Budapest, 30 May 2011 Workshop: Policies in Support of Service Innovation Case studies Innovative Indian IT-BPO services and the case of Infosys Renata Anna Jaksa Director, ICEG European Center
The background 2008-2011: ICT2: Study on the trends in public and private investments in ICT R&D in China, India and Taiwan, and on the globalisation of R&D and the competitiveness of their innovation systems in ICT Project for IPTS, DG JRC, EC, project officer: Marc Bogdanowicz Coordinator: ICEG EC Authors of the Indian report: Payal Malik and P. Igneswara Ilavarasan, Indicus Analytics Case study for InnoGrips policy brief: Oliver Kovacs, Renata Anna Jaksa 2
The Indian economy Indian growth: India's average quarterly GDP Growth: 8.4% (2004-2010), expectation for FY2011-12: 8% (RBI, Reserve Bank of India forecast) India had the world's third largest GDP in terms of purchasing power parity (PPP) (USD 4.164 trillion) (FY2007-8) With an estimated population of 1,138 million: India is the world's second. Large, young and growing population Introduction of major economic reforms in 1991 Key sector: Indian IT-BPO (Business Process Outsourcing), revenues of 71.7 billion USD in FY2009, within that revenues of the IT software and services industry accounting for 60 billion USD (NASSCOM) 3
Highligths of the IT-BPO industry Source: Indicus ICT2 report, The IT-BPO sector in India, Strategic Review, NASSCOM, 2008 and 2009. 4
Innovative IT-BPO services in India Domestic: With India s population size: fast growing domestic mobile market. Subscribers: 391.67 million in 2009, over 600 million in 2010 The mobile sector CAGR (Compound Annual Growth Rate): 84.01 percent in the last decade Technology: 2G, EDGE, phone equipments: small screen services over the mobile must adapt to that The domestic demand for the use of mobile phone and services over mobile phone is growing at a large pace, but the characteristics of that demand is very different from that of Europe or US 5
Innovative IT-BPO services in India Domestic: Innovation in mobile services (fit for the market): low mobile rates But for a large population size ( bottom of the pyramid model) Small quantities of services consumed/bought at a time, pre-paid model Consumers: lack of capital to invest, rather buy very small amounts of pre-paid As Rajiv Bawa, Executive VP Uninor put it: in developed countries, people buy a bottle of shampoo. In India, it is common to buy a small sachet at a time 6
Innovative IT-BPO services in India Selected domestic services over the mobile: Mobile payment of bills, mobile wallet services Farmer Information Superhighway (SMS: latest market trends, weather forecast, and crop information) Bollywood & cricket news IVR (Interactive Voice Response): popular due to low literacy rate 7
Innovative IT-BPO services in India For the international market: "India has become the global front office (OECD, 2010) world s leading IT services exporter India s I(C)T sector specialisation: in services, not in manufacturing (vs China) BPO and software sector success: largely attributed to the availability of high-skilled technical labour for exports 3 types of Indian firms drove the Indian services sector: entrepreneurial firms started by professionals working for multinationals in the early 1980s (e.g. Infosys); ICT manufacturing firms that diversified into software (e.g. HCL and Wipro); software divisions started by established industrial groups (e.g. Satyam). (Balakrishnan (2006) Malik, Igneswara 2010)) 8
Infosys The company s short profile Infosys Technologies Ltd. was founded three decades ago By now doing business on global scale with the aim of providing designed for future IT products and comprehensive consulting services The major products are: business and technology consulting, application services, systems integration, product engineering, custom software development, maintenance, re-engineering, independent testing and validation services, IT infrastructure services and business process outsourcing 9
Infosys Key data of Infosys 5.7 billion USD revenue 2010 Over $44.2 Bn in market capitalization on the National Stock Exchange (as of Dec 31, 2010) 127,779 Employees as of 31 Dec 2010 65 offices 59 Development centres in India, China, the US, Australia, the Czech Republic, Poland, the UK, Canada and Japan ( Data from Dr. Jai Ganesh, Infosys Principal Research Scientist) 10
Infosys Global delivery business model (GDM) by the end of the 1990s in order to enhance the distribution of its products and services through an integrated way, GDM principle: taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk (Dr. Jai Ganesh, Infosys Principal Research Scientist) Other major competitors, such as IBM, TCS and Accenture, had also adapted their GDM by challenging its viability GDM became a disruptive force in the industry leading to the rise of offshore outsourcing. Further development of the GDM: establishing the Collaborative Distributed Delivery Model (CDDM) -> extended number of offshore development centres 11
Infosys Infosys is double-innovative : by setting up an innovative framework (business model) the company is capable of developing and delivering several innovative services Unique, innovative services: Legal Process Outsourcing: Infosys Contract Administration Platform (ICAP), Intellectual Property Services, Legal Research Services, Litigation and Administrative Support Services Procurement outsourcing Healthcare (Payor services, Provider services) Finance and Accounting Sales and Fulfillment (Pre-Sales, Sales, After-Sales, Fulfillment) Cloud computing and knowledge management services Web services (iprowe - Web Accessibility Assessment & Remediation) 12
Policy background Selected important general policies: India s service sector: highly regulated up until the 1990s The gradual liberalisation of trade in services from the beginning of the 1990s + 1996: Venture Capital Funds Regulations, 1996 to regulate and promote the activities of domestic venture capital funds Important to note: Indian policy background at two levels: countrylevel and state-level 13
Policy background Science and Innovation The science and technology system: before the early 90s mostly driven by state-run research institutes and research laboratories without any pressure to compete at international levels Currently: the collaboration among private companies and state-run research institutes and research laboratories is still limited 1997: Ninth Five-Year Plan on science &technology 1999: Indian Patents Act (1970) amended, to permit patents in the pharmaceuticals, food and chemical sectors 2003 Science and technology policy: emphasis and commitment on R&D by the government, creation of Technology Transfer Organisations as associate organisations of universities and national laboratories to facilitate the transfer of technologies generated No specific service-innovation policy on the country level! 14
IT-BPO Policy background - India Software technology parks (STP) policy support was introduced in 1991: Favourable conditions on equipment (imported equipment without an import license or having to pay an import duty) Foreign equity up to 100 percent was permitted and firms were allowed to freely repatriate capital investment, royalties and dividends after paying the necessary taxes Export obligation: companies must earn a net amount equal to 150 percent of the hardware imported within four years, and a net amount equal to 150 percent of their wage bill on an annual basis Further measures were introduced later on Development of IT clusters: ICT clusters are located in Bangalore, Hyderabad, Chennai, Pune, Mumbai and the National Capital Region (New Delhi, Gurgaon, and Noida). IT cluster regions received major state-level policy support 15
Thank you for your attention! 16