With nearly a hundred thousand employees, Tech Mahindra is at the heart of India’s burgeoning technology sector. E&T Magazine caught up with global head of engineering Karthikeyan Natarajan to find out what the future holds for the industry.
In May 2014 Indian Prime Minister Narendra Modi and his Bharatiya Janata Party swept to power in a landslide victory on the back of a business-friendly campaign focused on getting the country’s underachieving economy back on track.
While the IT sector was already one of the country’s success stories, India has a reputation for being relied on to do the legwork needed to support Western firms' innovation. But according to Natarajan, new leaders focused on R&D and cutting red tape, growing entrepreneurialism and a rapidly developing domestic market could see India’s tech industry flourish in the coming decades.
For the full audio of the interview click on the SoundCloud link below:
What impact is Modi’s election going to have on the technology sector?
I think he has a big task to get 100 million extra jobs in the next five to seven years, which is not going to be easy. I think that will mean more spending on but also R&D. When they announced the budget they increased the defence spend by about a billion dollars, but 90 per cent of this increase is coming to R&D instead of just manufacturing.
They want to really design and develop products that are more relevant for the masses, which will need different price points. They will really encourage more R&D around products that will meet the needs of around half a billion Indian middle class consumers. I think that is really going to drive the most significant demand over the next ten years.
Is part of Modi’s job going to be tackling excess bureaucracy?
In the initial eight or ten weeks it is already visible that he is trying to cut out red tape. He wants industries and businesses to flourish in India and I think he will definitely create an environment that will make industries want to invest more.
If you look maybe 10 or 20 years down the line, Bangalore could be the next Bay Area. More than 150 companies have started in the last two years especially around e-commerce and some of the new generation of technologies, because the technology gap has shrunk in the last 20 years, which means you can pretty well go and start a company with cloud and other things that mean you don’t need a huge infrastructure.
That is making a lot of entrepreneurs start to jump into the new wave of entrepreneurship. I think that is really going to help India to build its own innovation ecosystems.
In the past Western companies relied on Indian firms to do the legwork but they wouldn’t rely on them for the innovation. In the last decade or so is that something you’ve seen changing?
Absolutely. Especially if you look at the Internet of Things I think it has put us on a level playing field with the global players. Most of the work that we are doing is at the cutting edge of innovation, because it is not about something we are helping the customers with that was in the market five years back; we are helping customers to put products out this year, next year or in the years to come.
Where has this trend for innovation come from? Is it home-grown or has is it imported?
If you compare India versus China, if you look at China most of the global companies have gone and set up shop, but if you look at in India most of the business we have sought is from global customers outside the country. So that means the exposure of the engineers to global customers is probably comparatively high compared to China.
The second biggest thing is if you look at the outsourcing or services industry this is pretty much built on a global customer base. So if I’m working for any customer, take any of the aviation customers for example, I’m pretty much integrated into the value chain. I am not at the fag end of the value chain where I only understand a small portion of the work; I’m already working on the next generation of aircraft.
Also, maybe one third of engineers want to do post-graduation in the US, I think that is one interesting thing we have seen. We are also present in many of the important locations. For example, we have had an innovation group that is based in the Bay Area for the last 10 years, so we are also trying to anchor ourselves in the innovation hubs. We are present in Toulouse, Hamburg, Montreal and Seattle.
There has been a big rise in the number of startups in India in recent times. Why is that?
Someone said if you go to the Bay Area then one in four companies is being started by an Indian. Many of them have now understood the model, how to make it cost-effective, how to work in tandem with the US and India. Many of them may be relocating from the Bay Area to India, or they are anchoring themselves in the Bay Area but getting a lot of things done from India.
That is creating a new wave of investments and capital that is not available in India – access to capital is a big thing in India – and they are also able to take more risk. Whereas maybe the previous generation couldn’t have afforded to go and take such risks, the next generation will definitely be a lot more used to taking more risk.
A few decades ago people mentioned India and China in the same breath, but over the last couple of decades China's has pulled away. What happened?
I think it is more to do with the political system – the democracy process we have – because democracy is slow. Every decision gets scrutinised by ten different people. India itself opened up about 20 years back, but in a democracy an open economy takes its own path.
I don’t think we can ever catch up with China, it’s far-fetched and there’s no point in discussing that we will ever be able to catch up. Having said that, the trajectory that India will follow will be very different, because we did not build infrastructure the way China has built it. That doesn’t mean that we were growing slowly, we were growing about 7 or 8 per cent because we took the path of services more than manufacturing.
But if you look at in the next 10 years I’m sure that manufacturing has to be the way forward for India, so they are trying to create their own niches. They are trying to pick and choose a few things where they will be able to create their own unique differentiators compared to China.
China has the lead on manufacturing but does India have a chance to be a world leader in IT?
I think if you compare maybe 20 years down the line, the technology gap that you will see between Indian companies versus Western companies will be far smaller than what you may see between China and other Western countries.
The industry is transforming itself, in terms of driving more product-based companies. Though India is not successful yet, you will find a few product based companies will start coming into play in the next 10 years especially around software.
It is also enabling us to be connected to the customer’s ecosystem and value chain. IT was more of an enabler 20 years back, but now it is part of the core. If you look at the smartphone, if you want to check your health it can be your monitoring device and if you want to know where your car is it can help you locate it. It is becoming an integral part of every product that you are going to buy or use, you need some kind of connectivity.
That is making India on par with the rest of the world in the building of products, enabling services, and integrating the whole value chain. I think that’s really going to create unique opportunities for Indian companies.