India Eyes Innovation

By Stan Gibson  |  Posted 2006-02-26 Print this article Print

India Eyes Innovation

Talk to any offshore outsourcing company and the importance of cost savings increasingly gets pushed to the background.
"The cost advantage got our foot in the door. Then we added quality. Now we need innovation," said S. Ramadorai, chairman of Nasscom and CEO and managing director of Mumbai-based Tata Consultancy Services.

Ramalinga Raju, chairman of Satyam Computer Services in Hyderabad, India, said, "The last 15 years is the end of the beginning."

The need to innovate has led Indias top services companies to select key technologies for R&D and to dedicate more of their profits to R&D than ever before. For instance, Infosys has several major initiatives under way in grid technology. In addition, the company has developed significant practices in .Net technologies, VOIP (voice over IP) and RFID (radio-frequency identification) technologies. Efforts like these, most company officials said, will lead to more patent applications, where there is plenty of room for improvement. (Wipro, for example, has only 28 patents to its name.)

However, retaining more IP in India will alter current relationships with customers. In the past, Indian companies would often do work under contract to customers who would retain IP rights on the work. That should change, according to one major customer of Indian companies.

Habib told a Nasscom audience that Indian companies should develop and market products and services that contain home-grown IP. "Find IP you are creating. Use domain knowledge to bring products to market," said Habib.

He said Citigroup would have no objection in principle to Indian companies selling products based on technology developed originally for Citigroup. "We need your products," said Habib. Since 1997, Citigroup has done about $1 billion in business with Indian outsourcers. "Nobody would challenge that I am a believer in this community," said Habib.

Michael Cusumano, MIT professor and author of the book, "The Business of Software," said the most successful software companies have a hybrid business model that consists of both software products and services. He said Indian companies should expand beyond their services-only approach and incorporate products and what he called "semi-products," such as tools or reusable platforms, into their portfolios.

In the past few years, Wipro has made progress in this direction using its so-called factory model, in which it has consolidated the needs of large customers into a "demand repository," from which common applications are developed to suit many similar needs for a large client. This process innovation cut costs by 10 percent and reduced the time to deliver software by 10 to 15 percent, according to a Harvard Business School case study of the practice.

Next Page: The offshore outsourcer next door.

Stan Gibson is Executive Editor of eWEEK. In addition to taking part in Ziff Davis eSeminars and taking charge of special editorial projects, his columns and editorials appear regularly in both the print and online editions of eWEEK. He is chairman of eWEEK's Editorial Board, which received the 1999 Jesse H. Neal Award of the American Business Press. In ten years at eWEEK, Gibson has served eWEEK (formerly PC Week) as Executive Editor/eBiz Strategies, Deputy News Editor, Networking Editor, Assignment Editor and Department Editor. His Webcast program, 'Take Down,' appeared on He has appeared on many radio and television programs including TechTV, CNBC, PBS, WBZ-Boston, WEVD New York and New England Cable News. Gibson has appeared as keynoter at many conferences, including CAMP Expo, Society for Information Management, and the Technology Managers Forum. A 19-year veteran covering information technology, he was previously News Editor at Communications Week and was Software Editor and Systems Editor at Computerworld.

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