India Can Replicate the Silicon Valley in Software: NASSCOM
Innovation is Keyto India's Growth
By Dev Varam

There has been a paradigm shift in the Indian software industry's approach to its future development. The emphasis is now shifting to innovation of new products. Indian Information Technology companies realize that only innovation can sustain their projected growth. The software industry is willing to plough back part of its resources and export earnings as investment into their research and development projects. Realizing that private investment is essential for promoting innovations, especially in terms of their commercial application, the government has recently announced incentives inthis regard. The National Association of Software Companies (NASSCOM), the apex body of the Indian IT industry, has recently organized an “IT Innovation in India Forum.” The NASSCOM objective in bringing together a panel of top IT Industry thought leaders, innovators and academia onto a single platform was to discuss the Innovation process and the critical elements that go into the creation of an effective Innovation system in the Indian technology and business environment.

In this regard, NASSCOM has collaborated with Observer Research Foundation (ORF) a leading public policy think-tank to bring together a report titled "Creating a Silicon Valley in India". The report critically evaluates the status of the IT industry and flags relevant issues that have to be addressed in order to continue as a key player in the global IT industry.
In the first place, the task of creating a Silicon Valley in India is not a dream. It is, in fact, an ongoing reality. The very development of the southern city of Bangalore depended on this concept. A large number of graduates from the Indian Institutes of Technology (IITs) and other such other prestigious educational institutions, migrated to the United States and their most important destination being the Silicon Valley. These graduates had risen to hold key positions in the Silicon Valley and according to estimates, a fourth of CEOs of Silicon Valley companies have been Indians or persons of Indian origin. Steve Ballmer, CEO, Microsoft, who was in India recently admitted that about 18 per cent of his company's engineers in Seattle are Indians. A number of these entrepreneurs have since returned to India to set up their own companies.


In recent times, almost all multinational companies (MNCs) have set up research and development (R&D) centers, and some have more than one centre, in India. The most advanced research continues to cluster in and around Bangalore. The set-up of Indian operations by MNCs has typically been triggered by senior executives of Indian origin. Microsoft`s research and development facility in India is the company's second largest R&D plant after its Redmond R&D centre.
In fact Ballmer is a strong believer in the capabilities of the Indian IT engineers, who, according to him, could redefine the software industry. "Thirty percent of all computer science graduates in the world are passing out of Indian universities. That puts a special responsibility on this country. The world is counting on the talent of this country to lead the next wave of innovation," he said.
In the Silicon Valley, strong ethnic networking among Indians is found to be highly concentrated in one association, The IndUS Entrepreneur (TiE). Its main purpose is to foster and support entrepreneurship, particularly in the early steps of a start-up through angel investing. TIE has spread to India through the opening of local chapters; the first one was opened in Bangalore in 1999 signaling the importance of Bangalore as a destination for the Indian entrepreneurs in the US TiE has since spread to other Indian key IT centers such as Mumbai and Pune. TiE brings to India, the culture of Silicon Valley.
NASSCOM was realistic in organizing the Innovation seminar. It organized a panel discussion of eminent speakers comprising Lin Chase, Director - Accenture Technology Lab, India; Swaminathan Krishnan, Chief Marketing Officer Sasken; Rajdeep Sahrawat, Vice President, NASSCOM; Ms Swati Sukumar, Anand & Anand, Advocates; Prof Arvind Kudchadker, Professor Emeritus, IIT, Mumbai and K Ananth Krishnan, Vice President & CTO, TCS Ltd.
The deliberations of these speakers focused on various topics including existing policy environment, participation of high-quality academic and research institutions in the Indian Innovation ecosystem, collaboration between vertical industries (consumers), academia & research (technology creators), social dynamics which encourage risk-taking over employment, infrastructure and workforce skills among others.
Speaking at the session, Kiran Karnik, President, NASSCOM, said, "With each success come greater expectations. This is the challenge now facing many segments of industry, including India's successful IT industry. Delivering "more" or "better" can be done by increasing efficiency, but beyond a point the curve begins to flatten and it becomes increasingly difficult to keep providing even more value-for-money. The only way to do so is through innovation: not just executing the same series of steps more efficiently, but of doing something completely different to achieve the required outcome. While it often means a new technology or product, it is equally applicable to procedures, services or business models.
"Ultimately firms compete in the marketplace and not nations or industries. As a result innovation will ultimately have to occur in the context of the firm, whether it is a start-up or a large firm. However, firms do not innovate in isolation and need an ecosystem, which enables and facilitates innovation on a sustained basis. The role of an ecosystem to drive innovation has been amply demonstrated in the success of innovation hotspots such as Silicon Valley, Israel, Cambridge etc. Given the importance of an ecosystem to drive innovation, NASSCOM is working on multiple fronts to foster a technology innovation ecosystem in India", he added.
Key discussion areas on the creation of an effective innovation ecosystem included:
• The existing policy environment
• Participation of high-quality academic and research institutions in the Indian Innovation Ecosystem
• Collaboration between vertical industries (consumers), academia and research (technology creators)
• Social dynamics which encourage risk-taking over employment
• Hard Infrastructure
• Workforce skills
• The role of sophisticated domestic demand
• Availability (or lack of) of funds for all stages of a firm's lifecycle
An Overview of "Creating a Silicon Valley in India - Can The Paradigm be Replicated?"
"Innovation does not have to have anything to do with technology." Instead, it is about understanding untapped user needs that need to be addressed through products and solutions in an ingenuous and innovative manner. Technology is merely the facilitator. Simply put, it is innovation at every stage of a product or service development and release cycle, through to pricing, support and value addition to the customer. And managing innovation is fast becoming the number one priority in a global business environment where technology is increasingly standardized and highly available.

Creation of New Products
Thus survival in today's intensely dynamic and competitive business environment is no longer about quality products and solutions at an affordable price. Instead, it is increasingly about creating new products, markets, applications and services that not just enhance quality of work and life, but take to a whole new dimension.
While firms need to be responsible for innovation rests with the firms as ultimately firms compete in the market place, there is no denying the role of the enabling environment at the national/regional/industry level to foster environment. A typical innovation ecosystem provides linkages among the various innovation stakeholders including inventors, VC & angels, patent experts, entrepreneurs, firms, academia and research. These linkages encourage collaboration for idea generation and transformation of the idea into a business outcome. The powerful role of an innovation ecosystem has adequately been demonstrated in the growth on technology innovation hotspots like Silicon Valley, Cambridge, Krista, Haifa, Hsin Chu etc.
The Silicon Valley has been there and done it all, and continues to do so, notwithstanding the intense competition emerging from today's technology superpowers such as China and India.

Entrepreneurial Visionaries
Bangalore, India's Silicon City has been one example of being a center that houses the best of IT software and ITES in the country. However, it remains a phenomenon that grew with some entrepreneurial vision for software sweat- or body-shops that provided affordable software programming talent, and over a period of time, grew to gargantuan proportions due to the enterprise of entrepreneurial visionaries such as N.R. Narayan Murthy and Azim Premji. The fact is that Indian programming talent delivered and provided excellent "coding" expertise and that too at the best possible costs. The results produced by an Infosys, Wipro or TCS have changed global dynamics in terms of skills to cost-efficiencies of software development the world over. However, the fact also is that India remains a source that does development once the actual technological incubation and realization process is achieved. Here we have to concede the position of being true innovators and also discount our position as developers of "original" software or technology. We have been facilitators in the Silicon Valley with the best companies the in the world, but very rarely, have we led in terms of actual indigenous technology breakthroughs or global standard-setting-even in the preferred field of expertise, that is, software. And these are the only imperatives that make for global dominance in a specified area
Thus, studying the Silicon Valley model, what the Indian IT industry needs to assess and address are the following issues:
• How closely are our Technology Incubators working with the Indian IT industry?
• Where do we stand on the 'bleeding-edge" technology scale vis-à-vis areas such as the Internet, Nano technology, Internet-related and Data Security technologies?
• What are the linkages between Indian Science & technology institutions and the Indian IT industry?
• What are the collaborative models of solution development between the IT industry & the Indian vertical industry?
• How many Indian start-up technology firms are venture capitalists investing big bucks in?
• How much are existing Indian heavyweights investing in new process-related technologies?
• Do we have a model or industrial environment that allows for global-level manufacturing or development, commercialization and delivery aspects of those technologies?
• Are we contributing in the areas of creating and patenting technology standards that could then be leveraged on a global scale?
Bangalore became India's Silicon Valley almost by default. Today, Indian industry captains are of the view that if the present state of affairs continues, they will be forced to look outside of Bangalore for their future ventures and investments - a sentiment that has been unanimously echoed by all major players in the state IT/ITES industry. No surprise therefore, that Gurgaon in Haryana and NOIDA in Uttar Pradesh are seeing a massive spurt in both FDI and in IT-related investments in the last five years. But neither can claim the mantle of being an alternative to Bangalore owing to the wide dispersion of various industries in addition to IT/ITES operating in these satellite cities. Other cities and townships being touted as potential locations by industry sources include Hubli in Karnataka, Chandigarh, Jaipur Hyderabad and Kolkata. It may be the right time to provide alternatives in terms of locations with a pre-specified focus on high-technology areas, backed up by world-class infrastructure. However, all that said, it may not be just enough to expect the Silicon Valley model to be replicated by providing real-estate and infrastructure alone. What must be borne in mind is that the Silicon Valley phenomenon grew because of a combination of factors -- the intangibles being an extremely strong high-tech culture, the spirit of innovation, invention and entrepreneurship fostered by Stanford University, the ability of that alma mater to identify, back and fund projects that could have global impact, and the entrepreneurial vision of individuals who understood the economies of scale by mass-producing what was essentially regarded as technology created exclusively for the U.S. Navy and NASA's aerospace programs.
Also what needs to be realized is that Silicon Valley wasn't built in a day. Its roots go way back to the early 1940s, which makes it almost 65 years on. Bangalore, by contrast is a relatively "young" technology city in that the real software boom started only in the early 1990s - a mere 15-years of existence at best. The other telling factor is that the Silicon Valley was the breeding ground for hardware and later, software standards whereas Bangalore remains a "services" and process-oriented environment. The question that needs to be answered is whether this service model could translate to global dominance by way of process standards or whether the existing and emerging companies can leverage sunrise technology areas.



Ideal Environment

As Nandan Nilekani explains in a recent column in The Hindustan Times, ``the new reality is that never has India been so poised to benefit from the full impact of globalization. Capital has become a commodity, technology is either free or freely available, and the connected `Flat World' has dramatically reduced the time on the experience curve. The outsourcing success has shown how one sector can take advantages of India's comparative advantages in human capital and the English language to create a global-sized competitive industry. We are now seeing this success spread to many manufacturing and pharmaceutical companies.''
Over the course of this report, we will see the genesis and evolution of the Silicon Valley and the factors that could contribute to replicating such a model in India, albeit on the services side of the business. The bottom line being revenue and profits, the primary focus would be on whether the creation of a perfect environment could translate to the next big IT and ITES boom in the country.