Time to cast the net far and wide

The government’s Digital India plan is a good thing but its success depends on an enabling ecosystem

As a leader in the global IT-BPM arena, India is the only country in the world that offers a wide spectrum of outsourcing services. The industry is on track to achieve revenue of $118 billion in 2014, up from a mere $8 billion at the turn of the century. Exports are expected to touch $86 billion this year, signifying the role of the technology sector in the nation’s economy. Trends such as social networking, cloud computing, analytics and mobility are converging and growth in global technology spend is expected to be driven by these areas in the coming years. Global businesses still outsource to India to fill this skill gap.

Today, many countries including India, Japan and China are creating emerging technologies. Mobile commerce and digital currencies have seen significant traction in Asia, as developing economies surpass a generation of legacy systems. Amongst emerging economies, India holds a promising future in leveraging and creating disruptive technologies. According to KPMG’s global technology innovation survey in 2014, Mumbai, New Delhi, Bengaluru and Hyderabad will become leading technology innovation hubs over the next four years.

Indian outlook

Much of India’s initial growth in the IT and BPM services sector came from labour arbitrage, soon replaced by innovative delivery models. The later years saw the Indian BPM industry evolve. What initially started with a simple lift and shift delivery model turned into a process of re-engineering-led service delivery. This led to significant savings for the clients and helped unlock value through this service delivery model. A number of companies took this forward and began offering platform-based process outsourcing, eliminating the need for companies to invest in expensive transaction processing systems. Automating repetitive and non-judgmental processes in the BPM industry using process robots has taken innovation and value-creation to yet another level. These robots are programmed to execute pre-defined instructions based on pre-defined criteria, resulting in low cost and high accuracy. This is an example of an industry reinventing itself and driving growth through innovation.

Government incentives

Several Indian technology companies have access to leading technology infrastructure; what they likely need from the government is policy incentives and an improved education system. These companies believe in the disruptive power of cloud computing and mobility and seek to innovate and open avenues of growth. Many Indian companies, especially leading service providers, have announced plans to invest in innovation to build capabilities around new disruptive technologies.

In 2014, India witnessed a change of government at the centre. The new government has announced several initiatives to promote growth in the technology sector:

Digital India: The project aims to create a digital hub for services that would use new-age technology to provide a digital locker to all citizens, so that all government-to-citizen services could be delivered digitally in the next three to four years. The government is optimistic about transforming the country into a connected economy and attracting global investment in sectors such as electronics, technology, retail and manufacturing, thus creating millions of jobs and supporting trade. Digital infrastructure is expected to provide immense opportunities for innovation and disruptive technologies across verticals, especially around internet of things’ (IoT). Having technology infrastructure in place is a must to realise the true potential of IoT and significant investment can be expected post the digital infrastructure rollout.

Technology innovation fund: This is a $2 billion fund that aims to attract private capital through options such as equity, soft loans and other risk capital for start-ups. Given the large number of engineers in India, the country can create the next Silicon Valley here. These type of funds can help Indian start-ups develop IP and aid development efforts. According to national association of software and services (Nasscom), India is one of the fastest-growing countries with the third-largest ecosystem. The need of the hour is to emphasise on creating funding options and on developing incubators in the country. A strong growth potential exists for companies to lead innovation in disruptive technologies such as 3D printing and wearable technology and these incubators play a big role in recognising this potential.

Also, Nasscom has launched an initiative called 10,000 Start-ups, through which it aims to incubate, fund and support 10,000 technology start-ups in India over the next ten years. The program will include early stage funding between ₹5 lakh-2 crore, three to four months of incubation and working space and access to potential investors and mentors. A district-level incubation and accelerator programme is also being created.

Smart cities: The government’s plan to develop 100 smart cities will not only push the frontier of urbanisation but also create an ecosystem of innovation across the technology industry. This move is aided by rising incomes and rapid urbanisation, thus driving demand. It has attracted government organisations from various nations offering to work with the Indian government in developing smart cities. This initiative is expected to bring together new-age technologies to create convenience, security and efficiency in daily life and fuel the growth of technologies like IoT and develop new solutions.

A platform to create

Large Indian IT-BPM companies are being led towards innovation due to declining margins in their traditional application development business. They are investing in platform-based solutions that can be modified as per client needs and provide non-linear growth opportunities. Also, several of these companies are big global players, with annual revenues of $10 billion. To continue growing at more than 20%, they will have to keep innovating. For a mid-sized IT company, innovation is the imperative for survival. Shadowed by larger players, they will have to identify their niche in the global technology market to make a difference with innovation as the differentiator. Additionally, a rising middle class is leading to a burst in innovative e-commerce and mobility companies. Through innovation, companies are emerging as market leaders, trouncing global rivals domestically.

However, there are several barriers to innovation in India. While the US boasts of Silicon Valley and incubators, India has not been able to replicate such an ecosystem. The digital India plan, a key enabler, would need an ecosystem to be able to work in complete harmony and overcome challenges. Many investors and innovators are also wary of India’s IP protection laws. Also, the path to commercialising innovation is often blocked by numerous legal and bureaucratic barriers.