Tuesday, February 27, 2007

Why we don’t have product-making companies?

I have already written an article called, ‘Why Product-making companies?’ 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-making 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 product-making technology 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 it 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 casteist 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-making 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 making company ecosystem in India. Where would I want to outsource my work when we become a successful product making company? To other Indian software services companies, of course!


Sridhar said...

I agree with you that till now Indian companies were focussing on Information Services. but, now the India 2.0 is emerging out.

Lot of young guns have quitted their jobs and are daring to start their own venture.

I can see a new sunrise.


savita said...


You have finally articulated some of the reasons as to why product companies are still not happening and what should happen.

However, you are completely discounting the extended social set up in India which I feel has a long way to go.

Product companies cannot make people managers in 2 yrs. What about the extended family which looks down upon a great engineer because he/she is still an engineer 5 yrs down the road. The services companies are really taking advantage of the social setup by providing a 'growth' path.
How do we go about changing the mindset ?

Its higher risk, higher return, so failures are going to be common. Are we as a society mature enough to handle failures ?? Where is the emotional maturity among the engineers? I see some changes in the younger generation, but we still have a long way to go, especially if the current generation of parents doesn't go over board with their parenting.

Product companies are not just created from 'great' technology. Cisco/Sun/Google had great technology, but they put the right business minds on top of the technology. In my experience, the technologists of India look down upon the business people. People confuse marketing with sales !

This is just some of the thoughts which trouble me ...while I agree with the larger point that you are bringing out.

Sujai K said...

Coming to the social setup. In India we never had the mainstream private industry. First, it was a transition from the mindset of a ‘secure government job’ to a ‘lucrative private industry job’. That transition is still taking place even now. While some communities and geographies have embraced this transition quite fast, few others are yet to go through this. For example, an engineer from Bangalore would rather take up a job in a software company such as Infosys than land himself a government job at DRDO. While a graduate from Bihar would rather take up a job with government than with private industry. Looking at some geographies and communities, It is clear that such a transition in the social mindset can change within a generation where right examples are set.

Coming to the next topic, of how fast we make managers out of our engineers. Again, this trend is set by examples. We have embraced what we experienced. If all the IT companies in Bangalore are purely service-oriented, then the only examples tend to come from such companies, where an engineer can dream of leading a team within 2 years of career. Hence, the expectation from parents or the society, and even the engineer himself that he should become a people’s manager right away (sooner the better). However, I believe that this mindset can also change (since it is a recent phenomenon, it is not deeply ingrained), with some right examples. Having success stories of some product making companies or technology focused companies where an engineer continues to be an engineer (without people management responsibility) will allow for the change in this mindset.

Coming to the next topic, of whether we are a society mature enough to handle failures. Clearly the middle-class Indian family tends to raise the kids with least amount of tolerance towards risk. Failures are not accepted and are actually frowned upon. Rather the kid takes up a mediocre job performing well than take a challenging job risking failure. I don’t see immediate results right away on this front because I don’t see our families, schools, colleges and especially parents changing their attitudes in raising their kids. They will not because they are told, by media, sociologists, and everyone around them that ‘Indian parenting’ is exemplar. However, a small percentage of the youth always tend to be risk-takers in spite of their conservative upbringing. Those young people should be banked upon to take the risks to set examples. Providing the right kind of access (to funds, advisors), lower barrier to entry, etc, will enable these risk-takers to set right kind of examples. I believe it is in the best interest of investors and the Indian industry to house and spawn product making companies here in India. The investors can, if they are willing to, take risks in creating many product-making companies out of which only few will succeed. If some of them succeed, they will be hitting a gold mine. Also, it is in the best interest of Indian industry to house such companies here in India to tap into more opportunities.

Coming to the next topic, of whether we have product marketers, those who can translate technology into a good business idea. My answer is Yes and No. While the mature product making communities (such as US or Japan) have come to realize that right business minds have to be placed at the strategic positions to create a successful business, less mature communities, such as India, which have not seen many of its products going to the global arena, tend to dismiss this problem. We have two choices here, learn from the experience of others and quickly embrace it or go through many failures to learn this on our own. I would prefer the first choice. For that to happen, we need many experienced people, those who have been there done it, to guide fledgling companies of India. We should also admit that some of the best companies in the world have been led by technologists who have turned business savvy. That transformation can happen when there are many companies being formed. In absence of examples, wrong examples get the limelight.