India Eyes Innovation
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.