Tech Entrepreneurship
How to Identify a Technology Wave, Ride It, and Forge a Multi-Hundred Billion Dollar Global Industry
Case study of successful nurturing of startups at scale
I recently met an old friend and colleague after nearly 22 years. It was an unbelievable catch-up as we ran into each other at traffic lights at a busy crossing. Except that I did not recognize him and moved on.
In a few moments, I felt someone touching me on the shoulder, and I turned around. There he stood beaming, said nothing, and it was the warmest smile ever. I had not seen him in two decades and couldn’t recognize him. And then he spoke — his voice gave him away.
We spent the next two hours at the same coffee shop we had spent hours on end years ago. We had worked together at Motorola, which was my first place of work.
The conversation brought up a ring-side view of the industry we grew up with, from its formative days to where it has reached today. I thought of sharing the story and hope it resonates with you, too.
Having been closely associated with the definition and evolution of the IT outsourcing industry from the early days to the powerhouse it has become today, I feel privileged to have had this ring-side view.
The evolution of the Indian IT industry is a tale of strategic foresight, tenacity, and seizing the right opportunities. From its humble beginnings in the 1980s, when Texas Instruments kickstarted the captive offshore software development trend in Bangalore, the industry has witnessed exponential growth and transformative changes.
In the early days, challenges were manifold. The technological infrastructure was rudimentary, with a mere 2.4 kbps data transmission speeds facilitated by exorbitantly priced leased circuits (today, we complain when mobile data speed drops to 300 Mbps.
However, the 1980s laid the foundation for what was to come. Realizing that mainframe software development could be executed from remote locations prompted numerous companies to adopt this model in the following decade.
Watch Out For The Big Wave
However, the impending Y2K (year 2000 bug issue) challenge at the close of the 20th century truly set the stage for India’s meteoric rise in the IT sector.
The Y2K bug, a design flaw in 16-bit processors, threatened to reset computer dates from December 31, 1999, to January 01, 1900, or 0000, instead of January 01, 2000. The potential repercussions were massive, with global experts warning of catastrophic failures, particularly in the financial sector.
Spotting an opportunity, Indian IT companies offered cost-effective, efficient solutions to address and rectify this monumental glitch. Their expertise and the value proposition they presented were unparalleled, resulting in a massive influx of projects to the subcontinent.
I remember the demand for IT professionals exploded to the point that American companies were willing to train hundreds of professionals, provide visas, organize travel to visit client locations, and fix the problem. This made millionaires out of some placement firms, travel agencies, recruiters, IT service firms, and consultants.
By conservative estimates, this singular event generated approximately 100,000 jobs for Indian IT companies. Numerous companies that sprouted during this period, riding on the Y2K wave, have since evolved into billion-dollar corporations.
Concentration is my motto — first honesty, then industry, then concentration — Andrew Carnegie
Fast forward to the present, the Indian IT landscape is unrecognizable from its early days. Current statistics paint a picture of a robust, thriving industry. Here are some vital statistics that will present a clearer picture:
India’s tech industry revenue is $245 Billion (annual run rate of 2022), of which exports are about $195 Billion. This is a 57–58% market share of all global IT sourcing.
The industry directly employs about 5.4 million people with 36% women employees (net adds 290k over the year) within about 35K companies. Separately there are another 27K tech startups (not included in the 35K counted above).
IT Foreign Direct Investment: about $14.7 billion (about 26% of the total FDI in the year).
Total tech patents filed by India in this sector: 266k (Source: NASSCOM)
That is a staggering achievement over 35 years (roughly). And it is not easy to summarize how this was done in one article.
There were some powerful reasons why this became possible. They are listed below:
Strong STEM Base: Indian demographics always had a strong Science, Tech, and Math base from school education onwards. This base is traditional (from vedic times) and has strengthened over time. The English education at early school made this a strong resource base today.
Large Technology Resource: India produces about 1.5 million Engineering graduates a year (about 14% women) from its 2,500 engineering schools, 1,400 polytechnics, and about 200 schools of planning and architecture.
Pro-IT industry Policy: The Indian government over the years has been hugely supportive and actively promoted the sector. It provided subsidies on land, IT parks, lower taxes or lucrative tax holidays, ease of import of capital equipment to do with the IT sector, and power subsidies and therefore encouraged ease of operations.
Industry Think Tank: NASSCOM is the not-for-profit apex body that represents the Indian IT industry. The agency has grown to represent the sector's interests within India — discussing with the government and is at every trade event globally representing the industry interests — training, visas, investment, distribution opportunities, and bilateral trade.
I do not think there is any thrill that can go through the human heart like that felt by the inventor as he sees some creation of the brain unfolding to success — Nikola Tesla
The IT industry in India has scaled so well that it is hard to believe how some of these could have grown to these levels. A quick snapshot of some of the top IT firms in India regarding employees on their rolls as of March 2023.
Some people joke that a company like TCS is bigger than a small European town with more employees on the roster than residents in the village. Here is a quick list.
Tata Consulting Services (TCS) — 614k
Infosys -343k
HCL — 250k
Wipro — 222k
Accenture — 300k
Global Sourcing: Not a one-trick pony
Such large-scale transformations cannot always be converted into sustainable industry models — for example, India missed the semiconductor bus decades ago. The small-scale manufacturing train left the station before India got its act together.
The clothing and textile revolution that India was ruling slipped out of hand as a strong competitor stepped in with all its might: China. China’s government-backed large-scale cotton processing plants made it the cheapest place on the planet to produce textiles.
So much so that India gave up the opportunity and started outsourcing cotton fabric production to China — with a caveat: ‘We will provide the cotton and designs. You just make them.’ India is still one of the largest producers of cotton in the world.
Natural resources, including raw materials and human capital, are crucial to pick up global sourcing opportunities. However, a highly responsive government policy with a constant pulse on the global market and quick response to changes can make or break your fortunes.
Geopolitical forces, regional trade alignments, customs duties, levies, and taxes are all factors that can derail a multi-billion dollar by the stroke of a pen. A new party gets voted to power in a significant buyer country, and subsequently, an existing trade agreement with another breaks down. This is enough to make large companies go bankrupt in a matter of months.
I have seen, personally, one of my clients in the Indian shrimp exporting business swing from one extreme to another, as a new Southeast Asian supplier nation overnight became super competitive as their tax laws changed.
Interestingly, the knowledge and information tech industries have some inherent buffers in this case because no physical commodity is shipped.
In the case of my shrimp exporting client, he eventually moved back to software exports, unable to manage the extreme swings, and the capital buffer required to sustain the business was high.
Ready to Repeat the Performance now with the AI wave
And now Nasscom is readying itself with a new arsenal to take on the emerging opportunities with AI.
Generative AI is estimated to yield an annual economic value of USD2.6 to USD4.4 trillion globally, with the highest impact expected across high-tech, banking, and retail industries.
Across the four application themes — Concision/Virtual Experts, Coding, Customer engagement, and Content generation — approximately 75% of the value is expected to be concentrated in four functions — sales and marketing, software engineering, customer operations, and product and R&D.
How to catch startups young
Towards this end, the concept of NASSCOM’s Generative AI Foundry was developed. The Foundry aims to help tech startups in the AI domain build India’s niche in the global Generative AI startup landscape. As part of this program, it has selected 26 startups from an initial group of 70 applicants.
The program is a 12-month training setup for the chosen firms with funding up to $25 million. The landscape of Gen AI has already raised funds of about $590 million so far in India.
These companies will get access to leading-edge tech stacks, GCP compute nodes, and opportunities for paid PoC (proof of concept) from the network.
Create the Support Infrastructure — the investor club, the mentors, the community, and cross-pollinate
The Foundry is a partnership with more than 30 investors and industry partners. Anthill Ventures, Broadridge, Capgemini, Centific, Chiratae Ventures, Cigniti, eClerx, Endiya Partners, GitHub, Jio GenNext, MathWorks, Microsoft, Pavestone VC, Premji Invest, Samsung R&D Institute Bangalore (SRI-B), Silver needle Ventures, Sutherland, and _VOIS (Vodafone Intelligent Solutions) are some of the partners putting their stake in the ground for this initiative.
If I had asked people what they wanted, they would have said faster horses — Henry Ford
From the list of 70 short-listed startups, a cohort of 26 have been picked for grooming and building up. I’d like to give you a few examples of these organizations for awareness so that you can learn from their initiatives.
KROOP AI is an ethical synthetic audio-visual deep-learning platform that develops digital avatars for given text input
Brahmgan.ai creates the next generation of infrastructure for 3D services. The company was started in 2022 by serial entrepreneurs to help various gaming studios make their asset development faster. Now cover Ecommerce clients and the XR industry which innovatively uses the NeRF outputs to create highly photorealistic scenes.
Justbaat.com creates life-like AI anchors for brands with engaging videos in Indian languages in seconds.
Vitra.ai has a platform that can help translate videos, podcasts, images, and text into 75 different languages with one click.
Zocket.ai helps clients create ads in less than 30 seconds using Generative AI and various techniques. Have raised $3 million from Kalaari Capital.
As it is beyond the scope of this story, I plan to post a separate article, including the full list, and you may also subscribe to my free Substack newsletter to access it.
I have seen and met the first Chairman of Nasscom, Shri. Dewang Mehta is an amazing, young, dynamic, high-energy professional who set the vision board uncommonly high. From those days, the industry body has never looked back.
What lessons are we learning here?
Nasscom has become an established model for incubating and scaling an emerging tech into a full-fledged industry that can become a global leader.
This requires aligning several things, such as governmental policies, resource base, investor community, regulations, and infrastructure. But beyond all that, it also requires a vision to take the industry to the next level year after year for decades.
This model is well worth emulating. To learn more about @nasscom, go here: Nasscom. This model can create any knowledge industry, including biomedical research, molecular development, and scientific disciplines.
Do a competitive audit of the nation’s most profound and broadest resource base and then apply similar principles on paper to see the top 5 things to target in the next ten years.
Building a multi-hundred billion dollar industry is also a matter of vision, self-confidence, resilience, and a long-term bet on the future. These marathons are multi-decade projects, with deep investments and commitments not just from entrepreneurs and business houses but from governments and policymakers.
The Nasscom site has numerous principles you can use and explore if they apply to your industry or country. Explore the site, download the templates, and see if it works for you.
Some of these resources will certainly get you thinking and give you some ideas on how to plan. You may also contact me if you think I can help with some policy measures and feedback.
Conclusions
This story summarized what we discussed in two hours during this serendipitous encounter. After a lovely conversation and several coffees in two hours, my friend and I parted ways with the promise that we would not wait for the AI wave to be fully established before our next meeting.
I trust that these overarching insights from the IT sector in India offer valuable perspectives, inspiring you to discern opportunities and take timely actions for the growth of your startup company.
While ending my story, I want to highlight that as the business landscape continues to evolve, many opportunities are emerging, spanning various sectors like ammunition and defense, space exploration, robotic automation, dissolvable surgical agents, DNA editing, and more — all seamlessly integrated with AI.
These opportunities pave the way for the next wave of nations, including the Philippines, Indonesia, Vietnam, Mexico, Australia, and Brazil, to strategically seize a niche and cultivate a robust $100 billion industry. I will cover my perspectives on these opportunities in my forthcoming stories.
Thank you for reading my story.
About me: I write about life, tech, societies, and startups. I help startup founders get clarity, grow, and scale. I write regularly here, and many thanks, ILLUMINATION editors, for creating a writer's profile for me.
You can contact me via email: [email protected], LinkedIn, Twitter, and YouTube. Subscribe to my daily AI nugget.
