India may be overhyped as innovation hub, but that's changing

Much IT in India is product maintenance and testing, but more development work is coming

BANGALORE -- India has been portrayed as a beehive of innovation, where engineers at Indian subsidiaries of global technology companies design sophisticated new products for global markets.

The reality is quite different, as most companies in India do mainly product maintenance and testing, and development of small components of products, according to Sudin Apte, an analyst at Forrester Research Inc., and Vinay Deshpande, a developer of the Simputer, a handheld computer designed in India. Their sentiments are shared by a range of others who work in IT in India.

"The situation is a lot better than it was some years ago, but most Indian operations of multinational companies are still far away from defining and architecting products," Deshpande said.

A lot of the product innovation in the country is coming from small and medium-size Indian companies, he added.

Multinational technology companies typically claim in their advertisements and press announcements that they are doing innovative product development in India. That image helps companies attract employees, said an executive with the Indian subsidiary of a technology company, under condition of anonymity.

Most technology product companies, however, still see India only as a "limitless source of bulk staffing," Forrester said in a report.

Multinational technology companies are setting up offshore development operations in India mainly to take advantage of the lower cost of staff in India and the availability of talent, Apte said. But innovation, which he describes as thinking out a product or having ownership of a product, does not happen at the Indian subsidiaries, he added.

Respondents to a Forrester survey of development centers in India of multinational technology companies cited availability of talent and low cost of staff as the main considerations for having their centers in India.

"We do not think out new products or architect products in India," said a software engineer at a multinational vendor of banking software in Bangalore, who requested anonymity. "We get to do the coding for new products, and are mainly involved in maintenance or making improvements to legacy products," he added.

When technology companies have outsourced to Indian companies, they have usually contracted for staff on a "time and materials" basis, which reflects the kind of work that is getting done in India, Apte said.

There are some exceptions, however. Intel Corp., for example, announced on Monday that its new Xeon 7400 series of server chips were designed in India.

Companies like Intel and Texas Instruments Inc. have started creating and developing products in India, but such companies are still few, Deshpande said.

In the long term, more subsidiaries of multinational technology companies will do full product design in India, rather than support product development teams elsewhere in the world, Deshpande said. Having tried Indian staff on support work with good results, some of these companies are taking the risk of doing product development as well in India, he said.

Companies that have development centers in India will benefit if they start focusing on product innovation, Apte said. Indian outsourcers will also have to focus more on their capability to deliver product innovation, rather than promote their companies as mere low-cost service providers, Apte said.

Copyright © 2008 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon