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On the embedded trail
When I wrote in my last column that Business
Process Outsourcing could well be India’s deliverance, I knew
I was sticking my neck out. Way out. For, there are quite a few
who are convinced that BPO’s but a temporary aberration, its
fleeting millions but the lure of an ephemeral seductress who will
tomorrow flit frivolously across to the next cheapest paramour.
I stand by what I wrote, though, and my conviction
is unflinching. But not even I harbour any illusions that BPO is the panacea
for all our ills. Sure, with colleges across the country spewing out 1.54 million
graduates every year, we’re lucky to have an industry that can keep so
many of ’em off the streets and gainfully occupied. But we need to hedge
our bets too, just in case the burgeoning IT services and BPO sectors in fact
turn out to be a mere matter of labour cost arbitrage after all.
Hedge our bets on what? “Products!” is the
knee-jerk yelp heard most often. The economics are compelling, no doubt. Back-of-the-envelope
calculations tell you that per-employee revenue generation potential is about
40 times greater when comparing software products with services. In other words,
if and when we achieve the projected $87 billion revenue figure in 2008, the
software/BPO workforce would need to be over five million strong if we go entirely
the services way (it’s about 0.65 million currently). On the other hand,
pure products, going by this highly simplified logic, would mean not only sensational
employee productivity statistics, but also rampant unemployment!
So we need a healthy combination of both—services
and products. But apart from an i-flex here and a Ramco there, I don’t
really think we’re going to make too much headway up the global product
path anytime soon. The wherewithal for product development and marketing seems
to have consistently eluded us, barring the rare exception.
The answer then must lie elsewhere. And I think it’s
hidden in Intellectual Property (IP) licensing for embedded systems—the
specialised chips and software that go into devices like mobile
phones, cameras, washing machines and just about every consumer
device being manufactured today. On a recent visit to Bangalore,
I set out on the embedded trail, visiting the likes of Sasken, Ittiam,
Synopsys, et al. To put it mildly: I was amazed at what I heard
and saw. Anyone who whines that we’re the software development
dregs, ought to be sent on a tour of the chip design and silicon
IP outfits scattered all over Bangalore and Hyderabad and elsewhere.
There’s leading-edge technology work happening
here, and not all of it is restricted to the MNC design centres. For instance,
take Ittiam (“I Think, Therefore I AM”). This start-up, formed in
2001 by the ex-MD of Texas Instruments India, Srini Rajam, along with six of
his senior colleagues, focuses on digital signal processing (DSP). Rajam wants
Ittiam to evolve into India’s first world-class technology company. In
pursuit of this goal he’s already set the company on the IP creation fast
track, in the areas of digital video, wireless LANs and VoIP. With close to
30 IPs in the bag and around 35 licensees signed on, the company’s poised
to take a big leap once the royalties from the licensed IP start a steady inflow.
Then there’s Sasken. Focusing largely on the telecom
sector, Sasken follows a slightly different model, dividing its resources between
embedded software IP creation and design services. Wishing to play a role in
“enriching every communication experience”, the company has developed
protocol stacks in the area of mobile 3G, GPRS, and GSM and filed for over 35
patents in the wireless, DSL and multimedia space. Sasken’s founder Rajiv
Mody has in the past stated that he’s targeting revenues of Rs 1,000 crore
by 2006. With the hiccups of 2001-02 now well behind it, the company seems poised
to get there.
Dr Pradip Dutta of the Bangalore development centre
of US-headquartered Synopsys heads a band of around 250 developers and researchers
(including 115 who came aboard in Hyderabad when Synopsys acquired Avant!).
Synopsys is the IC design tool leader; the India centre works on $25 million
worth of development of EDA tools, verification, chip design applications and
methodologies, design services and consulting.
Of course, none of these Synopsys revenues accrue to
the Indian industry. So, like with other MNC design centres, it’s a matter
of a US company using Indian brains to get its work done cheaper. Definitely
good for the Indian brains, but shouldn’t we be protesting? No way! For,
as Dutta rightly points out, what’s happening as a result of all these
MNCs setting up design shop here is that India’s becoming an embedded systems
and tech R&D hub. This is attracting the cream of Indian tech talent to
return back home and lead teams of top-notch Indian engineers right here. Some
of these learned folk will undoubtedly break away and launch their own research
start-ups somewhere down the line.
Embedded tech hasn’t escaped the attention of
the big guns of Indian IT—Wipro, HCL, TCS—all of which have thriving
embedded software divisions, and, not surprisingly, tilt towards design services
rather than IP licensing. Embedded systems software is currently a $25 billion
opportunity as envisaged by the Nasscom-McKinsey report, and is growing at a
20-30 percent yearly clip. If you add in the actual devices as well, the figure
rockets into the trillions.
That’s why Srini Rajam dreams of the day when
he will tie up with an Indian manufacturer, license his cutting-edge embedded
technology in India itself, and jointly reap the profits from a snazzy, Indian-made
high-tech device sold worldwide at an unbeatable price.
Yep, there’s gold embedded in them thar silicon
chips. And India’s now licensed to make a killing.
Val Souza, Editor
valsouza@expresscomputeronline.com
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