India: Low-cost, high-tech hub

By Swati Prasad

India is fast emerging as a hub where domestic and multinational corporations are busy churning out a host of low-cost, entry-level products for emerging markets.

Rajdeep Sehrawat, vice president of Nasscom, told HNN, "This is the biggest untold story about India." Nasscom is India's trade body and chamber of commerce for the country's IT-BPO industry.

From laptops to mobile phones, and from cars - such as the $2,500 Tata Nano - to motorcycles and consumer durables, India is now home to several low-cost innovations.

Both Indian and multinational companies are utilising India's talent pool for developing low-cost products. From mobile handset manufacturers, such as Nokia and Motorola, to IT giants like HP and Dell, to automobile manufacturers such as General Motors and Suzuki Motor, manufacturers from various industries have set up R&D centres that focus on developing entry-level products.

Sehrawat said: "The last time we took stock, there were some 650 captives operating in India." Even companies that do not have operations in India have also established R&D facilities in the country, he added.

Ravi Bhamidipati, executive director of performance improvement at PricewaterhouseCoopers India, said in a phone interview: "From plain and simple cost arbitrage, India is today offering tremendous value arbitrage."

According to Bhamidipati, India's advantages emanate from the fact the country's rich talent pool is able to span the entire value chain, from low- to high-skill jobs.

Sehrawat said: "Low cost does not mean low technology. Simple, low-cost solutions often require very complex technology." He added that the technology behind Tata Nano, for instance, is "extremely complex" and neither cheap nor simple.

George Paul, executive vice president of marketing at HCL Infosystems, noted: "We often underestimate the innovative prowess of the domestic players, and have so far been looking for technological innovations from the West."

He said: "With the launch of innovative products like Tata Nano and HCL MiLeap [an ultra-portable laptop], that perception is slowly but surely changing." HCL has R&D centres, dubbed HCL Labs, across three locations in India.

"The HCL Labs serve as hubs of technological innovation and the design centres of future HCL products and solutions," Paul explained. The latest innovation from the HCL stable is the newly launched MiLeap range of 'Leaptops', or what HCL describes as mobile devices that are similar to laptops, with an ultra-small form factor. The devices are priced at $331.

"India is emerging as an R&D powerhouse. It's not that India is doing only simple coding work for the global products. Indian captives are today a major source of innovations", Sherawat added.

India's large and growing domestic market is helping both home-grown and multinational corporations. Bhamidipati said: "India has a very strong domestic market that is increasingly getting more prosperous. Unlike other economies, India is not dependent only on exports."

In addition, the requirements of the Indian market are unique. "The solutions for India are very different from the solutions multinationals undertake for the developed world," Sehrawat said.

A small or medium-sized enterprise (SME) in India is very different from an SME in Munich or Montreal. For this reason, several technology vendors have developed products especially for the Indian market.

For example, HP builds a range of desktops, including its range of Compaq Business Desktop PCs, out of its lab in Bangalore.

HP said in a statement: "These business PCs have a high-performance machine that has the ability to withstand harsh Indian working conditions and delivers productivity and efficiency consistently. With a small form factor, these desktops are ideal for organisations that struggle with challenges such as space limitations, data security and power consumption, especially in the ITES [IT-enabled services] sector."

Indian companies, too, are looking to ride the low-cost wave.

Following the launch of the Tata Nano in January this year, Indian automotive company Mahindra and Mahindra (M&M) announced it is developing a platform for low-cost utility vehicles. Expected to roll out by the end of 2009, these vehicles will be available from $9,400, compared to the $14,000 price of some competitors. M&M also has plans to launch an ultra-low-cost tractor for India's rural market.