Bangalore: Products vs. Services?

Bangalore and the IT outsourcing industry have been at the heart of the Indian economy for over a decade now. But as things finally begin to shake and falter, has the time arrived for innovation?  Kathryn Cave chats to Suchit Bachalli, Executive Vice President and Co-founder of Unilog Content Solutions, about Bangalore and the future of ICT.

“Bangalore is bursting at its seams,” Suchit Bachalli tells me over the phone. “It is half as liveable today as it was 10 years ago.” The housing is extremely expensive and “for those who can afford it; it is hard to ignore the fact you don’t have drinking water out of your tap, you don’t have 24/7 power and you step out of your house into a traffic jam – it takes an hour and a half to do 10 – 14 KM.”

Unilog is based in Mysor, which is about three hours further South because, as Bachalli explains, “it feels like the Bangalore of the 80s. [Now] the government and policy makers need to consider moving out of Bangalore. The infrastructure of the city cannot take it anymore.”  Yet Bachalli believes the problems with Bangalore run far deeper than simply overcrowding and congestion, they strike to the very heart of the ICT industry.

“The Indian IT industry is at an inflexion point,” says Bachalli. “I think that the model of providing job based services is in decline. That is my personal opinion and I’m sure there are other analysts who will disagree with me. But I believe it is [in] terminal [decline] because when the only value you offer is cost, systems are going to move to other locations where things are [even] cheaper and [even] better.”

The strain on the Indian outsourcing industry has been well documented.  Mike Magee concluded an article on Indian Outsourcing on this site back in June with the warning: “The fear is that at some point the drive to keep costs low will hit a brick wall, and in 10 years there will be nowhere left where labour is cheap, leaving eight billion people on the planet looking for work.” And it is true; there is a constant quest for ever cheaper destinations… which puts Indonesia and the Philippines high on many international companies’ hit lists and could leave many Indian organisations simply competing amongst themselves.

Bachalli thinks the real opportunity for Indian companies will to be to become innovative. “There are companies that are doing software development,” he says “but they are told what the solution is. Very few companies, in my opinion, are at the problem [solving] end of it and are actually designing solutions and implementing them worldwide. Yet many Indian companies are sitting on a goldmine of data.” This places them in an ideal position to offer truly unique solutions to unique business problems.

This loosely corresponds with a response to another piece on India we published at the start of July: “Personally, I think waning of outsourcing is good for local tech business. We have an army of experienced technologists and abundant technical manpower who will focus more on local tech if outsourcing companies stop hiring in large numbers. [The] easy life and good salary has prevented people from joining startups and taking risks. As outsourcing loses [its] sizzle, you can definitely expect more RedBus like success stories coming out.”

“I would like to see India considered as an innovator,” continues Bachalli. “The lack of innovation bothers [me]. Everyone seems to be very content with a desk job. In the west it’s the opposite fear. There the worry is that someone in India or China will take your job. But [I think Indians are] taking the wrong kinds of jobs.”

The change will necessarily be slow and based around mind set, but Bachalli is hopeful. “Yesterday I was at a conclave for Big Data in Bangalore. It was most heartening because [whilst] the average Indian’s reaction to any new technology is to [talk about] setting up a training institute… or [talk about] outsourcing services to the west. I did not hear any of that yesterday. The thought process yesterday was: this is a great technology, what are the applications we can build on it?”

“I was pleased to see that the whole conversation was about applications and what we can do with the technology rather than servicing people with what they want. I think that is a big shift in how we’re thinking. If that [thinking] gains popularity and momentum we’ll clearly have an edge.” However, he adds “[although] some companies are in a great position, they’ll need to change their organisation because running a product company goes against the grain of running a services company.”

Bachalli believes part of the overall problem is the way people are trained. “From a demographic perspective the average age is very low. The number of people coming on the job market [over the next couple of years] will be difficult to address short and mid-term.” It is easy to find a call centre person. But filling software development roles where people are required to think is a lot harder. In addition to which if people have been in a service job for five years, you almost have to retrain them to think analytically.  He is convinced a ‘rote education’ is partly to blame: “the vast majority of people entering the job market are essentially geared towards a service economy.”

“From an India perspective we’re doing ourselves a big disservice,” he continues. “I look around my house at the TV, fridge, microwave and fan and see these are all innovations which have come out of the west. How do we start building products and technology to reverse that flow of innovation? Those are the jobs we should be looking to take. We should be aiming for Mark Zuckerberg’s job not just call centre employees recording changes to flights…”

The real problem for India may well be highlighted in Bachalli’s descriptions of Bangalore. This is the Silicon Valley of India, it is an extremely expensive place to live, yet it still suffers from typical Indian problems.  The power situation for example is “better than other places - but it is still pretty bad.” And a lot of homes and businesses are run on private power fuelled by commercially available materials. This makes it extremely expensive and if the rupee continues to fall, and the cost of living continues to rise, it makes the situation on the ground all the more untenable. 

“Bangalore is not sustainable at this rate,” says Bachalli “It is hard enough for people who are already in the system, but what about today’s 14 year olds. I shudder to think what will happen when they get to be 24 and where Bangalore is going to be.” Bangalore does appear to be at a cross roads; the rupee is still falling; services are continuing to be outsourced to ever cheaper destinations. Maybe with India up against a solid brick wall the only thing for developers to do will be to innovate?


Kathryn Cave is Editor at IDG Connect


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