India's Technology Future: 2010 and Beyond

Friday, August 06, 2004

Read my lips: No New Taxes!

I had not intended to talk about governance till a much later time, but this news article has forced my hand:http://www.ecommercetimes.com/story/35472.htmlThe Indian government is contemplating taxing foreign firms sending outsourcing http://www.ecommercetimes.com/perl/search.pl?query=outsourcing&scope=networkwork to India and firms that import and resell shrinkwrap software in India. Proposals range from setting a simple 4 percent tax on the value of outsourcing contracts to a more complex system of taxing the global income of corporations with standalone operations in India.I wish the Indian government would stop and consider for a moment the impact this might have on outsourcing to India. I wish they would weigh taxation vs. job creation and wealth creation. Is it more important to create 70,000 new jobs and sustain the 1.1 Million jobs that the outsourcing industry supports, or is it more important to put 10s of millions of dollars in the governments coffers?

Thursday, August 05, 2004

Race for Biotech: Singapore leads the way

I found this article on wired.com. Good way to think about spurring research in niche areas.

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Singapore Wants You!

The future-friendly city-state has an offer bioscientists can't refuse: unrestricted research, top-notch equipment, and limitless funds. (Just leave your chewing gum at home.)
By Stuart LumanPage

Eight years ago, Alan Colman and his team of geneticists stunned the world when they cloned a sheep. Dolly became a household name, and Colman found himself in the spotlight. He made appearances on NBC, CNN, and the BBC, and landed more than a hundred invitations to lecture in front of audiences around the globe: Islamic scholars in Dubai, philosophers at Oxford University, biotech conferences in Delhi and Bangalore. Suddenly Colman, who was working in Edinburgh, had his pick of prestigious academic posts and private research labs across the Western world. He turned them all down.

Instead, he packed up his life and moved to the Southeast Asian city-state of Singapore, where he is now sitting, explaining his next big project over a tuna sandwich. The 55-year-old scientist hopes to create insulin-producing stem cells, which he'll use to treat diabetics, freeing tens of millions of people from a lifetime of needles and glucose monitoring. Before Colman came to Singapore in 2002, his plan was just a lofty goal in need of funding. Then Singapore dangled a $6 million grant if he'd agree to relocate. "I met with venture capitalists in the US and the UK and realized that it would be very difficult to fund the work I wanted to do," he explains. "But Singapore was prepared to put money into it. They're not just interested in conventional returns on investment; they're taking a long-term view. It really wasn't a difficult decision."
Colman's not alone. Singapore is treating hundreds of scientists like free agents, promising first-class laboratories, top-notch equipment, and more than enough money to pursue work that's not fundable, or is too controversial, back home. The government is investing more than $2 billion into research of all stripes, hoping to attract leaders in therapeutic cloning, drug discovery, cancer research, and other areas, bioscience all-stars who will in turn help build a local community that will bolster the economy.

So far, it's working. A third of the almost 4,000 science PhDs here are foreigners, many with impressive résumés. Edison Liu, former director of the US National Cancer Institute's Division of Clinical Sciences, moved in 2001 to head the Genome Institute of Singapore. Japanese cancer researcher Yoshiaki Ito brought his entire Kyoto University team to Singapore's Institute of Molecular and Cell Biology in 2002. Nobel Prize-winning molecular biologist Sydney Brenner splits his time between the Salk Institute for Biological Studies in San Diego and advising Singapore on how to attract more people like him.

The government has also been successful in luring multinational pharmaceutical companies. Together, Singapore and Swiss pharmco Novartis founded the Novartis Institute for Tropical Diseases. With a 10-year, $120 million budget, scientists at the center will work to rid the developing world of scourges like tuberculosis and dengue fever, a tropical disease that infects 50 million annually. TB kills nearly 2 million every year, mostly in poor regions. Neither disease has received much attention from drug companies. The government is working with Novartis to change all that.

Exhibit A in Singapore's quest is Biopolis, a $300 million, 2 million-square-foot complex taking shape just outside of downtown. When complete by year's end, Biopolis will include institutes specializing in bioinformatics, genomics, molecular biology, and nanotech - not to mention a shopping mall, a fitness center, restaurants, a day care center, lecture halls, a pub, and a light-rail system. The gleaming food court features local delicacies like chicken rice and laksa soup, Indian fried bread, a Malay beef dish called rendang - and Wi-Fi. The main lobby is set off with white Mies van der Rohe Barcelona chairs and an Achille Castiglioni floor lamp.
But it isn't the food or the furniture that lured Martin Hibberd from his tenured post at London's Imperial College to run the population genetics lab at the Genome Institute. It's the equipment. Biopolis labs are lavishly outfitted with mass spectrometers, robotic microarrays, and a computing room that can house a petabyte of data storage. On a tour of his facilities, Hibberd proudly notes the $600,000 sequence variation analyzer purchased by the government. The system can sequence 4,000 DNA samples a day. Then there are the four $400,000 Applied Biosystems DNA analyzers. "At Imperial, it was hard to get funding for new technology, but here it's available," he says. "We've gone from nothing to this in only a short period of time."

Of course, there are trade-offs for scientists who choose to live and work in Singapore - a country that treats chewing gum like contraband, canes graffiti artists, and executes drug dealers. Such top-down control extends to the scientific community. In exchange for funding, researchers effectively become on-call consultants, expected to help on various problems of the day in tandem with local scientists. Colman spends 20 percent of his time doing government-sponsored work and recruiting scientists. During the 2003 SARS outbreak, Hibberd's boss asked him to sequence the virus. He developed a diagnostic test, now sold by Roche Pharmaceuticals, and will split royalties with Roche and the government. "In the UK, an academic institution would look down on that," Hibberd says. "Here, I'm totally open."
By working in the biotech community, foreign scientists will train an emerging generation of Singaporean researchers, who will one day rule Biopolis. At least that's the plan. Getting to that point requires an overhaul of the educational system, which has always been based on rote memorization and absolute respect for authority. For many countries, this would take forever, but things happen more quickly here. "Singapore works as a company," says Denmark-born Søren Bested, CTO of CordLife, which banks stem cells from the blood of umbilical cords. "When a decision is made to support life sciences, the government can provide billions in funding, build 2 million square feet of life science space in the middle of town, and change the curriculum of all schools to incorporate it."

The bigger obstacle may be cultural. The government is suddenly encouraging a type of creativity that it has all but purged from this hermetically sealed country. "People have had a very good deal here, but unfortunately compliance is part of the problem for the future. They don't think for themselves," says Colman. "This runs through to science."
The man responsible for setting Singapore's economic course: Philip Yeo, cochair of the Singapore Economic Development Board. Having watched electronics manufacturing and financial services flee to China and Taiwan, Yeo sees biotechnology as a way to keep the city-state's economy afloat. "If the whole world market for electronics or chemicals shrinks, oops, we're in trouble," he says. "Biotech is one more weapon."

It's an expensive gamble. By one estimate, $60 billion worldwide has been lost in private biotech investment since 1990. Yeo doesn't seem worried. Officially, the country has $100 billion in cash reserves. Unofficially, the number is much higher, perhaps double. "Money is not a problem," he says. "My problem is people."

In his search for world-class microbiologists, chemists, geneticists, and the like, Yeo has given his pitch hundreds of times. Yet he still gets excited about the change he's inciting. He jumps up from the table in a Biopolis conference room and starts writing on the frosted glass walls. Biopolis, he explains, will be a creative environment where Western scientists and an emerging class of Singaporean researchers will work side by side. "Anyone can build a building. But to do this" - he points to his scribbles describing a massive scholarship program - "the selection, the marketing to the kids, that's our competitive edge. I'm looking for future leaders."
After an hour, Yeo has covered nearly every inch of the glass drawing board in charts, pyramids, and Venn diagrams. He admires his handiwork and turns back to me. "This is the only place you can graffiti," he says with a laugh. "Elsewhere you go to jail!"

Learning from Israel

What can you learn from the 100th smallest country, with less than 1/1000th of the world's population? There is plenty to learn. here are some tidbits:
  • Israel leads the world in the number of scientists and technicians in the workforce, with 145 per 10,000, as opposed to 85 in the U.S., over 70 in Japan, and less than 60 in Germany. With over 25% of its work force employed in technical professions. Israel places first in this category as well.
  • Israel has the highest ratio of university degrees to the population in the world.
  • Israel has the highest per capita ratio of scientific publications in the world by a large margin, as well as one of the highest per capita rates of patents filed.
  • In proportion to its population, Israel has the largest number of startup companies in the world. In absolute terms, Israel has the largest number of startup companies than any other country in the world, except the US (3,500 companies mostly in hi-tech).
  • Israel is ranked #2 in the world for VC funds right behind the US.
  • Israel has the highest percentage in the world of home computers per capita.
  • Outside the United States and Canada, Israel has the largest number of NASDAQ listed companies
  • Israel has the highest average living standards in the Middle East. The per capita income in 2000 is over $17,500, exceeding that of the UK.
  • With more than 3,000 high-tech companies and start-ups, Israel has the highest concentration of hi-tech companies in the world (apart from the Silicon Valley).
  • On a per capita basis, Israel has the largest number of biotech start-ups
  • Twenty-four percent of Israel's workforce holds university degrees -- ranking third in the industrialized world, after the United States and Holland -- and 12 percent hold advanced degrees.


    So, I repeat, here are some lessons India should learn from Israel:
  • Invest in education
  • Investment - fostering entrepreneurship through private and venture funding
  • Foster a breed of entrepreneurs that are willinng to take risk
  • Expand your horizon (look at Israel - it specializes in chip design, hardware, software, security, AI, graphics, biotech........ to name a few)
  • Provide a means to reach markets (why are so many Israeli startups listed on Nasdaq? Because the US is their primary market)

Thursday, July 22, 2004

New Business Models

What does the tech industry in India do really well today? I think in one word it is outsourcing - allowing corporations worldwide to trim costs from their bottom line by outsourcing development to an offshore company that can provide the necessary resources in a timely manner for a fraction of the cost that the corporation would otherwise have to undertake themselves. Let us be clear about one thing - it is all about the bottomline and the ROI for these corporations. The advantages of the outsourcing business model are:

- Built a new industry in India that has pumped in over $10 Billion into the Indian economy
- Created numerous jobs in the high tech field
- Pushed the infrastructure (electricity, water, internet access, transportation, etc.) to new limits
- Fostered a new breed of entrepreneurs
- Forced the governments at all levels to respond to this opportunity with favourable governance like export promotion acts, tax implications, foreign exchange, etc.

These, and numerous other advantages have created new opportunities that we will explore later. Before we do that, there are some problems with this business model:

- Building temporal knowledge bases - Our tech workers focus on one project at a time, and then moving on to a completely new area. The knoweldge they have acquired through this process is temporal and not long lasting. We are building jacks of many trades and masters of none.
- Not enough skilled managers and workerbees in business areas - We do well when we want to build an engineering organization, but not when we need a business organization to support that organization. For example the skills of product marketing and product management are not being developed.
- Building an economy that can be a victim of its own success - what happens when the Indian tech worker starts making 60-75% of the salary that say a tech worker in the US makes. At that point the ROI for outsourcing will be gone.

To counter these and other disadvantages we must focus on developing products. I am not saying that we must get away from the outsourcing model. Not at all. What I am saying is that if you want to build a long term sustainable economy around the tech industry, then we must start building and selling products, not just services. These products will create:

- Permanent Knowledge Centers - lets explore this with an example. Say corporation Acme produces a new encryption algorithm that can completely change the face of Public Key Encryption. The founders work with a couple of professors at Universities in India to solve several technology problems. The professors in turn work with existing students, who start researching and getting involved in this industry, publishing papers, some of them turn it into their Ph.D. thesis, and this creates more interest, new companies in this area are formed, and soon there will a cycle where new students will come upw ith new ideas, Acme may become successful creating a success story that many of these students want to replicate, and start new businesses which compete with one another to come up with the best products, and where many employees are focusing on solving similar yet disparate problems. That is the start of building Permanent Knowledge Centers. This cycle creates new businesses, new ideas, innovation, and personnel trained and knowledgeable in this field.

- Products sustain in the long term - look at silicon valley. It has the highest cost of living index, the average tech employee is the highest paid tech employee anywhere, yet the largest and the best technology corporations are based in the valley. Why? Because this is where the knowledge Centers are, this is where the best product ideas are formed, and these products can sustain these upward economic pressures where services will fail. Think about this: Corporation sin the US have already started exploring China as an outsourcing partner because India has become much more expensive in the last 5 years, and the ROI of outsourcing is dropping every year. Product pricing is based on value to the corporation.

Its time for us to wake up and build products that will fuel the economic engine for a long time to come.

Wednesday, July 21, 2004

The Challenge Facing India's Tech Industry

The Indian tech industry has created an economic revolution in India. It has done things that no other industry has been able to do - create a real middle class in India. It is refreshing to see that there are working class people in India now who can afford to live well - own cars, lease/buy apartments or houses, have disposable incomes that are creating new dynamics - new forms of enetertainment, and this has somewhat filled the gap between the haves and have-nots. I am sure this argument can be argued to death. However this is not what I am here to debate.

There is a challenge facing the Indian Tech Industry. Is it possible to continue a healthy growth with the current business model of IT outsourcing, BPO, call centers etc.? Probably not, because as propsperity continues to increase and cost of personnel and other resources in India go up, the ROI on the outsourcing model will go down, and the same people who do business in India will start finding greener pastures. While China is an intriguing possibility, I am sure a number of economies can step up to the plate and feed the need.

So the question facing India is how do we sustain this economic revolution in the long term? I think the answer lies in these areas:

1. New business models that can withstand rising costs
2. Governance - policies and regulations by the Indian government that favors this climate
3. Education - continued growth in quality and quantity of students being produced in the right areas
4. Investment - fostering entrepreneurship through private and venture funding
5. Cultural shift (hardest to do) - allow entrepreneurs to take risk without having the cultural stigma of failure

The way I see it is that India can become the silicon valley of the east if we focus the right amount of attention in each of these areas. Should we do that, I think India could surpass $100 Billion in revenues in the tech sector in the next decade.

Lets keep this as an open forum for debate and brainstorming, with the key goal that we can arrive at some findings, and recommendations for the industry leaders, for the entrepreneurs dreaming of creating the next infosys, so that we can adapt and grow and make our country and economy stronger.