The Indian IT industry has come a long way from its beginnings in early ‘90s with a mere $150 million to $40 billion in 2006-07, with projected revenues for this year expected to be around $49-50 billion. The Indian IT companies that started with limited software services such as the banking and engineering software have today spread to include high-end product design work developing the next generation products. As global OEM firms look at reducing costs and product development cycles, India is fast emerging as the new-age design hub. Today, the concept of the product is developed in the US, designed in India, manufactured in China and sold in markets across the globe.
As far as offshore product development is concerned, the country has emerged from being labor intensive where the only advantage was lower development cost. We are now facing a paradigm shift to skill intensive outsourcing where the advantage lies in the unavailability of technically skilled engineering.
According to NASSCOM, the Indian IT-ITES industry grew at 30.7% last year to reach revenue of $40 billion. The Indian IT industry continues to be amongst the largest employers, directly employing more than 1.6 million people. It is expected that this industry will create approximately 12 to 15 million more jobs by 2010. The fast emergence of India as a research and development hub has also seen some of the largest IT companies in the world looking towards India. With the outsourced R&D services set to grow from $1.3 billion in 2003 to an expected $11 billion in 2008 from over 150 established R&D outsourcing centers, product development is becoming synonymous with India.
Challenges
Product companies face a lot of challenges in catering to ever-increasing consumer needs. They must focus on providing greater value to customers by continuously offering new products and combining the best emerging technologies in order to enhance customer loyalty and market presence. Due to increased competition in the global arena, companies need to have a very short time-to-market approach, and come out with new and improved products continuously while maintaining the low cost structure.
These market pressures have forced firms to move away from the “not invented here” (NIH) syndrome to adopt the “open innovation model” by working with partners during the R&D and engineering phase of the product. Companies now believe in investing their time in concept development of a product, sales and marketing strategies, and relying on partners for engineering, R&D, and experience.
Indian firms such as Wipro have carved a section in this innovation model by taking complete ownership of the engineering effort. The ODE (original design engineering) model helps product development firms across the globe by taking over the engineering efforts and working with leading manufacturers to provide winning products. Additionally, the ODE partner can add value to the product development cycle by complimenting product design efforts with end-to-end solutions. With a global reach, broad domain expertise and deep technical strengths, R&D partners can deliver fully optimized, integrated and transparent solutions.
Indian firms have the capability to provide derivative designs to product companies, which gives these companies a chance to concentrate on their new product lines. For xample, Wipro worked with a leading peripheral manufacturer in Japan to come up with a low cost derivative product. Wipro was involved in developing the embedded controller and its applications. The new embedded controller was a derivative design based on the previous product, whereas the hardware was new for the most part. Features such as a new USB based communication protocol, change in storage from HDD to Flash, and an interface layer for the new hardware were added while some of the existing resource intensive functionalities were removed. By outsourcing this development, the manufacturer was able to use its engineering force to concentrate on developing a next generation product platform and get a new product out to the market.
Advantage India
India has a huge talent pool of engineers and technical graduates with almost 500,000 technical graduates being added every year. There are more than 2,000 colleges and 113 universities in India with engineering colleges growing at the rate of 20% per year, and MBA colleges at the rate of 60%.
Ranking high in areas such as qualifications, capabilities, quality of work, linguistic capabilities and work ethics, India has the world's second largest pool of English speaking scientific and engineering talent, lower costs of living and strong government backing for its IT sector infrastructure.
The major advantages that India enjoys over other countries are its technological agility, quality, flexibility, cost control, time-to-market and competitive advantage. Firms are investing more to understand local languages and culture of target markets, thus reducing cultural barriers and making product development truly global.
Unprecedented domain familiarity in every industrial vertical through in-house centers of excellence has also helped the Indian firms bring more value to their outsourcing partners. Special focus groups have helped bring a wealth of product development experience. The ability to partner with customers at any or every stage of the product development life cycle, and to take complete program ownership of customer's products drastically reduces the total cost of ownership.
For example, Wipro Technologies provides end-to-end (concept to cradle) solutions to its customers right from the hardware designing stage, to hardware and software support, to maintenance and testing services. In this way, the customer ultimately gets the complete product ready, which eventually helps it in its sales and marketing efforts.
You can reach H. R. Venkatesh at venkatesh.hulikal@wipro.com.
