What's Next for India's Tech Entrepreneurs

Suhas Gopinath is in demand these days. He takes time from his schedule as chief executive officer of the Bangalore-based IT services firm Globals, which he founded in 2000, to speak several days a week at youth entrepreneur events, business schools, and industry conferences. He was in Davos in February for the World Economic Forum and was one of the organizers of the Young Business Leaders conference held in May in Tanzania. After 10 years at the helm of his company, he's looking ahead to new challenges and new ventures.

Not bad for someone 24 years old.

Gopinath gained fame for his precocious success, starting his company in a cybercafé at age 14 and expanding it into a multinational business while his peers were still studying for their high school finals. These days the novelty of Gopinath's youth has worn thin—to him, at least. His ardor for entrepreneurship remains undiminished.

Though Gopinath is real enough—a soft-spoken, keenly intelligent young man kept humble by a solidly middle-class mother who doesn't let him believe too much of his own hype—his unusual story has become a foundational myth in India's rise as a hub for tech entrepreneurs. It's a Horatio Alger fable reinvented for a new century on a new continent.

The roots of India's tech entrepreneurship boom extend back to the early 1980s, when a group of software engineers decided to form a business to provide technology services to overseas clients, based on the wide availability and low cost of India's human talent base. They called their company Infosys (INFY). It became the company that would go on to flatten the world.

reinvesting for India's momentum

During the 1990s, Infosys went from win to win, popularizing outsourcing as a business model for IT services and alerting the world to the potential of India's growing number of highly educated technical professionals. People like a winner and the example of a home-grown company rising to take on the likes of IBM Global Services (IBM) and Accenture (ACN) inspired the pride of the public and even made India's hidebound political establishment take note.

Infosys had, and continues to have, a more tangible effect on the entrepreneurial ecosystem within India. It made millionaires out of hundreds of middle-class Indians who rose through the ranks largely on merit, independent of family connections or government patronage. Some of these executives left the company to start their own businesses or bolster other entrepreneurial ventures with their world-class managerial experience. Most who benefited from Infosys's success, including the company itself, aggressively reinvest in developing the workforce capacity, infrastructure, and momentum necessary to keep India's economic development moving forward.

Infosys built a futuristic campus in Bangalore that inspired young Indians everywhere. As the nation's most desirable employer, according to surveys, Infosys gets more than one million job applications per year for 15,000 to 20,000 openings. For each applicant who wants to work at Infosys, there are probably several more who want to be Infosys—to emulate both the company's material success and its influence on India's economic and social culture.

"Traditionally, entrepreneurship in India was limited to a certain group of people [who] have been entrepreneurs for 5,000 years or whatever," says Aditya Nath Jha, head of marketing at Infosys. "[In Hindu religion], we have a goddess for wealth and a goddess for studies and education, and they are sisters: Lakshmi and Saraswati. Conventional wisdom in India was that both cannot coexist in the same house. You cannot have education and wealth at the same time, which presumed that education does not lead to wealth. This was pre-knowledge economy. What Infosys did was to become a role model [and demonstrate] that through education, middle class kids can become entrepreneurs and make it big—and can do it without compromising on values, ethics, transparency, and integrity."

tech entrepreneurship: lush ecosystem

The success of Infosys inspired a growing number of ambitious, tech-savvy young Indians who began looking beyond the traditional career path of a good government job or a place in the family business. Groups such as the Indus Entrepreneur, established by expatriate Indians in Silicon Valley in the 1980s, helped spread the gospel of entrepreneurship. At the same time, the arrival of fast Internet connections and low-cost cybercafés in many of India's large urban areas exposed greater numbers of young Indians to the possibilities of the global knowledge economy.

Back in the days when Narayana Murthy, Nandan Nilekani, and their colleagues founded Infosys, that was a hard and untraveled road. Even in 2000, as young Suhas Gopinath began building websites for small businesses in the U.S., the pieces were only beginning to fall into place. Now the ecosystem for tech entrepreneurship has grown lush as faster, better technology penetrates deeper into the socioeconomic strata, investment in skills accelerates, government policies evolve to support rather than hinder entrepreneurs, and global platforms exist to propel small startups quickly into the spotlight of the global knowledge economy.

Several recent developments have accelerated the momentum. These include:

Adoption of Innovation & Entrepreneurship curricula at leading Indian business schools: Until recently, even the most prestigious higher education institutions in India focused on traditional management disciplines. Graduates aspired to good jobs within existing multinationals or government service. In the past several years, centers of excellence in innovation and entrepreneurship have emerged at schools around the country, many in collaboration with U.S. business schools, foundations, or private industry. These classes not only instill the skills necessary to found and grow a new venture, but also teach students the kind of integrated, interdisciplinary thinking that executives need to provide competitive value in a sophisticated global economy.

Innovation competitions to shine the spotlight on young talent: "Idea competition is very recent in India," says A.S. Rao, an entrepreneurship advocate and official in India's Ministry of Science & Technology. According to Rao, competitions are now a common part of Entrepreneur Week and Technology Week events hosted around the country. He helped judge an innovation contest in India in 2008 that attracted more than 5,000 entries. "There is a large number of youngsters and students who are now getting into this particular [area of] idea generation, idea-initiating, putting themselves in a competition for an idea award," he says. "This is very positive. These boys and girls, they think differently. Their perspective is different. We feel they probably would be able to fix long-festering problems, because of the technology in their hands and they are the masters of technology. It's all very promising to me."

Rapid spread and growth of mobile networks and mobile platforms for application development: Mobile networks and mobile data services are still growing at record levels in India as service providers extend coverage to rural areas and competition continues to drive down prices. While 3G service may initially be slow to grow beyond affluent urban centers, even 2G data services provide a platform for useful consumer and business applications, including many targeted at lower-income market segments. Carriers such as Reliance Communications (RCOM:IN), Bharti Airtel (BHARTI:IN), and Tata Telecom (TCOM:IN) are trying to position their networks as delivery platforms for independently developed applications, subsidizing a growing ecosystem of indigenous entrepreneurs who can create the kind of specialized mobile apps that can draw new customers into the mobile systems.

Increasing popularity of social networks and online resources for aspiring entrepreneurs and independent professionals: Traditional entrepreneurs had to rely on their personal networks and relationships, cultivated over decades or generations, to reach customers and recruit workers. Now social networks provide shortcuts to gaining the introductions and attention that entrepreneurs need to build their businesses. Facebook, Okrut, LinkedIn, and other large international networks are extremely popular in India. They are being supplemented by a growing number of specialty sites designed specifically to connect entrepreneurs and professionals, engage with prosperous expatriate communities overseas, and offer services and content in local languages, as well as in English.

Arrival in earnest of venture capital and commercial credit for fledgling companies: Even today, most start-ups have to depend on their own resources or informal loans to get their business off the ground. Large companies such as Infosys with an interest in spurring entrepreneurship sometimes provide capital or in-kind incubation services to employees trying to spin up new business units. However, the arrival of true venture capital and commercial credit is still a work-in-progress and is slowed by the ongoing credit crunch in U.S. and European financial markets. In the long run, this is a problem India can solve on its own with the growth of an indigenous investment banking segment independent of foreign capital. However, India's high personal savings rates are only slowly moving from household safes into the formal banking system. As this process accelerates, India's existing and newly created wealth can be channeled more efficiently through the financial system to drive new business creation. Getting there will take some changes in policy and in individual behavior, which may be slow to arrive.

a burgeoning, promising niche

Changes in government regulations and tax policy could have a significant impact on tech entrepreneurship in India. The complexities of Indian politics make it unwise to attempt to forecast government policies—or their efficacy. Amid this uncertainty, entrepreneurship continues to thrive on its internal dynamic and by riding the external trends of demographics (lots of young people) and technology (information and communication networks growing better and more accessible every day). Indians are concerned about income inequality, social justice, infrastructure, and the environment. They also recognize that innovation and prosperity can bring them a lot closer to addressing these problems in ways that transcend the traditional zero-sum calculus of ethnic and redistributive politics.

Tech entrepreneurship in India, for all its hype and popularity, remains a niche activity, restricted to a few with the talent, ambition, resources, and patience to navigate the complexities. Those like Suhas Gopinath, who are able to make something from nothing at such a young age, are rarer still. But in a country with 1.1 billion people, there are 1.1 billion possibilities. Even the one-in-a-million stories come true often enough to make a huge impact.

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