categories

HOT TOPICS

Subscribe to our Feed

Why No Product Companies in India?

Posted on Saturday, Mar 3rd 2007

By Sujai Karampuri, Guest Author

I have already written an article called, ‘Need Product Companies In India’s Growth.’ Before I start writing on what we need to do, I would like to talk about some of the most important reasons that curtail us from spawning product companies. Some of them are obvious-history, post-independent economic policies, our social structure, etc. But I don’t like to list 10+ different reasons for each problem. I like to concentrate on 2-3 top reasons. Here, I list what I think is the top reason why we don’t have technology product companies.

Our obsession with stars and brands

I agree stars are important. It’s the obsession with those stars where I see the problem. We (as Indians) are obsessed with stars and brands. We don’t need to look deep to realize this about us. Our Cinema (unabashedly called ‘Bollywood’) and Cricket has many examples. The whole focus is on one or two individuals while the rest are completely unknown. It applies to our technology space as well. IITs are a brand. Therefore, anything to do with technology in India is referred to IITs while hundreds of universities and other institutes get no mention at all. If an IITian starts a paan shop, the heading goes, “The IITian left his cushy job to start a paan shop right across the street…” If they start some dumb political party, the article reads, “The IITians instead of going to US have sacrificed their careers to start a political party to better India…” A mere contraption of no significance from IITian gets the attention of starving media. This media is more interested in writing ‘This IITian has done…” than writing what he has actually done. The media is only feeding into our own obsessions. They reflect our sentiments- that of ordinary people, the families, and the societies.

The same is true of our software-services companies. Why we did not look at other important industries is because these services companies were hogging the limelight for more than 20 years now. In fact, they are hogging the complete light while the rest of the industry is languishing in the dark. Bangalore, which is supposedly the ‘Silicon Valley of India’ (which I don’t agree at all), has lavish office spaces (look at Infosys and ITPL) which almost resemble a developed world. These are the same office spaces which have been glorified by the likes of Thomas Friedman (who has added more fuel to the celebration of our mediocrity). On the other hand, the same Bangalore provides extremely worse conditions to the industrial sectors where hardware and manufacturing houses are located. I have visited some of these manufacturing places- they don’t have roads, they are connected by muddy paths which have huge cracks in the middle, they don’t have water or electricity and this place looks like a remote village of India in the 16th century. The attention of whole of media, political administration, elite, institutions, investors, has been directed towards software-services companies while other industries do not get basic amenities. Software-services companies get lands at very low price; they get tax-holidays, exporting and importing is easy for them. Meanwhile, the manufacturing and other industry of India is putting with policies of old economy. Here is what I have to say to these software-services companies:

‘Thank you, you have done a good job of re-branding India. You have changed our image from being a land of snake charmers to the land of software programmers’. But my thanks stops right there. ‘You are also the culprit of taking away complete attention from other important industry. You rob us of passion of the young minds to make them Xerox machines. Your growth is welcome, but its avarice and appetite is overwhelming. We are not able to proceed to the next step. Our fear is we will get stuck right here’. There are examples galore where many countries got stuck to a label and that actually turned out to be their doom. South American countries which rode the wave of globalization have now realized that they got ‘stuck’ at being providers of raw material to the Western world. East Asian countries like Malaysia, Thailand, Philippines, etc, are faced with similar situation, where the competition from Taiwan and China has robbed them of their advantage of being the manufacturing houses. There is danger in being slotted that way. ‘We don’t want to be slotted that way.’

What our media, the analysts, the writers, etc, did in their over-enthusiasm and over-excitement is a great damage to India. They said, ‘Since we completely skipped industrial revolution, there was no need to go back to that.’ They insisted on continuing with services industry and professed it was good enough for India. They cited some examples (which are actually very rare) of product-making companies (like IBM) moving to take up services, and justified their jobs and their companies. The media lapped if up, furthered this notion, and made it a ground rule for India. Their message was: ‘If West has products and technology, China has manufacturing, we in India have services!’ The VCs furthered it, the investors furthered it, the entrepreneurs furthered it, and even the government joined hands. Thomas Friedman made millions selling the same idea back to India while making sure he and his country continued to dominate the technology markets.

Young minds of India, even those with passion and enthusiasm to create and innovate, get bogged down by the pressures- created by us- the media, the elite writers, the parents, the teachers. They end up taking up a career at Infosys and Wipro just because of its brand. Seven years of working there, he is not good for a product making company anymore. He is already institutionalized. Only few make it out of that vicious cycle only to face even bigger issues that confront them.

As a step one, we need ground breaking examples. To unshackle ourselves of this caste-ist mentality where in we accept our position in the hierarchy of technology businesses, where we get slotted into one type of industry by the virtue of what our ancestors did. These examples have to be the tough ones. They have to ride their boat against the strong tide. But they have to do it. I see some companies around me taking up this struggle, it’s a long way to go, but I also see that once one case gets successful, suddenly there will be new articles written and soon India will be seen differently.

The industry (even those involved in software-services) needs to consciously promote product companies. Is there a vested interest? Yes, there is. No nation, no industry, no man can make loads of money for himself while the rest around him are paupers. It just doesn’t work. Such disparities are not sustainable. One has to create an ecosystem. Those in the ecosystem need to be making loads of money. That money has to translate to the societies and communities that we live in. That’s when we can go the next higher level of making more monies. A society which has very few stars while the rest are all paupers is not a sustainable system.

Even the software services companies will benefit if there is technology product company ecosystem in India. Where would I want to outsource my work when we become a successful product company? To other Indian software services companies, of course!

Hacker News
() Comments

Featured Videos

Comments

[…] source : http://sramanamitra.com/2007/03/03/why-no-product-companies-in-india/  […]

India Need Product based IT-ITES companies..? « Share your thoughts Monday, June 16, 2008 at 4:05 AM PT

How about companies like Iflex, Subex, 3i-infotech, Cranes software, Ramco Systems ?
Are these not software product companies.
Things change slowly but many of your points are true especially about our obsession with brands and the pressure to settle down. US is diffrent place with 13.8 trillion dollar economy obviously there is a lot more scope for enterpreneurs in US. And even there I heard that the actual guys who try to be enterpreneurs is less than 1% of total population. Indian economy is still a long way off from achieving scale(we do not have enough electricity in metroes yet). India can possibly develop small products(or more correctly packaged applications) for the US and other developed country markets. India is still small despite 9% growth. And we need not just software product companies, we need product companies in a lot of fields. What is India famous for apart from oustourcing ? nothing apart from Yoga maybe 🙂

Sandeep Deshpande Sunday, July 20, 2008 at 1:03 AM PT

[…] In her blog [Indian IT Industry: The Next 8 Years], Sramana Mitra delves into the cost aspect and points out that with an average increase of 15% year-on-year in the cost of the commodity, an undifferentiated capacity leasing model will soon loose its labour arbitrage advantage. “So what would need to happen in the next 8 years to find another sustainable competitive advantage for India, considering that India doesn’t do IT products? […]

Commoditization and Labour Arbitrage « Kishore’s Law of Capacity Leasing Wednesday, October 1, 2008 at 7:23 AM PT

Very nice article and very versatile chain of comments.

Let me begin with that I work with an IT Product company. The company has been developing one of the most promising product in Human Resources Management.

The Product is – EmpXtrack On Demand Human Capital and Talent Management Software. (www.empxtrack.com)

My experience says that it is right time in India for a product company.

One big difference in a product company and a service company is Intellectual Property. A product developed by a company is its IP and company can earn recurring revenues by developing it once and selling multiple times. While the value of a Service expires as soon as it is delivered to client. So while service company can remain profitable from day one, it has growth limitations. On other hand, though it takes lots of efforts to develop a product and convert into a useful commodity, it gives long term results.

Gireesh Sharma Wednesday, November 19, 2008 at 10:40 PM PT

India doesn’t have a real product company (i think except for Tally accounting software) purely because of the mind set. Here people want product ( & relative knowledge) to be developed at the cost/risk of a few customers. To top it all product reach involves lots of marketing cost that too no promoters are willing to spend.( because customers are not funding it 🙂 )

Mukunth Monday, November 24, 2008 at 1:22 AM PT

its excellent yaar

Manjit Saturday, November 29, 2008 at 12:58 AM PT

I agree with the basic premise of this blog however I am not convinced of the reasoning’s behind the why there are no product companies. Here are what I believe the fundamental reason’s

1) The Indian society and the most of the primary education system do not foster “enquirer” minds.

2) Most Indian are good at analysis, designing and to so extent innovative product development; however lack marketing and sales skills.

3) Most Indian’s have a tough time articulating their thoughts/idea’s for various audiences.

Having experienced the struggles of entrepreneurship, working for small companies in India and US, I can definitely assert that we are no better or worst at product development then anybody else in the world. It is our lack of salesmanship that puts us on the bleeding edge.

Sanjay Tuesday, May 26, 2009 at 1:57 PM PT

Hello,

Your article is nice, but there are lot of things that you do not consider. It is a one sided view point.

Regarding Brands & Stars, I believe success does not come easy, there is reason why the Top performers are given top status. However having said that I do agree that there is too much obsession, which again is to intended to grab attention.

You must understand why did service companies in first place did to reach the top. they gained through software export and never considered india as a market for software. This is because india does not posses a mature auidence to accept software products. This is the primary reason for lack of innovation in that area.

Also you are completely underestimating the innovation capabilities of indian service industry. They can fish out new products had there been a good market for them to grab. however the share of pie in service is too large for them to neglect.

I completely find no value in arguing between service and product, the only thing a consumer is bothered is the solution to his problem he/she does not care about methodology. I believe that how companies also have to view. Take the cheaper path.

Praveen Kumar Friday, July 10, 2009 at 3:43 AM PT

Praveen,
I think you are right.
One more important point is the horizon in which these things have to be viewed. On an average, it takes any where between 20 to 30 years for people to build large enterprises and Infosys took more than 25 years to reach where it is today. Graduating from college and want to make a billion dollar company in 3 years kind of thought wont work. You need to sustain…fail a couple of times…maintain your cashflow… doesnt matter where it comes from and then re induce that cash into what you want to persue…Probably the ‘meaning’ of what you want to achieve. The media will eventually start looking at you…

Sasi Thursday, August 27, 2009 at 2:12 PM PT

This is stupidity. Competition & market condition decides fate of any industry. If industries could have survived by planning, none of the industry would have ever seen down turn.

marketIndia Monday, September 28, 2009 at 3:58 PM PT

Hi Sujai,

I do agree on few of the points made by you. I would like to add here that the education system in India is also to be blamed. we are following the education system designed by the british who wanted Indians to be only clerks (do what we are asked to do) because to get british clerks from england would have been an expensive matter. Still today that hangover is there we are very good in service industry where somebody else is dictating us what to do. we are very good in saying ” how do we serve you”.

Creative / out of the box thinking, risk taking traits have to be instilled in majority of us. For that I believe it has to start very early in our career – -our school days. Our education system needs to revisited if not revamped.

Aurobind Rath

Aurobind Thursday, October 1, 2009 at 12:43 AM PT

Hi
i am in third year of computer engineering in a non-IIT college:-).I navigated to this blog while surfing the net to find some material to read about a curriculum subject we have- product design. And i would like to thank all the people who have contributed to this blog.

Most of the companies that come to recruit students from our college are service-based. That places only one option before those who want to pursue a career in a product-based company- start your own!
I personally feel that Indians need to change their attitude about workplace and job. We CAN make and we ARE making money out of service-based companies. But that doesn’t make us technologically advanced. In fact, few years down the line, some other developing country make overtake India in this sector. I don’t mean to say that we should beat US in the race for product development but we can at least start to venture into this domain.
This way we can be self-reliant and save lots of money.This is because there ARE youth in India who HAVE the creativity and technolgical soundness to contribute actively to product development. It’s just that they don’t get the right platform and support from society.
If we plainly accept that”India is like this and it WILL remain like this”, we are doing nothing but spreading negativity further.
We need to be proactive and ready to take challenges and trained in entrepreneurship if we want to survive and emerge as a dominant contributor in product development on an international level.
Aafreen.

Aafreen Friday, February 5, 2010 at 7:34 AM PT

Hey guys, as something to cheer up…….First Indian browser has been launched ….it is called EPIC……this might be the first step….but we all can do a lot to balance that step and get higher on the ladder…start using …build applications for it…and so on…. i have started going through it to do my bit….

Rahul Friday, July 16, 2010 at 11:44 AM PT

Hi Sujai,

I came across your article because I googled for "product companies in india"! This is a question close to my beliefs (as in beliefs that I practice – I'm co-founder of one of India's upcoming semiconductor product companies!).

I was thrilled to read your article – not because I agree with you – but because you have echoed my very thoughts and words!! I have talked often to my friends about India's obsession with a single star and how most Indians don't seem to realize that there can be – no always will be – multiple stars in any field of achievment. For a country that has so many languages, gods, cuisines, communities…. it is very surprising to me why we can't digest the concept that there is never just one single superstar!

[continued]

Hemant Mallapur Tuesday, January 25, 2011 at 6:01 PM PT

[comment continued from earlier..]

I too get peeved at Indian media's permanent obsession with "Who is #1" – whether it is Sachin in cricket or "stars" of movie world – they like to simplify to the #1 or the one superstar. Nothing in nature echoes this – while our solar system may have one star there are countless stars in the universe.

When you talk about how Indians (investors) have attention span only for success of Software services companies and how the media obsession with them completely overshadows any attempts at product development! Based on compiled stats from public co.s I found that a product company from US (semiconductor) will outscore a SW services company (Indian) by a factor of 8X on both the top-line and bottom-line. With Indian costs those bottom-lines could look very healthy – a reason why MNC's spotted the opportunity in India! Wonder when India will wake up to its own potential!

[continued]

Hemant Mallapur Tuesday, January 25, 2011 at 6:03 PM PT

[comment continued from earlier….]

Again I echo your thoughts about how Indian media likes to make simplistic one-liner stereotypical conclusions such as "since India has bypassed the mfg opportunity we need to only focus on the services opportunity which is working so well for us". The reason why economies of Germany, Taiwan and Japan have prospered inspite of their small populations is because of their products and the huge profits they bring. A giant country like China when it gets into products can simply race ahead of others. And India can sit pretty with its simplistic one-liner conclusions.

While it's great that India has hit upon the well-paying low-risk services mine of silver it should not be limiting itself as an economy from finding a gold-mine of technology product co.s. There is effort and risk in prospecting for a new mine but there are potential rewards too!

Regards,
Hemant

Hemant Mallapur Tuesday, January 25, 2011 at 6:04 PM PT

Well, I disagree with the writer here… In a recent townhall meeting with our CEO here in Pune, he asked a question to a hall full of Indian folks who were experts (experienced managers, software programmers, designers & the likes).. The question was- How many people are here who have read an article in a technology magazine & thought to themselves- "shit, that is my idea"!!!
The answer was- 0, a big 0 out of about 500 people!!
So, the problem does not lie with the government, the media, the idols.. it lies with us.. People.. without new Ideas.. to be specific, how we are trained & not taught.. We are not taught to think.. We don't have questions like- how many windows does your home have or how many trees do you cross on the way to school everyday? No. We are only trained to answer close ended questions. Hence we never bother or take the efforts or don't know how to think out of the box. Even in product development companies here in India, you'll notice that the products are mostly conceptualized somewhere in the US & developed here.

Tejas Tuesday, May 24, 2011 at 2:55 AM PT

Dismal.

Sramana Mitra Tuesday, May 24, 2011 at 1:42 PM PT

I think we can not ignore the education system wherein most of our student end up learning poems and literature (those are also important) and are not exposed to hard core technology oriented education. How many of us at an young age has the willingness and knowledge to learn and start something like Facebook or Microsoft. Everyone can not get through IIT or it's not proved also that only an IITian has the expertise to do so. This has to be rooted in the early schooldays by the education system, environment which gives us the base. Rest depends upon the person his willingness and interest to become an entrepreneur.

dixita Thursday, August 11, 2011 at 5:30 AM PT

Hi,
Iam from India and an Engineer(Electrical).
I think we do not have product companies because of the following although there could other reasons also-
1) Cultural- We are not risk takers; what do i mean by that, our generation of educated people have seen safe cushy even though less paying government servants as their parents.
2) Education system- With our kind of approach, look at the present education system, at least earlier a guy in the indian education system would study hard including roting to come first…now you just have to look at students to come to conclusion ITS A DISATER HAPPENING.
3) Enginnering- Any countrie's Engineer are always at the forefront of product innovation, well mostly.There is beautiful opportunity to capitalize on that…ITS CALLED-"FINAL YEAR PROJECT"-Look at our system-you have to submit the project thats it, no corporate partnerships-not much,and over emphasizing submission for marks, has combined to make us what we are today…Brand and Personality Seekers("Some body else makes the products and creates wealth")

Soundaram V Saturday, September 17, 2011 at 5:16 AM PT

(1) Its hard for a startup in India to sell to Western markets (sales channels' etc.). Indian market in B2B is non existent for innovative products.B2C market is hard to crack unless there is immediate cost benefits. (Highly cost reduction driven rather than luxury)
(2) Acquisitions as an exit strategy is rare and again – need connections to the West to succeed. Even if product was made say for one of the big Indian firms, they would prefer to vertically integrate rather than acquire a product from an unknown startup.
(3) So entrepreneurs are left with either "smallish" more service ideas – Redbox, Flipkart, etc and not really product focused.

Da Truth Tuesday, November 1, 2011 at 6:47 PM PT

At the end of 2011, these statements are no longer true. We have companies in 1M/1M that are building full blown product companies from India.

Sramana Mitra Wednesday, November 2, 2011 at 3:31 PM PT

There is one and only one reason of the lack of product based companies……"Fear of failure"

Tinku Saturday, November 5, 2011 at 4:21 AM PT

Very Interesting article !

I liken the services industry as " You scratch my back. I'll scratch your's" . Although very crucial for our economy, over the long run services alone will never get us anywhere. Evolving a strong Eco system for product companies ( not just SW products) is need of the hour.

Ashok Sunday, November 20, 2011 at 9:16 AM PT

I don't agree with most of the reasons stated. It more to do with our culture and our ecosystem. Startups have still not got its recognition as a brand in India. In India people know biggies like Infosys and TCS and if somebody is working for those biggies, he is highly respected by families and relatives and there is so much of social pressure even if someone wants to pursue his/her dreams. Startup ecosystem itself is not mature enough in India if you compare it with Silicon Valley.

Anand Agarwal Thursday, December 1, 2011 at 2:12 AM PT

It takes talent,hardwork with patience to start a product based company. Most of us don't have anything of mentioned.

noComments Wednesday, December 7, 2011 at 6:37 AM PT

That’s way too cynical for my taste and for most of the readers of this blog.

Sramana Mitra Wednesday, December 7, 2011 at 4:08 PM PT

Please think IITian those are going to abroad fron India.

Ashu Sunday, December 25, 2011 at 9:59 AM PT

I have never see such clear vision on this major problem. I have understand this 7 months ago and determine to start a product based company in india. Really the ecosystem never agreed with my decision , i denied to work for infosys. And now i know what i am doing.
Thanks a lot sramana, You rule..

nikhil yadav Thursday, February 9, 2012 at 12:41 PM PT

I don’t rule, Nikhil. I want you to build a great company, and rule your market 🙂

Sramana Mitra Thursday, February 9, 2012 at 1:55 PM PT

Hello all,

1. I see POVERTY is main reason for all the problems in India. India has only 75% literacy population and no idea how the literacy is judged. Important is to read, write and speak English.

2. Many of the communities do not see English education in India. As multilingual society there is a lack of communication.

3. I don't see a constant growth or innovation in India in any sector. We are a community who do not accept new things fast.

4. Need for more practical education.

5. Need for research.

I say with so many engineers in Infosys, Wipro, TCS etc.. Even if one guy had thought of a mobile OS like Android. All the money in the world will be flowing into India.

charan Monday, February 13, 2012 at 1:42 AM PT

Infosys decided not to build products in 1998 🙂 It is just easy to sell/lease engineers than products 🙂

Guest Friday, August 31, 2012 at 7:35 AM PT

First of, it was a brilliant article.
I am a final year Mechanical Eng student in NIT – Calicut. My dream is to get into the product development field and to guide teams to bring out amazing products. I plan to do my Post graduate in the same. But i wish to work before i head out for studies. Anyone has any ideas where in India, an engineering fresher like me could get started in the product development field??
Repondez S'il Vous Plait…

praveenksam Thursday, October 11, 2012 at 10:19 PM PT