Vijay Thadani, cofounder and CEO of NIIT, an Indian chain of IT training schools, speaks of a management graduate who, during a campus recruitment drive, declined a job with IT services giant Infosys Technologies. She preferred to be an entrepreneur in Chhindwara, a small town in Madhya Pradesh, where she runs a daycare center for working mothers with an unusual twist: She provides webcam feeds that allow mothers to watch their children from their workplaces.
Such tales of entrepreneurs following their passion are surfacing amid a growing opportunity to take technology applications to India’s underserved markets. The daycare with webcams is an example of “jugad technology,” a buzzword in the country for indigenous and creative IT solutions, Thadani said during the 2009 Wharton India Economic Forum in Philadelphia. “Those are simple technology applications that create new opportunities.”
Thadani spoke as part of a panel titled, “Raising the Bar Code: Impact of Technology 2.0 on the Masses.” The under-penetration of technology in India, especially in sectors such as financial services, education and health care, provides big opportunities for investors, said panelist Adarsh Sarma, managing director of technology, media and telecommunications at private equity firm Warburg Pincus in New York. And half of India’s population is dependent on agriculture, “so that is a big opportunity” for technology-based market intelligence and trading platforms that are springing up, said Anand Eswaran, head of global services at Hewlett-Packard (HP). India’s image is evolving, Eswaran noted, from that of a service provider for the world to a country with huge opportunities to increase its own technology penetration.
The time is right for innovation to flower in India, the panelists agreed. According to the panel’s moderator, Sanjay Puri, president of the nonprofit Alliance for U.S.-India Business, “less than 1.5% to 2% of India’s US$65 billion technology sector [revenues] comes from innovation.” The country’s basic education curriculum needs to encourage innovation, which could lead to “fundamental change,” he added. Meanwhile, greater innovation in IT and related industries is beginning to empower wider population segments, Puri noted. “We are trying to change from [a culture of] managed innovation to something [built from the] ground up.”
Thadani said that he, too, senses great potential for increasing technology penetration in the underserved small towns and rural markets. “Focus on the jugad applications,” he advised. “Innovation is not necessarily about creating new products.” Instead, it will occur where “the IT component in our services increases.” With that perspective, he said, India can aim not necessarily to be a global leader in creating innovative technologies, “but we can be leaders in the applications of innovation.”
According to Sarma, India could be “at the frontier of new technology” in the next five years. “Innovation hasn’t happened in India because easy money was being made in the last 30 years.” He sees potential in technological innovations within India’s financial services industry. Drawing insights from the U.S. market, whose banking industry drove innovation in back-office processing and financial products, Sarma predicted that India would go through a similar evolution even though it doesn’t yet have the same scale of operations. (Checks and cash make up 55% of transactions in the United States, he noted, while in India they still account for 90%.) He foresees innovation in payment-mechanism products and mobile banking, even though Internet banking may be slow to take off.
Over the longer term, Sarma said, he expects banks to hand over ownership of back-office processing centers to third-party investors, creating the size and increased market opportunity for further innovation. “Those entities are not going to stay in the banks; somebody else will come and make investments in them.”
Innovation is no longer something targeted only at export markets, Eswaran noted, adding that “domestic consumption will actually start to matter” in the coming years. “India has 370 million mobile customers. That could grow to more than 700 million,” he said. “Nokia’s number-two market is India, and IBM, HP and even local firms have started looking at the country’s domestic market.”
Eswaran pointed to technology-led innovation in other areas, too, such as the several Indian states with “e-governance” initiatives, through which they reduce paperwork in areas such as land records. Private companies, including major Indian conglomerate ITC, have begun tapping domestic rural markets with offerings such as “e-Choupal,” an electronic, real-time rendering of market information and intelligence for farmers that filters out middlemen and allows for greater pricing clarity. “The government is already focusing on how it can build an information highway,” Eswaran said. “When 50% of the people subsist on agriculture, that is a big opportunity.”
A ‘Telephone Revolution’
Thadani cited several examples of the Indian market’s appetite for innovation. For one, India is in the midst of a “telephone revolution,” adding 15 million users in January and 30 million in February. “[A decade ago,] we had 10 million phones. We now have 415 million.” Land records have been automated in more than half of the country’s 29 states, he added, pointing out that “there are 15 more states to go, and that is a huge opportunity.” India’s railway reservation system is the world’s single largest e-commerce portal, he said, and hugely popular matrimonial sites are also buyers of new technology.
Thadani identified financial services, health care and education as the sectors with the biggest need for increased technology innovation. He agreed with Sarma that the financial services industry offers entry points in credit and debit cards, services such as PayPal, and mobile banking. But things get more complicated with the education sector, he said. The general level of education in India is “still very poor,” and regulations could inhibit the adoption of new technology in schools. “One of the fundamental issues is to figure out the delivery mechanism. How do you deliver the content?”
Thadani said his company alone has “four large applications that can keep you busy for 10 years” in the education sector, “where [India has] a million schools.” NIIT has begun by training teachers in computers at 20,000 schools, he noted. And at NIIT’s request, the government has allowed the creation of 6,000 model schools across the country that will include computer education. “We suggested that these 6,000 schools be handed over to the private sector and that we will do them cheaper, better, faster.” He sees bigger opportunities ahead in education: “We currently have 18,000 colleges, and 30,000 more are coming up.”
In India’s health care sector, too, technology has touched only the tip of the iceberg. “Just 2% of the population is covered by medical insurance,” Thadani noted. “Imagine the size of automation required, especially when you have to provide urban services in rural areas, much like in the U.S.”
In a multilingual country, translation services would present a big opportunity for technological innovation, the panelists agreed. Sarma wondered about the possibilities presented by “globalization and India’s different languages,” while Eswaran talked about applications being rolled out for ITC’s e-Choupal that will be compatible with multiple languages. “Localization and working with multiple languages come naturally to us, and that is our strength,” said Thadani, adding that most Indian software is written in Unicode, “which means you have a language translation capability.” He mentioned that governments in different states insist on people using the local language for official communication, such as Maharashtra requiring forms to be filled out in Marathi or Tamil Nadu insisting on Tamil. “Technology can solve this problem,” Thadani said. “You pick up a form in any language, and software will translate it into the language the bureaucracy understands.”
All those opportunities, however, come with imponderables. Eswaran said that while the domestic market is large, it is also “highly fragmented, highly local.” Efficiencies in rollouts of products and services and economies of scale “don’t actually apply to the Indian economy as transparently” as in other world markets, he added. Sarma agreed that it is not enough to have new technology; the “proof of concept” must be established before investors feel ready to participate.
One audience member mentioned government bureaucracy as a limiting factor, even if the public sector were a large consumer of technology. “The question is: Is there a life outside the government to create a critical mass for your product?” Thadani said. “My advice is: Once you come in touch with the government, be ready to pay the price of democracy — not just corruption, but delays in decision-making processes, etc. But meanwhile, have something to fall back on.”