Knowledge is capital: Journey of knowledge enterprises

NS Raghavan

Powerful forces of globalisation have given rise to a new paradigm where products and services are produced in the most efficient and economical locations and delivered where they are most needed. This has enabled entrepreneurs from across the developing countries to reach out to global markets with their knowledge-based services and products.

Indians with their somewhat unique ability to cope with diversity and chaos enjoy a special advantage. Research shows that diversity as well as a tolerance for diversity engenders new ways of thinking and new approaches to problem-solving, which, when supported by a proper eco-system, can provide the requisite impetus for entrepreneurship. Techno-entrepreneurs in the IT services area were the first to grab this emerging opportunity and it is well acknowledged now that India is the most preferred destination for IT services, IT product development and IT-enabled services. The question asked in the Silicon Valley these days is “Who is your Indian chief technology officer?”

Having tasted success in IT, Indian entrepreneurs are pursuing other areas of knowledge-intensive businesses, particularly life sciences and biotechnology. In India, currently third in Asia when it comes to biotech patent filing, the biotech market is expected to cross $9 billion by 2007-08.

Indian pharmaceutical companies have more than three decades of expertise in reverse engineering ‘on-patent’ drugs in order to develop generic ones. Utilising the complex synthesising capabilities of Indian scientists, these companies have developed great process engineering capabilities which are being leveraged for both contract research and contract manufacturing today. Drug discovery companies also seek to maximise their chances of success through in-silico analysis of clinical data, which leverage the power of population genomics-based paradigms. It is estimated that a typical spend of $800 million required to take a molecule to the market, can be reduced by more than half by harnessing the Indian advantage, especially in clinical development.

India has the third largest scientific and technical manpower in the world. Around 162 universities award 4,000 doctorates and 35,000 post-graduate degrees. The Council of Scientific and Industrial Research runs 40 research laboratories, which have significant achievements to their credit. But we’ve been using this advantage only to a very limited extent.

To take an example of a company that does, Indegene, the Bangalore-based life sciences company, provides scientific content services to more than 1,50,000 doctors across Asia and to 150 medical associations and 45 pharmaceutical companies across India. It is leveraging this network for aggregating clinical data, organising it, and analysing it to profile diseases, therapeutic options and treatment outcomes. India’s biodiverse patient pool provides a solid foundation for aggregating population data and generating meaningful knowledge that can drive a healthcare revolution.

In the aerospace and automotive sectors, ‘time to market’ is getting compressed and shorter product lifecycles, technological obsolescence, rapid technology advances, and the increasing complexity of design and engineering are making it  even tougher. IT majors like Infosys, TCS, Satyam and Wipro have built engineering services divisions to grab this opportunity. But more importantly, boutique firms like Cades, Quest and Infotech Enterprises, who are focused only on engineering design services, are growing rapidly and bidding for high-end work such as complete design and analysis of aircraft structures or turbine components. One should not forget that, historically, all aerospace-related work was restricted to Hindustan Aeronautics Ltd, government undertakings and DRDO labs.

What is required today is a good model of public-private collaboration whereby the heavy investments that have already been made in R&D, and the experience and expertise gained in these establishments is tapped by the Indian high-tech entrepreneurs to provide world-class services. However, for India to make use of its 200 million-strong middle class and move faster in grabbing a larger share of the global market, it has to strengthen its intellectual property protection process, reduce red tape, encourage quality education for the best and brightest, and continue its open door policy for rapid investments.

The writer, a co-founder of Infosys, heads Nadathur Holdings and Investments, a private equity firm that promotes India-based knowledge enterprises

Opportunities elsewhere

With over 44,000 engineering graduates and diploma holders, 2.3 million arts, science and commerce graduates, and 3 lakh post-graduates added every year, and the largest English-speaking workforce, India is one of the largest talent pools in the world. Besides IT, newer avenues have opened beyond IT-enabled services.

Legal services: Several international firms, publishing companies, legal research firms and multinational companies are now sourcing services — secretarial support, voice messaging, legal assistance and support by professional lawyers — from India. Companies like General Electric, Oracle, Sun and Cisco have even moved part of their in-house legal departments to India-based units. This segment is expected to touch $20 billion by 2015.

Animation and gaming: The sector, currently estimated at $250-300 million, is slated to grow by 30 per cent annually in the next 4-5 years.

Engineering, research, and development services: Companies are sourcing these services in sectors such as telecommunications and aerospace, in areas such as offshore product development. The services sourced from India have almost doubled from $1.7billion in 2003-04 to $2.2 billion in 2004-05.

Financial and accounting services: This includes general accounting and transaction management and makes up approximately 40 per cent of the Indian ITES-BPO industry. It is estimated to touch $25.3 billion by 2009.

Pharmaceutical industry: According to Associated Chambers of Commerce and Industry of India (Assocham), the $13 billion Indian pharmaceutical industry is expected to grow to $25 billion by 2010.

Customer interactive services: This segment accounts for approximately 46 per cent of the Indian ITES-BPO demand worldwide and is projected to increase between 12-13 per cent within five years. It includes IT-enabled customer contact, inbound and outbound voice or non-voice based support, sales and marketing.

Source: NASSCOM Strategic Review 2006