It is educational to compare and contrast the two tech. booms that this world is witnessing right now. Silicon Valley is going thru a mini deja-vu of sorts, what with the spurt of so called web 2.0 companies mushrooming all over the place. The buzz word this time around is “build to flip” – build something cool and innovative and hope it catches the eyes of one of the big three – Google, Microsoft or Yahoo (affectionately termed as GYM). The VC community can’t hide its excitement as well and funds have come up to focus exclusively on emerging technologies like RSS. Earlier this year, during my visit to the Valley, I happened to go to the Canvas cafe with Marc. We were able to spot half a dozen leading thinkers there deep in conversation and bainstorming ideas. In short, a boom in Silicon Valley means lots of new startups, exciting ideas, coolio conferences and most importantly small companies giving big companies a run for their money. Exciting times indeed!
Now, let us turn our attention to our own..ahem… IT boom. What we term as a boom is actually creation of behemoth billion dollar companies with tens of thousands of employees. This has led to rising salaries and growing concerns about attrition and employee retention. Don’t get me wrong – it is great that the software sector has been able to generate such wealth and employment. But, unfortunately, our boom has so far not been about technology or innovation. Our tech. industry has its head buried so deep down in servicing offshore clients, that we are taking no notice of the other boom on that side of atlantic. Everyday I still run into tech. savvy engineers who don’t know the silicon valley has already moved onto web 2.0. We are running way behind the curve and not making much of an effort to catch up. The outsourcing business is so huge and lucrative, that it has almost become an albatross around our neck. The big 3 – Infy, Wipro and TCS should be investing in creating more awareness and spurring innovation – but they are not. Why do we see no or few technology conferences? Why is this IT boom just about outsourcing? Where are the startups, I ask!
I think our VC community can play a big role in changing things. They need to make some big bets. Fund a risky idea. Bet a few million on something that is untested and never done before (of course easy to say for me coz it ain’t my money!) Encourage technology development for local market. Convince Indian engineers and entrepreneurs abroad to return back and do statups. Even during the dotcom boom we saw much more buzz and excitement in India (India World, Naukri, Jobsahead etc all started before or around that time). But since Y2K, its been all downhill.
This outsourcing thing killed the startup culture!
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I fully agree with what Gaurav is saying about the tech boom in India! The discussion on web2.0 seems like its right out of a classiv techie Vs VC discussion. Exciting technology need not always translate into excellent revenues – I guess everyone is aware of that! However, unless there is a pool of excitable techies who can dream about building something cool(!), there isn’t much hope of innovation!
While it may be true that there aren’t too many smart engineers who are brave enough to venture on their own, its also important to note that courage comes from knowing that there are more than a handful of people who are willing to back an original idea! Be it here or in the valley, putting all your chips behind one hand requires a great deal of courage – and in this case, the line between courage and foolishness is only defined by the result! The point is that the more the VCs invest in original ideas here, the more encouraged the ‘smart engineer in the big 3’ is going to be take a chance!
I was using “web 2.0” only as an illustation of an idea that has caught fancy of many in the Silicon Valley but is completely unheard of here in India. I agree it might well be a bubble. My point is that nothing really creates any buzz or excitement in the tech. circles here. I distinctly remember that in 1998-99, during the original bubble, there was so much activity happening in India as well. Startups were happening all around and it was cool to be working for one. That bubble burst and at the same time Indian IT services company made it big on top of the Y2K wave. These two events together seemed to have pushed back entrepreneurial activity in Indian by several years. Post Y2K, startups looked like extremely risky propositions and VCs were apprehensive too. At the same time, as our services sector grew, it could offer much better compensation and job security.
I don’t think outsourcing or doing services is a bad thing. As an entrepreneur I make a living doing that too. But it does seem to be stifling original thought, creativity and enterprise that would be expected from technology hotbeds (?) like Gurgaon and Banglore.
Pankaj, your point is very valid. The big companies can’t kill startups. But they have created a sort of a vicious cirlce where smart engineers end up working at the big 3 because there aren’t enough startup oppurtunities and startups can’t thrive because all the smart engineers got lapped up by the big 3!
Loved your last line “This outsourcing thing killed the startup culture”. New twist to the argument. Got me thinking about the Walmart effect.
Nowadays there is often talk that Walmart is putting local mom and pop shops out of business. Obviously, Walmart cannot put anyone out of business – only customers can do that by spending their dollars at Walmart. Infosys/TCS/WIpro can no more kill startups than Walmart can kill mom & pop shops. Only smart engineers choosing to work at Infosys can do that.
Talking to investors, a common refrain seems to be that there aren’t enough quality deals coming around. Not quantity — quality. May be the startup culture is alive and well, and just in its infancy.
Great article. A few thoughts:
Services and products are not necessarily opposing or mutually exclusive phenomena. Every industry space demands its own mix of services and products. Services companies are looking for innovative products to launch, and products companies are always eyeing service opportunities to steady their revenue stream. After all, if your main revenue source comes from software maintenance charges, are you a services company or a products company ? Every company formed around opensource products is at its core a services company.
Having said that, your point about the big-3 is bang on. These companies seem to be idea-bankrupt. It would be worth it for these companies to launch innovative mindshare-grabbing products merely to improve their brand image in terms of recruitment and retention.
Finally, I agree with Alok. Web 2.0 might be sexy – but where is the revenue ? Many would regard AdSense income as chump change. High-traffic Web2.0 sites might be earning more income for Google than for themselves. 🙂
couple of points
1. services businesses have their own line to innovation. ibm, for example, is focussing their research efforts more and more on innovating in their services businesses.
2. in a few months that i have been looking at it, havent seen too many web ideas come by which will make money (read, profits)… “built to flip” sounds interesting, but just another bubble perhaps (enough of this already on other forums)