to raise out of India but there has been little understanding of product businesses and especially open source businesses by the Indian investment community from my (admittedly little) exposure to them.

Of course Infosys and others have made successful products. However name me one globally known Indian software (not services) brand and I'll accept your point better.

Raphael Alwin Kalathil said...
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Raphael Alwin Kalathil said...
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Sid said...

I am an Indian (IIT graduate) living in Australia and working as an IT Architect.
There is no doubt that several Indians have done extremely well overseas in various disciplines (Technology, Management, Healthcare, Pharma, Government, etc.). We also have software vendor (not services) powerhouses such as Infosys (Finacle), iFlex (Flexcube), plus several others in pharma (Dr. Reddy's), etc.

However, the underlying message Sanjiva is trying to convey is accurate and relevant in the Indian context.

The innate mindset of the average Indian is inclined towards "following" the most treaded path towards financial happiness. We do not "believe" in anything really. The society (largely fascinated by the West and its wonderful way of life) makes up the majority of our belief system. We do not encourage ourselves and others to be ambitious and break the norm, the routine.

The day we start "believing" in ourselves and other fellow countrymen (like Sanjiva did), we will discover a great hidden potential in the billions amongst us.
We have several hundred Sanjiva's in India, but we need thousands more.

b-paras said...

I think it is partly due to a general apathy to risk taking by Indians (esp the middle class). There may be valid reasons for that, but its definitely required for innovation.
Indian Government barely invests in R&D, nor does the education system here encourage thinking differently.
The other aspect is team work and ability to apply management principles in general. Innovation without the ability to execute to perfection is no good. While you will find so many talented Indians everywhere, but put a few Indians together and you will have them eat up their productivity. Don't recall who, but somebody once said : 1 Indian = 10 Americans but 10 Indians = 1 American.

a ji o ji suno ji said...

This one gave me the heebie jeebies. Brought back some bad memories of a bout with giardia when I was a teenager. Got that after I thought I had treated the water.
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