India: stop renting IQ, start creating IP

I am not the first one to realize and state that the wage differentials between the workforce in India and the US will continue to shrink and reach an equilibrium in the next decade. It is become more and more certain that the primary advantage of outsourcing to India is the core expertise of the Indian workforce and not necessarily lower wages. Although I’ve dabbled here and there by outsourcing some projects to India and as well during my earlier startup days, I hadn’t grappled the actual gist of entrepreneurial opportunities in the much-cliched "business process outsourcing" (BPO) market.

It is common sense that there are lucrative entrepreneurial opportunities in the BPO space. I don’t want my grandchildren to read Thomas Friedman’s book (The World is Flat) after fifty years or so and ask me, "what was I doing, when there was so much action happening?"  So, I decided to dedicate a considerable portion (more than 90%) of my time during my last trip to India (January 2007) on learning about the BPO industry with an intent to start a company that can make a significant impact to the economy.

As with any new thing, after reading three books, multiple blogposts and several other magazine articles (espcecially in Business India/Business World), I met with 18 founders/CEOs, from leading and emerging BPO companies in India and get their perspective on the industry and consider potential partnership opportunities. I also visited the NASSCOM headquarters in Mumbai and met with their staff to understand the market dynamics.

It is not news that the market for software and services (official term for the BPO sector) has increased exponentially in the last five years in India. But, as a passive observer of these trends I had seen Indian firms as providing "intellectual" services to a product company in the US/UK. I believe firmly that the market semantics in India have been favorable (in fact ideal) in the last 18 months, to cultivate more "product" companies. Access to capital, experienced workforce and the overall entrepreneurial spirit have led to the growth of such favorable conditions.

We’ve seen that more and more entrepreneurs in India are seeing value in creating intellectual property, by developing core processes and products, as compared to renting their IQ/talent to provide outsourced services to companies in the west. This is also reflected in the type of work that is being done in the Indian operations of large corporations. For instance, Microsoft India develops several high impact projects/products, as opposed to serving as a test center/research center.

It is inspiring to see the sleuth of product startups by Sabeer Bhatia in India and upstarts like Tekriti by Ashish Kumar, who are focusing on creating intellectual property by developing products. I would love to see more product-based or core service-based (with IP) startups emerging in India.

I’m in the process of helping start a healthcare services company to provide key services to physicians, based on my previous experience in healthcare through Securamed (I’ll keep you posted, as the venture progresses, currently keeping it under covers until the official launch.)

Net-net, it is exciting to see more and more Indian start-ups focusing on creating IP.

Let’s create IP.

Kintan

Technorati tags: business process outsourcing , bpo , India , Indian startup , entrepreneur