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India Runway: Guide for understanding ICT
 

India Runway: Guide for understanding ICT

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India Runway: Guide for understanding ICT by Finpro and Tekes

India Runway: Guide for understanding ICT by Finpro and Tekes

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    India Runway: Guide for understanding ICT India Runway: Guide for understanding ICT Document Transcript

    • India Runway: Guide for understanding ICT Finpro India Aug 2011
    • India Runway: Guide for understanding ICTTable of contentsPREFACE ..................................................................................................................................................................... 41 INCREDIBLE INDIA .............................................................................................................................................. 5 1.1 BUSINESS ATTRACTIVENESS ............................................................................................................................. 5 1.2 SWOT ANALYSIS: INDIAN ICT SECTOR ............................................................................................................. 62 INDIA ENTRY – KEY CHECK POINTS ................................................................................................................ 7 2.1 KEY SUCCESS CRITERIA ................................................................................................................................... 8 2.2 TAXATION......................................................................................................................................................... 8 2.3 DIRECT TAXATION ............................................................................................................................................ 8 2.4 INDIRECT TAXATION ........................................................................................................................................ 10 2.5 TAX DEDUCTED AT SOURCE ............................................................................................................................ 11 2.6 EXPATRIATE TAXATION ................................................................................................................................... 12 2.7 INTELLECTUAL PROPERTY RIGHTS................................................................................................................... 12 2.8 CULTURAL ASPECTS ....................................................................................................................................... 133 INNOVATION ECOSYSTEM IN INDIA ............................................................................................................... 14 3.1 INDIAN R&D ECOSYSTEM................................................................................................................................ 14 3.2 PROMOTING R&D ........................................................................................................................................... 15 3.3 INNOVATION ECOSYSTEM PLAYERS ................................................................................................................. 16 3.4 FISCAL INCENTIVES FOR R&D ......................................................................................................................... 16 3.5 SUPPORTING INFRASTRUCTURE ...................................................................................................................... 16 3.6 SUPPORTING INFRASTRUCTURE ...................................................................................................................... 20 3.7 ICT R&D HOTSPOTS ...................................................................................................................................... 21 3.8 GOVERNMENT INITIATIVES............................................................................................................................... 25 3.9 PRIVATE INNOVATION FUNDING IN INDIA ........................................................................................................... 26 3.10 R&D CENTRES OF EXCELLENCE (COES) ......................................................................................................... 27 3.11 DRAFT NATIONAL TELECOM POLICY 2011 ....................................................................................................... 28 3.12 GOVERNMENT DEPARTMENTS ......................................................................................................................... 29 3.13 ACADEMIC RESEARCH INSTITUTIONS ............................................................................................................... 29 3.14 INDUSTRY ASSOCIATIONS ............................................................................................................................... 314 BUSINESS ECOSYSTEM IN INDIA ................................................................................................................... 32 4.1 MARKET TRENDS: OVERVIEW .......................................................................................................................... 32 4.2 MAJOR ICT CLUSTERS IN INDIA ....................................................................................................................... 33 4.3 SOFTWARE PRODUCTS AND INFORMATION PROCESSING SERVICES (SWIP) ...................................................... 33 4.4 TELECOM PRODUCTS & SERVICES (TPS) ........................................................................................................ 38 4.5 TELECOM EQUIPMENT MANUFACTURING .......................................................................................................... 42 4.6 SEMICONDUCTOR INDUSTRY IN INDIA ............................................................................................................... 45 4.7 ELECTRONICS MANUFACTURING...................................................................................................................... 47 4.8 DIGITAL MEDIA ............................................................................................................................................... 485 RURAL ICT MARKET ......................................................................................................................................... 50 5.1 MARKET OVERVIEW ........................................................................................................................................ 50 5.2 ROLE OF CENTRAL GOVERNMENT ................................................................................................................... 53 5.3 STAKEHOLDERS IN RURAL ICT PROJECTS ....................................................................................................... 54 5.4 MODES OF ENTRY .......................................................................................................................................... 546 FINNISH EXPERIENCES, OPPORTUNITIES & CHALLENGES IN INDIA ....................................................... 56 6.1 EXPERIENCES OF FINNISH ICT COMPANIES IN INDIA ......................................................................................... 56 6.2 SUMMARY OF FINNISH OPPORTUNITIES IN INDIA ............................................................................................... 577 SERVICE OFFERING BY TEKES & FINPRO .................................................................................................... 58 7.1 TEKES‘ OFFERING ........................................................................................................................................... 58 7.2 FINPRO‘S OFFERING........................................................................................................................................ 58© Finpro -2-
    • India Runway: Guide for understanding ICTEditors Ambika Oberoi, Region India, Operations & Network Vrunda Chandorkar, Region India, Operations & Network Sreehari B, Finpro, Region India, Operations & Network For contact information see www.finpro.fi.© Finpro -3-
    • India Runway: Guide for understanding ICTPrefaceSlogan ―Incredible India‖ is true in many ways: India is the world‘s largest democracy, secular, diverse,multicultural, colorful, noisy, and crowded. And above all, it is huge and quickly developing country inmany ways. On the other hand, India has a long history of innovations – do you know, Indianmathematicians invented the zero and the decimal system as well a long, long time ago?India isn‘t any more only a cost effective global delivery center and back-office service provider forsoftware and electronics products. It is in a runway heading to be a global player in the ICT innovationecosystem, covering software products, digital media, telecommunication, embedded systems andconsumer electronics. It is already now a huge market for different kind of ICT products and services forconsumers, businesses and governmental use. India is today one of the fastest growing telecommarkets in the world. And all these markets are in rapid transition phase, and they are growing quickly,the long-term potential of these markets seems to be much higher than the current one. Both the centralgovernment and most of the states are investing heavily on infrastructure and ―ICT innovation basics‖(e.g. end-user terminal penetration as tablets, mobiles, and pc‘s, broadband access, digital public andprivate services, clouded backbones and platforms, IP reform, education and competence development,business incubation, basic and applied research etc) to really push India towards a digital innovationsociety. In the latest national innovation policy ICT innovations have a significant role, because it isdifficult to gain growth in the future on service-oriented business.Everybody recognizes and approves status of Bengaluru (earlier Bangalore) as globally perhaps thesecond most significant ICT innovation hotspot challenging Silicon Valley, but there are many otherinteresting locations like Pune, Chennai (Madras) and Hyderabad with huge talent pool for innovationactivities - do you know these?This document should be used to structure India, to understand its innovation ecosystem in general andspecifically in ICT in the central government and national levels, briefly also in state level. It should beused also to outline business and innovation potential in this huge and quickly growing and developingnation or rather a subcontinent.Of course, India is not an easy market to understand or to enter. But the market benefits from a healthydegree of competition and growth exceeding global growth, although in most ICT business areas it ishigh-volume, low-cost and low-profit market. In order to survive in the new global economy, companieshave to engage with China and India, not only with USA and EU.Tekes, the Finnish Funding Agency for Technology and Innovation and its India Task Force projectordered this guide from Finpro in summer 2011 in order to understand ICT in India in more details, andto distribute this understanding to Finnish companies. The content of this guide is based on Finpro‘s andTekes personnel‘s knowledge, experiences, interviews and desk studies on India. This guide is writtenby Finpro. The main objective of this study was to provide general information about economics andespecially innovation ecosystem in India. We wanted also to outline in a rough level business possibilityin some interesting ICT segments.We hope that this guide can assist Finnish companies, their management and owners to understand thishuge country and its business possibilities somewhat better, and to support their way for successfulventures with India.Tekes, the Finnish Funding Agency for Technology and InnovationLappeenranta, December 2011© Finpro -4-
    • India Runway: Guide for understanding ICT1 Incredible IndiaIndia, the largest democracy in the world; a country with varied cultures, practices and beliefs, a countrysurging ahead in international scenario with its robust growth in economy and attracting investmentacross all the industries; has achieved all this because of its intrinsic strength and ability to grow withinrather than be dependant on the exports. 12.0 Economy - Indian vs. World Real GDP Growth rate 9.8 10.0 9.2 9.3 India World 8.2 7.9 8.0 8.0 7.2 6.7 5.6 5.7 5.9 5.8 6.0 5.2 5.1 5.4 Growth % 4.0 4.3 3.6 4.0 2.9 2.7 2.0 - -2.0 -2.2 -4.0 1950s 1960s 1970s 1980s 1990s 2001-03 2004 2005 2006 2007 2008 2009 2010 2011 India has been on the growth path since the opening up of the economy from the 1990‘s.1.1 Business Attractiveness A set of regulations affecting 9 stages of a business‘s life are measured: starting a business, dealingwith construction permits, registering property, getting credit, protecting investors, paying taxes, tradingacross borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current asof June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms haveworked, where, and why. Doing Business in India Parameters Doing Business 2011 - Ranking Ease of doing business 134 Starting a business 165 Dealing with construction permits 177 Registering property 94 Getting credit 32 Protecting Investors 44 Paying taxes 164 Trading across borders 100 Enforcing contracts 182 Closing a Business 134 Source: http://www.doingbusiness.org/data/exploreeconomies/india© Finpro -5-
    • India Runway: Guide for understanding ICT1.2 SWOT Analysis: Indian ICT Sector Strength Weakness Mobile subscriber growth continues to be strong.  MNCs dominate- India yet to have own global Fast growing telecom sector incl. software hardware, software brands solutions, services, system integration, back  The design and architecture of any new product office operations, VAS requires very high level of domain experience High IT maturity levels. Excellent product and this is missing in India development capabilities at par with global  Product design, conceptualisation, new product development centers of parent companies – ideas mainly from parent company origin offices, many global R & D centers implementation done in India Cost effective R & D  India perceived as a complex market with Government promotes and encourages complicated tax laws, rules & regulations, institutes/organizations to conduct R&D activities bureaucracy, infrastructure bottlenecks and offers various tax benefits and incentives  Despite MNCs‘ R & D set ups in India, not much Demand for mobile value-added services is innovation (esp. product related) is taking place strong and expected to grow  Academic Research hasn‘t taken off widely Huge talent pool: strong English-speaking (except in IITs and IISc). Weak industry- workforce, huge base of engineers/graduates, academia linkages strong university base  Mobile market is still highly skewed towards Attractive business environment encouraging prepaid users; inactivity levels are thought to be entry of foreign players high. National agenda ‖Broadband for All‖ creates  The dominance of prepaid services has backbone for huge investments contributed to declining mobile average revenue Media & entertainment: strong culture of per user levels. consuming entertainment  Disagreements between the telecoms regulator and various government ministries has led to delayed policy implementation in a number of areas, this was notable in the case of 3G licensing.  Despite major ongoing investments, mobile network infrastructures in rural areas remain limited.  Local issues often requiring customization on account of regional languages, cultural aspects, low income levels, low percentage of banked population, illiteracy Opportunity Threat India‘s huge domestic market provides  Danger that the current slowdown in domestic tremendous opportunities for products and consumption will impact negatively on mobile services innovation market. Government is undertaking measures to promote  Emergence of China and incentivize domestic manufacturing -Higher number of R&D centers Large, untapped rural market expected to provide -China gives specific incentives, and produces the next wave of growth way more PhDs Opportunities in embedded software, gaming, R  Cost escalation, economic meltdown & D collaboration, wireless technology incl. green  Develop India-specific strategy: Finnish business technology and for rural areas: e-banking, e- and work practices may not necessarily work health, e-education, e-agri, e-governance  Network capacity, particularly in mobile market, The Draft National Telecom Policy 2011 has a could struggle to keep up with demand. thrust on sustained technology adoption to  Mobile number portability will make migration© Finpro -6-
    • India Runway: Guide for understanding ICT enable overcoming of developmental challenges between operators easier, thus adding pressure in education, financial inclusion, health, on operators to retain existing customers. employment generation among other areas.2 India entry – Key Check points Quick check list • Nature of Activity •Form of business & presence Entry •FDI norms (if applicable) Strategy • Evaluate the Indian investment and form a suitable investment vehicle • Public / Private limited company • Branch office Business • Liason office entity • Authorized selling agent / representative • Share capital (Preference and Equity) • Debt (Local borrowings and External commercial borrowings) Funding • Advance receipts Options • one time costs ( Registration, duty charges etc for incorporation of Company) • ongoing cost & compliances (Direct & Indirect taxes, Levies & Charges) Costs • Central registrations like PAN, TAN, Exim Code, Excise code, Service tax number • State registrations like Professional tax, Shop & Establishment act etc • Registration with Registrar of companies under the Companies Act, 1956 Compliances • Filing of statutory reports, Auditing of accounts and payment of Income Tax • Buy back of equity shares • Issue of redeemable preference shares • Capital reduction Cash • Distribution of dividends Extraction • Management / Consultancy charges© Finpro -7-
    • India Runway: Guide for understanding ICT2.1 Key Success Criteria What is your USP – Identify your target why Finnish segment+ localize Develop market company and not your offering+ understanding Indian. Develop customize your value pricing strategy for proposition India. Do thorough check of Local knowledge + partner candidates, Find Good Local Local contacts + monitor partners for Partners Local team success. Partner internationally. Develop India Closely engage with specific strategy- client 24x7. Establish Scale up for Success Finnish business & suitable R & D work practices may model. not work2.2 Taxation India‘s tax structure is well developed and tax levy is divided between Central and State governments.The Central government levies direct taxes like income tax, wealth tax and corporate tax; and indirecttaxes like customs duty excise duty, central sales tax and service tax. The taxes that come under statewould be professional tax, state sales tax along with local taxes like entry tax or Octroi. Now the statesales tax has been replaced by VAT all across the country. The Indian tax year is from 1st April of the year to 31st March of the subsequent year. All corporate arerequired to file Income Tax (IT) return, even in the event of loss for the entity. If non-resident corporateconducts business in India, they should also file an IT return in India on the specified date. For payment of income tax and other direct taxes the company has to obtain Permanent AccountNumber (PAN), which is a ten character unique number allotted to a company by the Income TaxDepartment. It also has Tax Deduction and Collection Account Number (TAN), which, in turn, is a 10digit alpha numeric number required to be obtained by all companies and persons who are deducting orcollecting tax.2.3 Direct Taxation2.3.1 Corporate income Tax The Income Tax Act, 1961, governs the levy of income tax. The policy regarding income taxationin India is decided by Ministry of Finance, Government of India. The highest administrative authority forthe income tax is the Central Board of Direct Taxes, which administers the Act.© Finpro -8-
    • India Runway: Guide for understanding ICT Corporate tax rates are different for domestic and foreign companies. Domestic companies arethose incorporated in India. Foreign companies having Liaison/representative offices, project offices,unincorporated joint ventures and branch offices are treated as foreign companies. Surcharge andEducation cess are calculated additionally for all taxes. The taxable income is called ―Total Income‖ which is computed after adding certaindisallowances, such as loss on sale of asset and miscellaneous expenditure written off, and reducingcertain allowances/benefits from the book profits. Depreciation is allowed separately at various rates forthe respective assets for computing taxable income.2.3.2 Minimum Alternate Tax MAT is levied at 18% of the adjusted book profits, if the payable income tax (inclusive ofsurcharge and education cess) according to the normal provisions is less than 10% of the profits. Asurcharge of 10% is applicable for domestic companies if the adjusted book profits exceed INR 10million (€ 10,000,000). In addition, the taxable income is subject to the 3% Education Cess. This resultsin total rate of 19.93 %.2.3.3 Dividend Distribution Tax Dividend distribution tax (DDT) at the rate of 15% (plus education cess) is levied on thosecompanies declaring dividend. This is resulting in an effective taxation rate of 16.609% for a company onits distributed profits. The dividend tax is payable also when subsidiary pays dividends to the parentcompany. DDT has been criticized since it basically means double taxation on the profits. Despite thecriticisms, the tax continues to exist.2.3.4 Transfer pricing Comprehensive transfer pricing regulations (TPRs) were introduced from 1st April 2001. Theobjective was to prevent MNCs from manipulating prices in intra-group transactions, e.g. by transferringtheir profits out of India. Indian transfer pricing provisions are generally in line with the transfer pricingguidelines for MNCs and tax administrators under the OECD (Organization for Economic Co-operationand Development) guidelines. Under TPR, any international transaction between two or more associated enterprises must be atarm‘s length price (ALP). The determination of arm‘s length price for international transaction is subjectto ―safe harbour‖ rules. The Central Board of Direct Taxes (CBDT) is empowered to draft this andindicates the circumstances under which tax authorities accept a transfer price declared by a taxpayer.These regulations also apply to cost-sharing arrangements.2.3.5 Other direct taxesFringe Benefit Tax Fringe benefit tax was introduced in 2005; it‘s recently been abolished by the Finance Act, 2009.Wealth Tax Wealth Tax is charged on each company for every assessment year in respect of net wealth ofthe corresponding valuation date, at the rate of 1% of the amount by which the net wealth exceeds INR 3million (approx € 50,000). Wealth tax is not deductible for central income tax purposes.© Finpro -9-
    • India Runway: Guide for understanding ICTWithholding tax When making certain payments to non-residents and non-residential companies Indiancompanies are required to deduct withholding tax. As per Section 40(a)(i) read with Section 195 of the ofthe Indian Income Tax Act, the entire expenses, relating to any payments to Non-Residents withoutdeduction and deposit of the relevant withholding tax are to be disallowed in the computation of itstaxable incomeCapital Gains tax Profit or gains arising from the transfer of a capital asset during the previous year is taxable asCapital Gains under section45 (1) of the Income Tax Act. The taxability of capital gains is in the year oftransfer of the capital asset1. Capital assets are classified as Long Term or Short Term with reference to the period of holdingof the assets till it is transferred.All the following taxes explained below are applicable in case of purchase of machinery, ancillaryproducts and services for the purpose of generating / transmitting / distribution of electricity.2.4 Indirect Taxation2.4.1 Excise duty Excise duty is a tax applicable to all the manufactured goods within India and is payable by themanufacturer. The Central Excise Act, 1944 and the Central Excise Tariff Act, 1985, govern exciseduties. An article attracting excise duty must be both movable and marketable – they should be in aposition to be taken to the market and sold. Basic Excise duty (also termed as Cenvat) is usually payable on assessable value on ad valorembasis. Generally this is understood as the price mentioned in bill or invoice. However, in some cases it isbased on the maximum retail price, fixed tariff value etc. Subject to specified conditions, there is exportof finished goods and import of input materials, without payment of excise duty. The basic general rate for excise duty is about 10%. Education cess at the rate of 3 % is payableof the basic duty. Thus the effective rate is 10.32%.2.4.2 Value Added Tax (VAT)/Central Sales Tax (CST) By 1st April 2008 all the Indian states have adopted Value Added Tax (VAT). All businesstransactions carried on within a State by individuals, partnerships, companies etc. will be covered byVAT. VAT has 4 slabs of taxes 0%, 1%, 4% and 12.5%. Out of these 4 and 12.5 are the most commonones. Dealers can deduct the amount of tax paid by him for purchase from the tax collected on sales,thereby paying just the balance amount to the Government. VAT paid on inputs purchased and used inthe manufacture of goods – also those for exports – will be refunded.1 Capital asset means property of any kind held by the assessee except stock in trade, consumable stores or raw materials heldfor the purpose of business.© Finpro - 10 -
    • India Runway: Guide for understanding ICT Interstate sales continue to be liable to CST, which is imposed by the central government andadministered by the state governments.2.4.3 Service tax Service tax is a tax levied on certain identified taxable services provided in India by specifiedservice providers. It is rendered at the rate of 10% of the gross value of taxable services. In addition aneducation cess at 3% is also levied on the services resulting in an effective rate of 10.3 %. The rate ofservice tax continues at 10%. The Government has broadened the service tax base by introducing eightnew categories of services and has expanded the scope of certain existing services.2.4.4 Octroi & Entry Tax Octroi is the tax levied on import or conveying of any goods in the municipal area of any town orcity. Octroi has been largely abolished, and it is levied only in cities within the state of Maharashtra. AlsoMaharashtra is planning to abolish this duty within the coming years. The range of Octroi ranges from 4to 5% of the invoice amount. Octroi rates vary from municipality to municipality and are on invoice valueof the product. Several states (except Maharashtra) are collecting Entry Tax or other equivalent tax (e.g. inHaryana this is called Local Area Development Tax) on entry of goods within the State limits. The rateof entry tax is usually between 2% and 4%.2.4.5 Electricity Duty Electricity duty is levied by state governments on electricity supplied to consumer. Totalexemption for electricity duty for captive power plants is for 5 years; for SEZ / EOU / STP is for 10 years;new industrial project located under specific areas for 15 years. In case the Generation Companysupplies electricity to the Transmission Company & Distribution Company, there would be taximplications.2.4.6 General Sales Tax (GST) The indirect tax regime in India is going to be replaced by a comprehensive dual GST;concurrently levied by the central and the state. The base of GST would be comprehensive, includingvirtually all goods and services, with minimum exemptions. The structure would follow the destinationprinciple, i.e. imports would be included in the tax base, while exports would be nil. For inter-statetransaction in India, the state of destination can levy the tax opposed to that of origin. GST is said to replace most of the indirect taxes currently being levied both at the centre andstate level.2.5 Tax Deducted at Source Under the Indian Income Tax Act 1961, there are often a number of requirements for taxdeduction at source for payments made for various outside contractors for services, payments for rentetc. Tax deduction at source means the tax required to be paid by the recipient of income, is deductedby the person paying the income to him. Thus, the tax is deducted at the source of income itself. Theincome tax act enjoins on the payer of such income to deduct the given percentage of income as income© Finpro - 11 -
    • India Runway: Guide for understanding ICTtax and pay the balance amount to the recipient of such income. The tax so deducted at source by thepayer is to be deposited in the income tax department account.2.6 Expatriate Taxation The liability to tax under the Income Tax (IT) Act depends upon the residential status of theindividual, irrespective of his/her nationality or domicile. Thus for income taxation purposes it makes nodifference whether the person is from Finland or Singapore. For tax purposes, an individual may be resident, non-resident or not-ordinarily resident (NOR). Anindividual is said to be resident in India in a tax year (1st April to 31st March next) if he/she is present:1. In India for a period or periods amounting to 182 days or more in a tax year; or2. In India for an aggregate period of 60 days or more in the tax year and has been in India for an aggregate period of 365 days or more in the four tax years preceding that particular tax year.Individuals fulfilling neither of these conditions are non-residents.An individual is said to be not-ordinarily resident in India in any tax year if such person is:1. An individual who has been non-resident in India nine out of ten tax years preceding that tax year; or2. Who has during the seven tax years preceding that tax year, been in India for a period or periods aggregating to 729 days or less.A resident is taxed on worldwide income in India. However, they are entitled to claim credit for foreigntaxes pad under Double Tax Avoidance Agreement (DTAA).A non-resident is taxed only on income received or that arises or is deemed to arise in India.A person not-ordinarily resident is taxed like a non-resident but is also liable to tax on income accruingabroad if it is from business controlled in or a profession set up in India.In effect, a newcomer to India remains not-ordinarily resident for the first nine years of residence in India. In most other aspects, expatriates are on the same footing as Indians. Peak tax rate is30%.2.7 Intellectual Property Rights Intellectual Property (IP) is defined as any ―original creative work manifested in a tangible form thatcan be legally protected‖. Right associated with Intellectual Property which gives legal protection isreferred to as Intellectual Property Rights (IPR). IPR refers to controlling the way IP is used, accessed ordistributed. Categories of IPR and the acts governing them are as follows:  Copyright – The copyright Act, 1957  Geographical Indications – The Geographical Indications of Goods Act, 1999  Patents – The Patents Act, 1970  Plant breeder‘s rights – The Protection of plant varieties & Farmers‘ Right Act, 2001  Trade mark and domain names – The Trade Marks Act, 1999  Trade secrets© Finpro - 12 -
    • India Runway: Guide for understanding ICT  Utility model/ Designs – The Designs Act, 20002.8 Cultural aspects India is a complex country with varieties of cultures and beliefs and that is what defines the people.People from different socio-economic strata, educational background and religion may behavedifferently. The points discussed are some behavioral aspects and in no-way depict exactly the way howan Indian would always behave. Educated Indians are adapted to various societies and ways & meansof westerners. They understand the importance of time. They can even be quite assertive, aggressiveand direct, quite contradictory to what is been discussed. Some cultural adjustments would be required, but still business sentiments and logic (avoiding risksand uncertainties or high risk – high return) pays off, as it does elsewhere. Foreign investors should have at least a preliminary overview of the India specific strategy, ready withthem, while conversing with a potential a partner or an associate. The overview should consists of thefollowing  A long term perspective of the proposed investment along with a good regional business model  Conceptualized India specific products/ product lines/services  Keep in mind the value for money concept  Utilize an optimal mix of expatriate and local talent in the management  Define a clear communication channel between HQ & Indian entity  Have a consideration for local aspirations & sensitiveness while establishing the corporate culture The investor should also pay attention to / consider the following  Be hands on – don‘t always go the ―report‖ way  Personal interaction – with customers and employees is very critical  Hierarchy system still exists – chain of command, protocol etc are strictly followed (esp. government departments and similar organizations)  Do factor in last minute delays in project plans/ schedules and time consumption on account of approvals and paperwork, for instance, with government departments  Complex & high bureaucratic decision making can be time consuming and requires follow-up and perseverance (includes documentation, chain of permissions etc)  To tackle these utilize the skills of the local management and have it delegated to them2.8.1 Dealing in Indian Way Some interesting situations© Finpro - 13 -
    • India Runway: Guide for understanding ICT ―Can’t say no‖ Behind a hesitation to say ―no‖ to a given task, there is a willingness to try; presumption of theunrealistic nature of the job, possibility of causing disappointment or offense could be some other relatedreasons. To tackle this its good to have an environment safe/comfortable where one can say ―no‖ andfear no repercussions ―Criticism vs Self-esteem‖ Criticism needs to be done constructively, such that it doesn‘t damage one‘s self-esteem, especially infront of known people, colleagues or public ―Aggressiveness‖ Over aggressiveness and related behavior can be interpreted as a sign of disrespect and can evenaffect further communication and interaction. ―Be tactful‖ Disagreement need not always be expressed with a straightforward NO! The turndown can beconveyed in a toned down gentle manner and the difficulty would be understood. Remember that itsfriendly and constructive bargaining. ―Its not money & business always‖ Indians want to recognize the value in any business engagement, in addition to the monetary benefits.Even important business meetings in Indian will not begin without a gush of small talk, inquiries aboutfamily, weather, etc. Indians respect people who value their family and at times family would gain priority over work too. Delays in appointment are accepted, but it is not commonly practiced. Statistics, empirical data, power point presentations and reports may not be the only basis fordecision making; there is faith, intuition and gut feel to guide.3 Innovation Ecosystem in India3.1 Indian R&D Ecosystem India enjoys a rich tradition of innovation and skilled talent pool both within its geographical confinesas well as diaspora engaged in innovative activities elsewhere in the world. The country today iswitnessing the emergence of a collaborative innovation ecosystem with a growing role played bystakeholders such as venture capitalists, angel investors, incubators, academia, industry bodies as wellas by the Government. There are over 800 start-ups currently with more than 50 venture capital/privateequity firms, 200 angels and 20+ operational incubators funding and supporting start-ups. With entrybarriers for start-ups diminishing, there is stronger need for collaboration among industry, academia,Government, industry bodies, R & D labs and other innovation ecosystem players. The picture below depicts the various stakeholders in the Indian innovation ecosystem© Finpro - 14 -
    • India Runway: Guide for understanding ICT The Indian Government on its part, recognising the importance of innovation as the engine of growthand prosperity, has declared 2010 as the ‗decade of innovation‘ and is working on developing a nationalstrategy on innovation with emphasis on inclusive growth. A National Innovation Council has been set upto formulate a roadmap for innovation for 2010-2020 as well as to create a framework for-  Evolve an Indian model of innovation with focus on inclusive growth  Create appropriate ecosystem and environment to foster inclusive innovation  Explore new strategies and alternatives for innovation and collaboration  Identify avenues for sustaining and scaling innovations  Encouraging and facilitating innovation in all important sectors among universities, R & D institutions, SMEs and Government at the Central and State level  Encouraging innovation in public service delivery The National Innovation Council proposes to create local industry and university innovation clustersreferred to as ‗Cluster Innovation Centres‘ on Public Private Partnership (PPP) model. These centres,grouping innovation ecosystem players within an industry, would stimulate and strengthen thecompetitive advantage of that industry by linking various local and national stakeholders. These clusterswould drive innovation by connecting cluster needs to ideas, knowledge, technologies, labs and people.3.2 Promoting R&D There exists a plethora of Government Departments/ Agencies for funding, promoting and conductingR & D activities: • University Grants Commission • Council for Scientific and Industrial Research • Department of Scientific and Industrial Research • Department of Science & Technology© Finpro - 15 -
    • India Runway: Guide for understanding ICT • Department of Information Technology • Department of Biotechnology • All India Council of Technical Education among others.3.3 Innovation Ecosystem Players Council for Scientific and Industrial research (CSIR) is the funding agency under the Ministry ofScience and Technology is considered as one of the worlds largest publicly-funded R&D organisationswith 37 laboratories, 3 units, 39 extension centres and over 4500 scientists. It enjoys strong academicand industrial linkages and good relations with other R&D institutes. National Science & Technology Entrepreneurship Development Board (NSTEDB) established bythe Government of India under the aegis of Department of Science & Technology (DST), is aninstitutional mechanism to help promote knowledge driven and technology intensive enterprises. TheBoard, having representations from socio-economic and scientific Ministries/Departments, aims toconvert "job-seekers" into "job-generators" through Science & Technology (S&T) interventions. The NSTEDB , DST has been in the forefront in setting up Business Incubation Centres to encouragedevelopment of start-up companies. NSTEDB Catalyzes and Supports – • Science & Technology Entrepreneurs Park (STEPs) - http://www.nstedb.com/institutional/step- centre.htm • Technology Business Incubators (TBIs)–http://www.nstedb.com/institutional/tbi-center.htm • Indian STEPS & Business Incubators Association - www.isba.in3.4 Fiscal Incentives for R&D • Both revenue and capital expenditure on R&D are 100% deductible from taxable income under the Income Tax Act • A weighted tax deduction of 125% is allowed for sponsored research in approved national laboratories and institutions of higher technical education • A weighted tax deduction of 150% is allowed on R&D expenditure by companies in government- approved in-house R&D centres in selected industries • A company whose principal objective is research and development is exempt from income tax for ten years from its inception • Accelerated depreciation is allowed for investment in plant and machinery made on the basis of indigenous technology • Customs and excise duty exemptions for capital equipments and consumables required for R&D • Excise duty exemption for three years on goods designed and developed by a wholly owned Indian company and patented in any two countries out of: India, the United States, Japan and any country of the European Union3.5 Supporting InfrastructureSupporting infrastructure comprises: A. Business Incubator B. Tech / Science Park C. Special Economic ZoneThese have been described in detail below.© Finpro - 16 -
    • India Runway: Guide for understanding ICT A. Business Incubators • Business incubators can be Profit or Non Profit • Classified – Academic/Scientific, Private Investment & Corporate • Activities: Commercialisation of Business Ideas, Funding (In-house or arranging funds from VC‘s etc), Funding from ongoing schemes of Government, Technological support/safeguarding IP rights, foster entrepreneurship • The technology business incubators (TBIs) provide a good platform for industry-academia interactions to help convert a potential research idea into a commercial success.Process: • Key areas of research – Science and technology including electronic equipment, biotechnology, nanotechnology, software development, automobiles, pharmaceuticals and aviation • Other areas - food processing, media and entertainment, and rural innovationsSome of the Major Incubators I. IIT Madras, TeNeT – www.tenet.res.in A coalition of 14 faculty from the Electrical Engineering and Computer Science & EngineeringDepartments of IIT Madras to address pressing needs of India and other developing countries bymarket-driven product development, strengthening of Indian telecom/networking industry, technicaltraining and education, and driving telecom/IT policy.Vision: World class technology at affordable price • enabling 50 million broadband connections in the next five years© Finpro - 17 -
    • India Runway: Guide for understanding ICT • doubling the rural GDP of India • turning India into a telecom Design House for the world • enabling one or two billion-dollar product companies in India • driving the next generation of international wireless standards specifically for India • high quality distance education with an emphasis on rural areas • Diverse areas - Wireless Communications, Computer Networking, Fibre Optics, Digital Systems Architecture, Network Management Systems, Integrated Voice/Video/Data Communications, Indic Computing and applications for rural development Activities: teaching and training, product development, incubation of technology companies by alumni,telecom and IT policy studies, and front-line research in the specialties.Incubated Companies: Midas Communication Technologies Pvt Ltd, NMSWorks, NexGe Technologies,iSofTech, Nilgiri Networks, Amdale, Neuro Synaptics and many more. CEWiT The Centre of Excellence in Wireless Technology (CEWiT), India, has been set up under apublic-private initiative with the mission of making India a leader in the research, development, anddeployment of wireless technology. It is an autonomous institution, temporarily headquartered at IITMadras. II. Technology Business Incubator@BITS - http://discovery.bits-pilani.ac.in/TBI/ The Birla Institute of Technology and Science (BITS), Pilani in association with the Department ofScience and Technology (DST), Government of India has established a Technology BusinessIncubator (TBI) in the area of Embedded Systems and VLSI Design.Objectives • Fostering the entrepreneurial spirit amongst students • Creating an environment for innovations • Promotion of technology based new enterprises • Creating value added jobs and services • Producing support for commercialisation of R&D outputs. • Product development in ASIC design, Mixed Signal design, VLSI Architecture and device modeling. • Providing support services to entrepreneursServices Oysters Lab (O-Lab) – VLSI Design lab house, has a computing farm consisting of Sun machinesrunning the Solaris operating system, industry standard VLSI Design tools from all major EDA vendorslike Cadence, Mentor Graphics and Magma. These tools are capable of taking any design from conceptto GDS.III. Indian Institute of Technology Mumbai – Society of Innovation & Entrepreneurship, http://www.sineiitb.org/index.html An umbrella for promotion of entrepreneurship at IIT-Bombay. SINE administers a business incubatorwhich provides support for technology based entrepreneurship Funding - DST & DIT has extended a financial assistance to SINE to provide seed support toincubatee companies at the business incubator.© Finpro - 18 -
    • India Runway: Guide for understanding ICTSome of the Incubatees • A3 Remote Monitoring Technologies – Technology Company in the field of remote patient monitoring • Agrocom Software Technologies - provision of agro-weather network engineering, information technology for remote extension and crop protection and agri-insurance support services • Feast Ltd - customized software solutions for designing of machines, machine elements, composite materials and material handling equipments • iKen Solutions - software product company specialized in intelligent business systems backed by hybrid AI (Artificial Intelligence) techniques (expert system, case-based reasoning, neural networks and genetic algorithms) • Polymeric Sensors - development of sensors and biosensors based on conducting polymers • Wilcom Technologies - cater for various wireless communication systems including antennas, microwave circuits for the mobile and telecom companies, space and defense organizations in the national and international markets • Zeus Numerix – CFD, Electromagnetism, Structural Analysis, High performance computing • Vegayan Systems - provides software products and integrated solutions for converged IP/MPLS communication networks to enhance their functionality, performance and management.IV. Indian Institute of Management, Ahmedabad - Center for Innovation, Incubation and Entrepreneurship, CIIE – www.ciieindia.org CIIE was setup by IIM, Ahmedabad in 2001 and is supported by Government of Gujarat as well as theNational Innovation Foundation Some of the ongoing projects are also being backed by Wadhwani Foundation (set up by ITentrepreneur in Silicon Valley, USA) and the TBI incubator is funded by the DSTIncubation – Physical (CIIE) and Virtual (current location)Some of the Incubatees • Exotic Technologies – INFLO, Infusion Flow Rate Monitor • Global Tech - An FPGA / Controller based Automation System designed for Gold Plating of PCB. • Vmukti - an innovative, multi-point unified communications, collaboration and conferencing server platform with built-in support for access to platform features • Whirlybird Electronics - specializes in the field of Inertial Navigation Systems and Avionics. Pioneer in development of MEMS based Inertial Navigation System • Mantis Technologies – SAAS Model in online ticket booking for bus Industry in IndiaV. Some Other Business Incubators focusing on ICT & Electronics – • Science & Technology Entrepreneurs‘ Park - www.stepiitkgp.in/ • National Design Business Incubator - www.ndbiindia.org/ • TBI – NIT, Calicut -http://nitc.ac.in/nitc/misc/tbi/public_html/index.htm • VITTBI, Vellore - http://www.vittbi.com/© Finpro - 19 -
    • India Runway: Guide for understanding ICT • Amity Innovation Incubator - http://www.amity.edu/aii/ • TREC-Step, Trichy - www.trecstep.com/VI. Entrepreneurship beginning to hatch: • Incubation centres have sprung up across some of the IITs, NITs and IIMs, (apart from Private/Corporate business Incubators) and they cater to 300 companies based in India and abroad • The International School of Business (ISB) and International Institute of Information Technology (IIIT) in Hyderabad are also incubating companies • ISB has a tie-up with The Indus Entrepreneurs (TiE) for identifying and, later, funding start-ups incubated by them • The IITs‘ start-up corpus funds come from the regional IITs, the Department of Science and Technology and IIT alumni, and are valued at between € 9 million and € 18million, in each project, they invest 1500 € to 40000 € • Seed funding VC‘s are very few compared to early and growth stage funding • While Indian incubators are known to have tech prowess, VC‘s are yet to see them build a strong brand/product that could be a world-beater3.6 Supporting infrastructure© Finpro - 20 -
    • India Runway: Guide for understanding ICT B. Tech / Science Park With the Indian IT industry becoming one of the largest exporters of software products globally, theMinistry of Information Technology has collaborated with private corporations and infrastructuredevelopment companies to set up technology parks. These technology parks offer a platform forgrooming requisite talent for the industry by providing world-class facilities.Some major operational IT parks are as follows: • Software Technology Parks of India (STPI), which are present in various cities such as Bangalore, Bhubaneswar, Chennai, Hyderabad, Guwahati, Noida, Mumbai, Kolkata, Lucknow, Dehradun, Patna, Ranchi and Gandhinagar • Rajiv Gandhi Infotech Park, Hinjewadi, Pune • International Tech Park, Bangalore • SIPCOT IT Park (State Industries Promotion Corporation of Tamil Nadu) • Hyderabad Information Technology Engineering Consultancy City, Hyderabad • Technopark Kerala, Trivandrum • Rajiv Gandhi Chandigarh Technology Park (RGCTP) C. Special Economic Zone The main objectives of setting up SEZs are as follows: • Generating additional economic activity • Promoting exports of goods and services • Promoting investments from domestic and foreign sources • Creating employment opportunities • Developing infrastructure facilities • The exports from SEZs increased from INR 138.5 billion in 2003-04 to INR 346.2 billion in 2006-07 and reached INR 670.9 billion by 2007-08.3.7 ICT R&D HotspotsICT R & D • R & D includes software product development (53%), embedded systems (26%)and specific areas of engineering services (21%) • Market size includes domestic and exports revenues • R&D off shoring to India is now a USD 9.35 Billion industry (2008); with MNC-owned R&D centers accounting for about USD 5.83 Billion of this market • R&D off shoring constitutes 14.4 per cent of the total off shoring to India with captive R&D centers commanding 62.7 per cent of the market share • Dominant Verticals – Enterprise Software and Telecom & Networking • Cost is no more a key driver for off shoring R&D operations to India, as companies seek to value the skilled R&D talent pool and emerging market opportunities also© Finpro - 21 -
    • India Runway: Guide for understanding ICT • R&D off shoring employs - about 146.7 thousand professionals across domains • Contribution to parent global R & D • Small R & D centers – 80% • Medium R & D centers – 50 to 70% • Large R & D centers – 25 to 35% • Growth in software product start up activity over the last three years • A convergence of number of factors has helped strengthen the ecosystem • No of R & D centers • Talent pool • Start up ecosystem – Technology Business Incubator, VC‘s • Partnerships- Universities & Corporate • Domestic MarketHotspots – Bangalore, Pune, Hyderabad, NCR (Delhi Region), ChennaiHOT SPOTS - 594 R & D centers operating from Bangalore, Pune and NCR© Finpro - 22 -
    • India Runway: Guide for understanding ICTHOT SPOTS – Bangalore has the highest number of R & D centers© Finpro - 23 -
    • India Runway: Guide for understanding ICTHOT SPOTS – Bangalore the top choice, Pune high growth category, Hyderabad emerging highpotentialAnalysis • Bangalore, Silicon valley of India, with 312 R & D centers is the top choice • Bangalore continues to be the headquarter of choice for India‘s and the world‘s pioneering companies as well as venture capital (VC) firms • Pune is presently under high growth category but with infrastructure bottle necks, growth could be hampered in the long run • Hyderabad and Chennai have emerged as high potential and medium potential, these two cities will soon catch up with Pune • Talent pool in Pune & Hyderabad is not easily open to relocation • NCR may lose out in the long run on account of high costs required for setting up and operation • Emerging locations such as Jaipur, Ahmedabad, Indore, Kolkata, Coimbatore etc. are strengthening the ecosystem to a greater extent • Chennai & Hyderabad are also turning into start up hot spot, this could make the cities a centre of innovation in India© Finpro - 24 -
    • India Runway: Guide for understanding ICT • India is seen as a high value Hub for innovations3.8 Government InitiativesFunding Institutions – Public innovation funding in IndiaMechanisms supporting transformation of Idea to Prototype • Technopreneur Promotion Programme (TePP) - TePP (DSIR – Department of Scientific & Industrial Research and DSTs – Department of Science & Technology common programme) • Technology Incubation & Development of Entrepreneurs (TIDE) – Department of Information TechnologyMechanisms supporting transformation of Prototype to Pilot Plant • Technology Development and Demonstration Program (TDDP) - (DSIR – Department of Scientific & Industrial Research) • TDDP Start-ups - (DSIR – Department of Scientific & Industrial Research) • Home Grown Technology Programme – (mechanism of Technology Information Forecasting and Assessment Council (TIFAC) of the Department of Science & Technology)Mechanisms supporting transformation of Pilot Plant to Commercial Product • Technology Development Board (TDB) – (Department of Science & Technology) • New Millennium Indian Technology Leadership Initiative (NMITLI) – (division of CSIR (Council of Scientific & Industrial Research)© Finpro - 25 -
    • India Runway: Guide for understanding ICT3.9 Private innovation funding in IndiaVenture Capital Association • The Indian Venture Capital Association (IVCA) has been working towards the development of the private equity and venture capital industry in India since 1993. • The agency also serves as a networking body and facilitates interaction between major investment funds from India and abroad. • The key activities carried out by IVCA are as follows: o Information Resource - IVCA collects, analyses and publishes data related to private equity managers and their investee companies o The analysis provides a comparison between performance figures from India and other markets o The assessment is done in alliance with Thomas Financial and is published in the IVCA yearbook. o Professional Development - The association conducts various knowledge and training sessions/seminars for its members through collaborations with organisations such as the European Venture Capital Association (EVCA). o This enables investment professionals to get a good exposure to the industry trends and outlook of venture capitalists o Networking/Membership - The web portal www.indiavca.org acts as a hub for VC/PE managers and other corporations interested in VC funding Indian Angel Network • Indian Angel Network is Indias first and the largest angel group that brings together successful entrepreneurs and CEOs who share their passion to enable more early-stage businesses to grow in terms of scale, as well as value. • By focusing on start-ups, the Network addresses the present scenario of acute unavailability of funds to early-stage companies. • As an angel group, IAN has innovated by bringing institutional members such as IBM, Google, Intel and Naukri.com • Has already invested in 18 companies across multiple sectors such as information technology, education, hospitality, intellectual property, robotics and consumer internet • Has become the first port of call for entrepreneurs with innovative ideas, which is evident from the total deal flow, which exceeds over 50 a month • The Network looks at investing from USD 100,000 to about USD 1 mn, and exiting over a 3 to 5 year period through a strategic sale. • The Network may consider investments over a million dollars but is only likely to do so through syndication© Finpro - 26 -
    • India Runway: Guide for understanding ICT3.9.1 Standards I) University Grants Commission(UGC) UGC is the apex body of the Government of India entrusted with the twin tasks of providing funds andcoordination, determination and maintenance of standards in institutions of higher education in India. II) All India Council for Technical Education(AICTE) AICTE is a statutory body under the Ministry of Human Resource Development, Government of India.It is responsible for the promotion of technical education in the country and acts as a standard-settingorganisation for all programmes of technical education in the country.3.10 R&D Centres of Excellence (CoEs) Based on the public-private partnership model, quite a few Centres of Excellence (CoEs) have beenset up in India for the benefit of society. Funded by the government, these CoEs aim to provide high-quality training, undertake advancedresearch and develop globally competitive tools within a defined timeframe. • Focus is on technology development and transfer, path-breaking scientific research, development of trained human resources and economic outreach. • CoEs have been set up in the areas of telecom, wireless technology, bioinformatics, lasers and optoelectronic devices and nano-electronics Fields of Excellence for Telecom Centres of Excellence Field of Excellence in Telecom Associated Sponsor Institute Next-generation network & network technology IIT, Kharagpur Vodafone Telecom technology & management IIT, Delhi Bharti Airtel Technology integration, multimedia & IIT, Kanpur BSNL computational maths Telecom policy, regulation, governance, customer IIM, Ahmedabad Idea Cellular care & marketing Telecom infrastructure & energy IIT, Chennai Reliance Disaster management of info systems & IISc, Bangalore Aircel information security Rural application IIT, Mumbai Tata Telecom Spectrum management WPC, Chennai Govt with Industry Consortium© Finpro - 27 -
    • India Runway: Guide for understanding ICTFuture Roadmap of CoE in Telecom • Association of foreign universities with the CoEs will bring in the international perspective in respect of regulatory and technological Issues. • The association will also keep the CoEs updated about the latest international practices including spectrum management • The relationship will also bring in considerable benefits to foreign universities in respect of access to research of such a large, reputed and efficient talent pool in telecom R&D. • This will also facilitate the capacity building of telecom professionals in South Asia and other emerging markets. • These CoEs will also help passing on the best practices followed in Indian telecom sector which has made it one of the most efficient and low-cost telecom networks in the world • A VPN has been set up with hub at the coordination centre (being set up at the premises of C-DoT, Delhi) to facilitate sharing of research results and to promote collaborative research.3.11 Draft National Telecom Policy 2011 Policy thrust: Sustained technology adoption to enable overcoming of developmental challenges in education, financial inclusion, health, employment generation among other areas Key Areas: • Proposed increase in rural teledensity from 35 to 100 by 2020 • Broadband on demand, 175 million broadband connections by 2017 and 600 million connections by 2020 • Provide high speed and high quality broadband access to all village panchayats (local self- governments) through optical fibre by 2014 • Efforts towards ‗Right to Broadband‘ • Promote indigenous R & D, innovation and manufacturing to serve domestic and foreign markets • 80% telecom sector demand through domestic manufacturing with a value addition of 65% by 2020: preferential market access for domestic manufacturing of telecom products incl. mobile devices, SIM cards with enhanced features etc. special emphasis on Indian products for which IPRs reside in India • Build national capacity across areas esp. security standards, security testing, interception and monitoring capabilities and manufacturing of critical telecom equipment. • Build electronics ecosystem starting with wafer fab • Seamless voice, data, multimedia & broadcasting services on converged networks • Focus on new service formats such as machine-to-machine communication© Finpro - 28 -
    • India Runway: Guide for understanding ICT • Creation of investor friendly environment to attract foreign investment, increase employment3.12 Government Departments Department of Scientific and Industrial Research (DSIR) DSIR, under the Ministry of Science and Technology, carries out activities for the promotion,development, utilization and transfer of indigenous technology. The key initiatives undertaken by DSIRfor R&D promotion and commercialization are Technology Promotion, Development and Utilisation(TDPU) programme. The various initiatives under the TDPU are aimed at the promotion of R&D in the industry;development and commercialization of technologies; acquisition, management and export of technology;fostering greater domestic and international collaboration; information dissemination and e-governanceinitiatives, etc.Technology transfer • Technology transfer is one of the key engagement areas of DSIR. The department has established networks with international organizations such as UNCTAD, WIPO, UNIDO, UNESCAP and UNESCO in areas of technology development and transfer.3.13 Academic Research Institutions Except for the IITs and IISc, other institutes have not done much in R&D, though they have a vastpool of science and engineering PhDs. Institutes other than IITs and IISc such as NITs, BIT and VIT,have taken initiatives towards encouraging R&D at university level but the outcome of the same needs tobe seen. Despite various constraints, such as the shortage of high-skilled work force, relative inexperience inthe field of high-end research and poor infrastructure, India has witnessed an increase in good qualityR&D work. This can primarily be attributed to the MNC-led R&D being driven by companies such asIntel, Cisco, IBM, EMC, Nokia etcAcademic Research Institutions 1. Indian Institute of Technology – IIT 2. Indian Institute of Science – IISc 3. Tata Institute of Fundamental Research - TIFR 4. National Institute of Technology – NITs 5. Birla Institute of Technology & Science, Pilani – BITS Pilani 6. Indian Institute of Management – IIM1. Indian Institute of Technology The Indian Institutes of Technology (IITs) are a group of seven centres of excellence for highereducation, research and development in science, engineering and technology.Bilateral collaborations and Interactions with other players: • National & International organisations & universities • Collaborated with organizations, such as UNIDO and PPG Industries© Finpro - 29 -
    • India Runway: Guide for understanding ICT • Have R&D laboratories sponsored by industries/associations, such as Department of Science and Technology (DST), Department of Biotechnology (DBT) and the Ministry of Communications and Information Technology • Hosts Technology Business Incubators • International clients of IITs – AT & T Corporation, Commission for European Community , Engage technologies inc, General Electric Corporate Research & Dev. USA , Guidex, USA., Indo-French Centre for promotion of Adv. Research, Indo-US Collaboration, Microsoft Research, Microsoft corporation, Redmond, WA , Purdue University, Virtual machine works, USA , World Bank, Yxtech inc. USA , National Semiconductors, Intel, Motorola, Lucent Technologies and many more2. Indian Institute of Science (IISc) IISc, one of the premier institutions of higher education in India, works in close association withresearch institutions and the industry. The key activities undertaken by IISc include promotion,development and consultancy on research activities in diverse fields.Facilities for Academic Research– Computing, Cryogenic, Nano Electronics, Nuclear MagneticResonanceInternational Relations Cell (IRC) - It oversees and coordinates all international programmes of theinstitute, such as exchange programmes for faculties and research collaboration with foreign industryand academia. Collaborative agreements are in place with many universities, such as the Australian NationalUniversity, the National University of Singapore, UNESCO-UNISPAR, the University of Manchester, theUniversity of Southern California, Ecole Polytechnique of France , Ecole Centrale Paris, France,University of York England, University of Jyvaskyla, Finland, University of Kaiserslautern,Kaiserlautern, Germany , National Technical University of Athens , Alma Mater Studiorum-University ofBologna, University of Catanzaro Magna Graecia, Italy, Keio University, Japan, Nagoya University,Japan, The Korea Institute of Science and Technology, Seoul, Korea, Electronics AndTelecommunications Research Institute (ETRI), Korea, Karolinska Institutet, Sweden, Chalmers,Goteborg, Sweden , The University of California, Berkeley3. National Institute of Technology (NIT) The NITs are premiere institutes of engineering and technology in India, emulated on the lines of IITs.There are 20 NITs spread across different states of India.Bilateral Collaboration and Interaction with other Players • NIT Trichy has signed MoUs with several private players, such as BHEL, Bharti Foundation and IBM, to promote R&D. MoUs have also been signed with the National Institute for Material Science, Tsukuba, Japan; and the Government College of Engineering in Salem, India; for collaboration on research and commercialisation activities, etc. • IBM has set up an Advanced Computer Education (IBM ACE) Centre at NIT Calicut to impart training on latest technologies. • The Industry Institute Partnership Cell at NIT Rourkela is a platform for industry-academia interaction. • NIT Surathkal has set up an Open Power System Laboratory in collaboration with IBM and a MICO-BOSCH Power Tool Centre within its campus. The institute also has MoUs with many© Finpro - 30 -
    • India Runway: Guide for understanding ICT foreign universities, such as Kagoshima University in Japan, KAIST in South Korea and Eindhoven University of Technology in the Netherlands.4. Birla Institute of Technology (BITs) BITS Pilani is one of the most respected private institutes of science and technology education inIndia. The Research and Consultancy Division of BITS is the nodal agency for coordinating all researchactivities and industrial consultancy assignments at BITS.Bilateral Collaboration and Interaction with other Players • The institute, in collaboration with HP Labs, awards fellowships for research • BITS has established ‗Practice Schools‘ in various companies, where students can apply their theoretical knowledge on real world industrial problems. The college has agreements with many companies, such as Motorola, Yahoo, Google, NetApp, Honeywell and Trilogy • BITS is also a member of The Association for Computing Machinery (ACM), New York. ACM sponsors numerous computer science-related activities at BITS Pilani • The iCampus India Initiative is a result of the collaboration between BITS Pilani, India and the MIT- Cambridge, USA. Under the scheme, BITS will also collaborate with researchers from MIT • BITS has a collaborative agreement for research on biological sciences with Uniformed Services University of Health Sciences (USUHS), George Mason University in USA and several other institutions in India and abroad3.14 Industry AssociationsIndustry Associations – CII, NASSCOM, FICCI, ASSOCHAM Industry associations play a key role in bringing together the government, R&D community and theIndian industry for the benefit of the research and development scenario of the country. They also assistthe government on policy matters relating to the industry.Some of the key industry associations active in India are • Confederation of Indian Industry (CII) • Federation of Indian Chambers of Commerce and Industry (FICCI) • National Association of Software and Services Companies (NASSCOM) • Associated Chambers of Commerce and Industry of India (ASSOCHAM) • All these associations organise conferences and workshops for increasing awareness about science and technology issues affecting the Indian industry and academia • Play a critical role in promoting the research efforts of the country, have forged alliances to accelerate the pace of research initiatives in the country o Nasscom - MoUs and agreements with government R&D agencies such as Defence Research and Development Organisation (DRDO), and University Grants Commission (UGC) o CII has worked in tandem with DST to establish The Global Innovation and Technology Alliance (GITA), which seeks to implement public-private partnership in promoting International technology programmes of DST o FICCI has partnered with the Department of Biotechnology to involve the private sector in research initiatives© Finpro - 31 -
    • India Runway: Guide for understanding ICT4 Business Ecosystem in India4.1 Market Trends: OverviewSoftware Products and Information Processing Services (SWIP)  Market follows a pyramidal structure with a small number of large companies and large number of small companies.  Industry is divided into 4 sectors- o IT services o IT enabled services o Software products o Hardware  According to Nasscom, the aggregate revenues of IT-BPO sector in India is estimated to at USD 88.1 billion in FY2011 (Financial Year is calculated from April-March), with the IT software and services sector (excluding hardware) accounting for USD 76.1 billion of revenues.  Revenues of software products industry are estimated at USD 1.3 billion in FY2011 signifying a rapid shift from simple automation to product development  Within IT Services, application development is the biggest segment on account of increased customer interest in cloud, mobile and collaboration technology  Major business verticals are – automotive, healthcare and government with its focus on e- governanceTelecom Products & Services (TPS)  India is the fastest growing telecom market and 2nd largest in terms of wireless connections, after China  Total number of wireless subscribers is 865.71 million as on 31st August, 2011 according to Telecom Regulatory Authority of India (TRAI) reflecting an overall teledensity of 72.12  As of August 2011, number of broadband subscribers is 12.69 million  Rural areas and smaller towns and cities have emerged as the new growth centres with applications and services being developed and customized especially for this segment.  The wireless subscriber base is expected to reach 1.159 billion over the next 2 years  Number of 3G users as of May 2011 is estimated at 9 millionElectronics Manufacturing  Electronics manufacturing in India has been dominated by the foreign investors  Indian electronics manufacturing is low by international standards, however, is expected to boom once the supply chain is in place  The largest segment is the consumer electronics segment  The increased presence of EMS companies should stimulate local manufacturing by encouraging the development of Electronics ecosystem  Semiconductor devices, connectors, wound components, antennas offer high potential for manufacturersDigital Media© Finpro - 32 -
    • India Runway: Guide for understanding ICT  From a low cost base offshoring destination , India is emerging as a leading destination for high end, skill based activities with engagement across the value chain in animation and gaming  Domestic companies have started to focus on improving quality and the creation of original IP, which can be leveraged in terms of merchandizing and broadcast revenues.  Increased consumer spending on gaming especially mobile and console gaming also led by rising mobile and broadband penetration, increased penetration of devices – low cost handsets, tablets  Aggressive marketing by telecom companies esp. through app stores targeting games as a premium VAS segment  Expertise in end-to-end development of mobile and casual games resulting in many international publishers setting up captives in India  Online gaming moving towards MMORPG games ensuring consumer stickiness and multiple revenue streams4.2 Major ICT Clusters in India ICT Clusters in India4.3 Software Products and Information Processing Services (SWIP) The Indian IT-BPO sector reached revenues of USD 88.1 billion in FY2011 directly employing over2.5 million people and indirectly employing 8.3 million, according to Nasscom. The industry has beenincreasingly focusing on innovation and increased technology usage along with emergence of newbusiness models and delivery platforms to drive growth.© Finpro - 33 -
    • India Runway: Guide for understanding ICT The sector contributes 6.4% to India‘s GDP and to 26% of total Indian exports. Domestic IT-BPOrevenues including those from hardware are valued at USD 28.8 billion in FY2011 whereas thecorresponding exports are estimated at USD 59.4 billion. IT Services exports are estimated at USD 33.5billion and is the fastest growing segment. Remote Infrastructure Management has also witnessedstrong export growth at 26% on account of improved telecom networks and technologies besides flexibleand effective business models. India has also emerged as the leading destination for outsourcing ofsoftware testing services with 32% of the total global sourcing pie. Not only exports, Indian companies have also firmly established their global footprint as is evidencedby their presence in 52 countries, 500 global delivery centres and employing over 60,000 foreignnationals. The BPO industry has evolved into BPO 3.0 with increased portfolio of services, process re-engineering across the value chain, increased delivery of analytics and knowledge services throughplatforms besides the strong domestic market focus and SMB-centric delivery models. Engineering services and embedded systems are estimated to grow at a CAGR of ~15% to reachUSD 15-16 billion by FY2015. Open standards, local market products, standardisation and greentechnologies are the key growth drivers of this segment. Europe and Japan continue to be the majormarkets with the main business verticals as Telecom, Automotive and Semiconductors. Consumerelectronics is expected to witness major growth.4.3.1 Domestic Market The domestic IT-BPO market (including Hardware) accounts for 33 per cent of the industry and isestimated at USD 28.8 billion in FY2011. IT Services is the fastest growing segment in the domesticmarket with hardware and IT Services comprising 75 per cent of total revenues.© Finpro - 34 -
    • India Runway: Guide for understanding ICT IT-BPO Domestic revenues*(INR billion) 159 140 127 109 501 429 FY2009 FY2011E IT Services BPO SW Products (Source: Nasscom) Major growth is expected in the domestic software product segment due to high innovation levels ofstart-ups and increased adoption of standardised products from large organisations besides localizationstrategies of service providers. Companies are actively looking at new revenue streams for growth withchanging business and pricing models resulting from emerging technologies. There are over 750 IT-BPO MNCs captive centres in India with 28% present across multiple locationsin India. The main business verticals are Aerospace & Defence, Automotive, BFSI, Bio-Technology,Chemicals, Computer Hardware, Education, Electronic/Electrical Equipment, Energy, Healthcare,Industrial, Semiconductors, Software/Internet, and Telecommunications, etc.4.3.2 Emerging IT/ITeS destinations in India  The Indian IT/ITeS is concentrated primarily in 7 clusters- Bengaluru, Delhi – NCR, Hyderabad, Chennai, Pune, Mumbai and Kolkata.  Most IT companies initiated their operations in India in tier I cities and have subsequently expanded their operations to tier II cities  The emergence of tier III cities such as Mysore and Chandigarh has played a key role in the expansion of the ITeS – BPO segment.  Tier II and Tier III cities are gaining more importance due to lower cost of administration, manpower, maintenance, real estate.© Finpro - 35 -
    • India Runway: Guide for understanding ICT Leading IT Service Companies Leading BPOs  Tata Consultancy Services (TCS)  Genpact India Pvt. Ltd.  Infosys Technologies Ltd.  Tata Consultancy Services BPO  Wipro Ltd.  WNS Global Services (P) Ltd.  HCL Technologies Ltd.  Aegis Ltd.  Tech Mahindra Ltd.  Wipro BPO  Mphasis an EDS company  Firstsource Solutions Ltd.  Patni Computer Systems Ltd.  Infosys BPO  Aricent Technologies (Holdings) Ltd.  Aditya Birla Minacs Worldwide Ltd.  CSC India Pvt. Ltd.  Exl Service.com (India) Pvt Ltd.  L & T Infotech Ltd.  Hinduja Global Solutions Ltd.© Finpro - 36 -
    • India Runway: Guide for understanding ICT4.3.3 Software Business Models Outsourcing/(Inter-Firm) Intra-Firm Focusing on the core services are making Companies are doing lot of in-house companies to outsource more than before software development Specially the outsourcing of high skilled Many companies are having captives and in work is growing general the number of creation of smaller India is one of the most attractive captives have been declining. destinations for outsourcing Growth of inter-firms will outpace the captives Merchants of Innovation Agents of Innovation Many IP‘s from India Only few companies are in this sector, and Big MNC‘s and home bred Indian IT only few true innovations has been made by companies behind the success of India as R the companies & D power house Low risk taking ability by Indian companies IP creation and commercialisation a big as well as Indian MNC‘s non-linear growth strategy Companies often lack Product management Indian offices are at par with the US offices skills with respect to product development MNC‘s are having only R & D centers in Industry Academia partnerships growing India and not functioning as Business and effective Units with P & L account sOther Business Models  Though the evolution of the license model has been slow, it has dominated the market for the last two decades. In the last two decades, various models have evolved. However, still newer models are evolving based on customer requirement.  SaaS is fast emerging as a model that is getting great receptivity.  Software as an appliance is emerging as a solution specific to SMB‘s to simplify usage, reduce cost, security and make backup of dates simpler.  This is not a new model and has existed since quite some time.  SaaS is the model that Subex terms as ‗merged services‘. In this model, IP-based services are provided to customers based on SLA‘s . Pricing is for service usage not IP. IP is completely built and owned by the software vendor© Finpro - 37 -
    • India Runway: Guide for understanding ICT4.4 Telecom Products & Services (TPS) India has the highest number of operators in the world with 10-12 operators per circle on average.The chart below gives statistics of the telecom sector in India. Table: Telecom Mobility in India Parameter Data Total subscribers – wireless + wireline 899.78 million Total wireless subscribers 865.71 million Urban wireless subscribers 570.54 million Rural wireless subscribers 295.17 million Wireless teledensity 72.12 Broadband subscribers 12.69 million FDI in telecom during April-March 2010-2011 USD 1.66 billion Cumulative FDI in telecom during April 2000-April USD 10.61 billion 2011 Investment in telecom infrastructure development USD 110 billion th envisaged as part of 12 Five Year Plan (2012-2017)(Sources of information: Telecom Regulatory Authority of India (TRAI) statistics as on August 31, 2011;IBEF)© Finpro - 38 -
    • India Runway: Guide for understanding ICT4.4.1 Major Trends  Voice is getting commoditized – with intense competition, voice ARPUs will continue to decline making it critical for operators to increase VAS adoption and deliver new revenue streams to compensate for the commoditization of connectivity.  Mobile is the new Web- a large number of consumers who have never accessed the web on a PC are leapfrogging to adopt mobile applications – fishermen, auto drivers, farmers.  Internet and social networking are exploding: India is the world‘s largest growing social networking market and has more than 33 million internet accessed social networking sites (mid-2010) with net new visitors growing 43% over the past year. Emerging technologies over broadband-video conferencing, VoIP and social networking services are becoming the dominant means for the younger generation to connect and collaborate.  Rural India is exploding: rural consumers are enjoying higher levels of disposable income and are willing to spend on new technologies and services.Why India?  Number of users using mobile handsets to access the web is 5-10 times more than those using a PC  Introduction of 3G, WiMax, Mobile Number Portability are expected to be game changers  With 3G introduction, service providers are relying on Value Added Services such as high speed data applications and m-entertainment options  According to Telecom Regulatory Authority of India (TRAI) estimates, India will have 19 million WiMax users by 2012 and nearly half of current mobile users as 3G subscribers  3G will focus on – access, video, applications and gaming  M-commerce, m-banking, m-trading, m-wallet, location based services and mobile TV besides workforce mobility in enterprises will pick up in a big way  Leading Indian operators have launched their app stores – though still at a nascent stage, these enable operators to gain a small yet significant share of consumers‘ wallet.  In future, apps may be bundled with handsets and costs recovered through m-advertising. The m- advertisement market in India is estimated at USD 25 million and predicted to reach USD 100 million in the next 2 years.  Emergence of mobile TV and m-commerce are expected to be the next big thing in Indian telecom  With transformation in broadcasting sector, television industry will move towards digital services- consumers have started streaming shows, news and movies from the web onto television sets, laptops and now smartphones and ipads.  Mobile TV will become ubiquitous and revenues will be earned through personalized ads – over the next 2 years, India is estimated to have over 200 million mobile TV users4.4.2 Enterprise Telecom Telecom service providers are increasingly targeting enterprises by providing dedicated services. Thissegment is expected to witness major developments in the near future.Major services are:  Voice over Internet protocol (VoIP)  Dedicated telecom communication systems  IT infrastructure enabled unified communication services© Finpro - 39 -
    • India Runway: Guide for understanding ICT While in 2009, smart phones accounted for 11% of mobile phone shipments in APAC, this percentageis expected to grow steadily and, in 2012, 20% of mobile phone shipments in the region are expected tobe smart phones. (Source: Canalys) Adoption of enterprise mobility applications in the intra-enterprise space is low but gainingmomentum. However India is still at a stage where only a few sectors like retail and BFSI are usingmobility apps for conventional areas like sales force automation and transaction management. Otherearly adopter market segments include Pharma, Transportation and Logistics sectors. Mobile banking and payments is another important space and the past few years have seen severalapplications being launched by large banks for m-banking – through downloadable midlets, WAP sitesas well as through SMS. In the m-payment space, the market has witnessed moves from significantplayers such as Nokia (Nokia Money). Governments across India are busy mobilizing their operations and their workforces. The sector hasemerged as a significant consumer of mobile enterprise apps, and has niche requirements of developingits wireless capability while keeping in mind security, reliability, and scalability of operations.Applications that are being ported to mobility platforms are depicted in the picture below: Field Force Automation CRM Mobile transaction management Remote data collection and Asset tracking and management management Bill payments/receipts Queue buster solutions Ticketing RFID integrated solutions Intranet MIS applications Location based services4.4.3 Mobile Value Added Services  Increasing mobile phone and network penetration: substantial increase in subscriber base esp. low-end subscribers and rural areas. Handsets are becoming smarter as consumers‘ demand for access to applications and services are increasing.  Need for differentiation among telecom operators and handset manufacturers: heavy investments in 3G, falling prices of handsets and heavy churn rate have increased pressure on industry players to retain and increase market share.  Increasing consumer demand/awareness: increased willingness to spend on a compelling product.© Finpro - 40 -
    • India Runway: Guide for understanding ICT  Untapped rural market: services such as for agriculture, healthcare, governance, banking, education are prominent areas  Rich utility services: urban segment services such as m-banking and commerce, education, location based services, governance, ticketing etc  Business needs of service providers: banks, educational institutions etc use mobile applications and other Value Added Services as a channel to provide easy access to services to customers and increase productivity and efficiency of employees.  Enabling high-speed technologies – 3G/4G: these will provide further impetus to value added services.4.4.4 3G in India The introduction of 3G is expected to serve as a platform for delivering low cost voice telephony toIndian users. It can also help drive the Government‘s broadband objectives, cater to high speed datademand in urban areas and also act as an effective tool to drive digital inclusion in rural areas throughcustomized and well-targeted offerings such as banking, agriculture, education, healthcare, e-governance among other areas. Video is expected to be the star application driving 3G usage with the following areas offering growthpotential:  Mobile TV  Utility services  Interactive Voice & Video response  Video portals, video blogging, video ringback tones, video sharing  Managed VAS and cloud based applications4.4.5 M-CommerceKey Growth Drivers are:  Rapidly growing mobile penetration – mobile is the preferred medium for financial inclusion in rural areas. In urban areas, it is a mechanism for buying/paying on the move esp. utility payments, small transactions.  With huge unbanked population, associating with telecom operators as a distribution channel can help banks with wider outreach and reduce cost of banking transactions.  According to TowerGroup estimates, mobile banking usage in India will grow from 10 million active users in 2009 to >53 million active users in 2013.  Encouraging regulatory framework, introduction of 3G, capitalization of high mobile penetration rates by banks so as to offer a wide range of financial services.However,  M-payments are still at a nascent stage in the country  Customer awareness needs to be created© Finpro - 41 -
    • India Runway: Guide for understanding ICT4.4.6 Major Telecom Operators Market Share4.5 Telecom Equipment Manufacturing The annual handset demand in India which currently stands at 140 million units, is expected to touch240 million units by 2015 and about 350 million by 2020, according to a report by KPMG and IndianCellular Association. India‘s share of handset manufacturing has shot up from almost nil about 6 years back to almost 10%of global handset manufacturing currently. This has been primarily on account of most major OEM‘ssetting up manufacturing facilities in the country.Why India  With an average monthly addition of 18 million subscribers and also taking into account the replacement demand, handset OEMs have a good domestic business opportunity as well as potential for exporting to other emerging markets.  With demand shifting to Asia Pacific in a big way, India has the opportunity to emerge as an export hub on similar lines as China.  With the size and scale of domestic demand, labor arbitrage and availability, and investment friendly policies, India has the potential to emerge as a key component manufacturing hub.© Finpro - 42 -
    • India Runway: Guide for understanding ICT  Processes such as Assembly, Testing & Packaging in components such as PCBs, Batteries, Camera modules could potentially be targets for investments in India going forward  India has a big pool of highly skilled technical manpower to work in production and R&D areas.  FDI in telecom has given impetus to new technologies, business processes and presence of global brands which offers advantages to Indian telecom manufacturing companies.  India has a growing semiconductor chip design industry. Large MNCs are outsourcing their design work to India. As a result of Government policy, progress has been achieved in the manufacturing of telecomequipment in the country. There is a significant telecom equipment manufacturing base in the countrywith steady growth over the past few years. The Government has already set up Telecom Equipment and Services Export Promotion Council andTelecom Testing and Security Certification Centre (TETC). A large number of multinational corporationshave also shown interest in setting up their R&D centers in India. With the above initiatives India isexpected to be a manufacturing hub for the telecom equipment. The component manufacturing adoption in India so far has seen a higher emphasis on labor intensiveparts such as plastics, metals, casings. Further opportunities along this roadmap include AssemblyTesting & Packaging (ATP) for baseband processor, battery packs, camera modules etc© Finpro - 43 -
    • India Runway: Guide for understanding ICT The Indian Cellular Association has set up a Manufacturing Advisory Committee comprising industryand government aimed at-  Catalyzing the growth of a robust parts and components industry both as suppliers to the mobile handset industry in India and the world and to create a strong No.2 position for India with a minimum share of 25% in the global market.  To establish a competent design and R&D eco-system in India, catering to Indian and global markets, in the following areas: o Mechanical tooling design o Mechanical design o Hardware design o Mobile device software and software platform design o Mobile services content development Manufacturing Ecosystem4.5.1 Major Players At present, giants like Nokia, Ericsson, LG, Motorola, Samsung dominate the telecom hardwaremanufacturing sector and have already set up manufacturing base in India. Other foreign companies thathave setup base manufacturing bases in India include Foxconn, Flextronics, Elcoteq, Celestica,Salcomp, Siemens, Cisco, Perlos, Solectron and others. Following are Telecom Regulatory Authority of India‘s recommendations on objectives of TelecomEquipment Manufacturing Policy:© Finpro - 44 -
    • India Runway: Guide for understanding ICT  To meet 45% of the domestic demand through domestically manufactured products by the year 2015 and 80% by the year 2020.  To provide market access to domestic manufactured products to the extent of 30% by the year 2015 and 80% by the year 2020.  To increase value addition in domestic manufactured products to 35% by the year 2015 and 65% by the year 2020.  To provide market access to Indian products to the extent of 25% by the year 2015 and 50% by the year 2020.4.5.2 Research & Development India has proven its dominance as a technology solution provider. Efforts are being continuouslymade to develop affordable technology for masses, as also comprehensive security infrastructure fortelecom network. Research is on for the preparation of tested infrastructure for enabling interoperabilityin Next Generation Network. Emphasis is being given to technologies having potential to improve ruralconnectivity. Also to beef up R&D infrastructure in the telecom sector and bridge the digital divide,cellular operators, top academic institutes and the Government of India together set up the TelecomCentres of Excellence (COEs). Seven Centres of Excellence in various field of Telecom have been set up with the support ofGovernment and the participation of private/public telecom operators as sponsors, at the selectedacademic institutions of India. The details of COEs are enumerated below: -TCOEs CentresSr. Associate Institute Sponsor Work AssignedNo.1 IIT Kharagpur Vodafone Essar & Next Generation Network (NGN) & Network Texas Instruments Technology2 IIT Delhi Bharti Airtel Telecom Technology & Management3 IISC (Indian Institute of Aircel & Texas Information Security & Disaster Management of Science), Bangalore instrument Infrastructure4 IIT Kanpur BSNL & Alphion Technology Integration, Multimedia & Computational Mathematics5 IIT Chennai Reliance Telecom Infrastructure & Energy Communication6 IIT Mumbai Tata Teleservices Rural Applications7 IIM Ahmedabad Idea Cellular Policy, Regulation, Governance, Customer care & Marketing4.6 Semiconductor industry in IndiaThe evolution of Indian semiconductor industry can be classified into 4 phases: 1. The exploratory phase (Pre2005) 2. The IT industry-led growth phase (1995-2000)© Finpro - 45 -
    • India Runway: Guide for understanding ICT 3. Explosive growth phase (2000-2005) 4. Innovative phase (2005 onwards) According to a study conducted by the Indian Semiconductor Association and Frost & Sullivan, theIndian semiconductor market grew by 28.3% in 2010 with major contribution from mobile devices,telecommunication and IT/OA. Local manufacturing of telecom equipment by OEMs and EMScompanies is expected to result in a 50% increase in semiconductor consumption during 2010-2012.Automotive segment is estimated to be the biggest demand generator at 31% in the same period.With the top 10 global cable companies and the top 25 semiconductor companies present in India, theecosystem is gradually orienting towards product/design innovation.The increasing availability of a capable talent pool, coupled with the emergence of India as a consumermarket for electronic goods, has led to the increase in work being done in India. Total Indian semiconductor market: TM, TAM revenue forecasts, 2009-2012 12 9,86 10 8,25 8 6,55 Total Market (USD Billion) 6 5,11 4,71 Total Available Market (USD 3,88 Billion) 4 3,14 2,4 2 0 2009 2010 2011 2012 Base year: 2010 (Source: Indian Semiconductor Association – Frost & Sullivan, 2010) Strengths & Opportunities Challenges1. Availability of talent pool 1. Lack of semiconductor manufacturing2. Maturity of semiconductor industry ecosystem3. Cost competitiveness over US, Europe and a. Lack of foundries Japan b. The lack of local ODM/OEM companies to4. Stringent IP protection measures cater to the huge demand generated in India5. Proximity to growing Asia Pacific market 2. Competition from China, Taiwan and South6. Reverse brain drain to India due booming East Asian countries economic growth. 3. Eroding cost advantage 4. Adoption of protectionist policies by other countries© Finpro - 46 -
    • India Runway: Guide for understanding ICT4.7 Electronics ManufacturingWhy India  The increased presence of EMS companies should stimulate local manufacturing by encouraging the development of Electronics ecosystem.  India known for R & D and knowledge based services is likely to change rapidly in the next few years with a kick start in the Electronics manufacturing sector and provide serious competition to other Asian countries as manufacturing destination.  Large domestic demand, low labour cost, good engineering skills, R & D advantage and innovative management are all the key factors for a healthy growth.Key Electronics associations of India  CEAMA: Consumer Electronics & Appliances Manufacturers‘ Association  ELCINA: ELCINA Electronic Industries Association of India  ISA: Indian Semiconductor Association  MAIT: Manufacturers‘ Association for Information Technology  TEMA: Telecom Equipment Manufacturers Association Presence of Industry Players in IndiaCompanies with Electronics R & D Centres in India (select list) • Texas Instruments • Freescale • Intel • ADC • Motorola • SanDisk • AMD • Agilent • Dell • Cisco© Finpro - 47 -
    • India Runway: Guide for understanding ICT • Juniper • Analog Devices • IBM • National Semiconductors4.8 Digital Media4.8.1 Advertisement and entertainment  Currently the biggest markets are on this sector  E-commerce currently constitutes the fastest growing segment  Television and printed media are the most popular places to advertise (around 90%), only few percent is divided between cinema, radio and the Internet  The share of the Television as the biggest media will decrease while share of Internet and Radio will grow© Finpro - 48 -
    • India Runway: Guide for understanding ICT4.8.2 Gaming •Forecast to grow at a CAGR of 49 per cent to reach USD 830 million by 2012. •Consumer gaming market estimated to reach USD 610 million by 2012 Growth •By 2013, Mobile Gamers (53.4%)will outnumber the PC Online Gamers Estimates (46.8%)to constitute the largest segment •Increased consumer spending on gaming esp. mobile and console gaming also led by rising mobile and broadband penetration, increased penetration of devices – low cost handsets, tablets •Aggressive marketing by telecom companies esp. through app stores= Key Growth games as a premium VAS segment Drivers •Expertise in end-to-end development of mobile and casual games, many international publishers setting up captives in India •Online gaming moving towards MMORPG games ensuring consumer stickiness and multiple revenue streams •Integrated companies with presence across complete value chain, across multiple gaming platforms. E.g. Sony, Microsoft, UTV Interactive •Standalone companies or ‗service providers‘ – development services, Industry ancillary services, distribution services, BPO/Technical services. E.g. Structure Dhruva Interactive, IEnergizer •Large Indian domestic consumer market • Proven IT & technical expertise •Ease of scaling up due to abundance of skilled workforce •Cost effective location Why India •Large Indian media & entertainment industrySource: Nasscom4.8.3 AnimationThe animation industry in India can be divided into the following key segments:  Animation entertainment  Animation education  Custom content development and multimedia/web design  VFXAccording to a Nasscom- Ernst & Young report, custom content development and multimedia/webdesign is currently the largest segment followed by animation entertainment, animation education andVFX.© Finpro - 49 -
    • India Runway: Guide for understanding ICTWhy India  Increase in the size of domestic Indian animation market and market for outsourced assignments to India  Cost arbitrage for development of foreign movies in India.  Proven credentials, adherence to international quality standards and delivery get off-shored work from foreign studios.  Movement up the value chain- Shift from pure off=shoring to co-production  The increased interest in animation among Bollywood and regional film industry  Growth in internet content, new media and interactive platforms5 Rural ICT Market5.1 Market Overview The rural Indian Bottom of Pyramid (BoP) market is defined as households in the bottom fourexpenditure quintiles (based on data from the National Sample Survey Organization) that spend lessthan INR 3,453 Indian rupees (US$75) on goods and services per month. This definition represents amarket of 114 million households, or 76 percent of the total rural population. Approximately 26.5% of theincome of the rural consumer is spent on purchasing groceries implying that almost 73.5% of their totaldisposable income is spent on items that are not required for their subsistence needs, which is a bigopportunity for products and services that add value to their life5.1.1 Key Drivers in BoP Market Shift in Life Style  Changes in occupation pattern (reduced dependence on farming) is ensuring steady and regular income  Better infrastructure, increased investment, farm-loan waivers and improved income levels are stimulating activity in rural India. Consumerism is on the rise and the propensity to spend is quite visible  Enhanced connectivity by road is improving the employability quotient of rural population. This is allowing them to earn more and therefore have a slightly higher disposable income  The BoP consumers have become fairly ambitious and are focused on improving their lives, use education as a tool to improve life, and dream big for their children. Active Involvement by Organizations  During the period of 2009-10, the Government of India has funded rural development to fuel its growth through various sponsored schemes like National Rural Employment Guarantee Act (NREGA), and Sampoorna Grameen Rozgar Yojana (SGRY) etc. It is implementing initiatives like Financial Inclusion Unique Identification (UIDAI), and encouraging the uptake of internet and mobile connectivity for the BoP.  Greater impetus from NGOs – NGOs are working on income generating activities in rural India through various initiatives including the establishment of Self Help Groups. Digital Adoption© Finpro - 50 -
    • India Runway: Guide for understanding ICT  The combination of mobile phones, inexpensive networks, and voice-accessible internet applications—for obtaining market prices, health information, or government services—may open up the Internet to large numbers of new users  Mobile phones are more in number than television and have become the primary focus to target communication for effective reach  It is clear that ongoing innovation in technology will help increase the potential of rural—and largely BoP—ICT markets5.1.2 Segments offering business potential The BoP segment has information needs in the following areas, among others:  Agriculture  Healthcare  Education  Financial Services  Governance  Entertainment Some of these information needs are highlighted in the following table:© Finpro - 51 -
    • India Runway: Guide for understanding ICT Agriculture Healthcare  Government schemes and benefits  Information on right to receive healthcare  Tips and advice around animal husbandry facility, nearest centers providing these  Awareness around crop diseases, care options, facilities and benefits availability of services in the neighbourhood  Importance of health insurance and schemes  New techniques of farming and agricultural tools  Health information, medical advices, health  Availability of fertilizers, seeds, pesticides maintenance, hygiene, good eating habits  Latest market price of different commodities  Treatment cost, consultation fees, benefits  Weather updates for BoP, any reimbursement options, SHGs  Potential buyers and sellers for various for financial assistance etc. commodities  Platform to raise concerns and solve  Quality of the commodity produced for the buyer problems faced by BoP in availing healthcare services  Reliable service in case of health emergencies  Awareness about services and initiatives setup for the benefit of the community Education Financial Services Students  Sustainable and reliable model in the  Courses, syllabus, scholarships for different community for money deposits and availing colleges loans  Updates on class timings, lectures, schedules  Awareness about different schemes, savings etc. model, benefits and reliability on such services  Availability of reference material and data for  Awareness around right methods of banking college projects and reliable services  All information related to choosing a college to  Awareness about the benefits of having an getting admission in a college ATM card and the ease of transactions Women through kiosks  Women empowerment in the community by  Build trust in financial services provided by involving them in productive activities government and private initiatives  Enhance the functionality of Self Help Groups  Awareness about availing account updates (SHG) to provide employment opportunities to  Common platform to trade second hand items women Farmers  Educate farming community Labourers  Information for migrated population on job opportunities Governance Entertainment  Schemes/subsidies provided by the  Latest news and updates government  Booking tickets for travel  Centres for procurement of these schemes and  Social networking benefits  VAS offered by the service providers  Procedure to apply and avail these facilities  Latest apps for the youth population© Finpro - 52 -
    • India Runway: Guide for understanding ICT  Knowledge about the benefits of these services  Clarity of information related to tariff and provided by the government charges  Better mobile interface  Community interaction platform5.2 Role of Central Government Government has identified the need for growth in ICT sector with prime areas of investment as health, e-governance and finance Department of Information Technology of India (DIT) identifies following areas as emerging areas: o Radio Frequency Identification (RFID) o Smart Cards o Ubiquitous Computing o Perception Engineering o Scientific Computing & Nurturing New R&D Areas o Digital Preservation o MCommerce Initiative So far State ICT polices have focused on the international, national, and state-wide urban dimensions. However in recent times, strong emphasis is being laid on developmental changes in rural areas Unlike before, Government focus on IT emphasizes initiatives managed by State Governments more than Central Government programs Adhering to national IT policy, several state governments have set up or are in the process of setting up State Wide Area Networks (SWAN) to support rural connectivity applications Reformative Policies for BoP - Ministry of Rural Development is focused on generating income opportunities for rural poor by organizing them into Self Help Groups (SHGs) through the process of social mobilizing, training and capacity building through a Public Private Partnership (PPP) model.© Finpro - 53 -
    • India Runway: Guide for understanding ICT5.3 Stakeholders in Rural ICT Projects EXTERNAL FUNDING PARTNERS VILLAGES GOVT.- (END CENTRE, USERS) STATES PRIVATE NGO SECTOR LOCAL CATALYSTS EXPERTS Community awareness is generally raised through teams of local persons that interact with villagersand inform the target group of benefits of the service/product being offered. These persons can be fromorganisations‘ local area offices or through NGOs working in the area. Involvement of influential villagers also provides an impetus to the uptake of the service/product.These influencers can, for instance, be the village Sarpanch (Head of Panchayat), Headmaster of villageschool, Teacher at school, Doctor at Health centre.5.4 Modes of Entry Entry modes and business models would depend greatly on the value proposition of the Finnishcompany, its applicability to the target segment, the extent of customization required, available resources(including human resources), marketing and distribution channels as well as the cost structure andpossible revenue streams.Select modes of operation/entry with examples of some services that can be offered are highlighted inthe following table:Internet Kiosk Mobile Applications/Alerts Kiosk maintained by Panchayat personnel (or Some (select) services that can be offered are- village entrepreneur) to disseminate  Trade App: Farmers/ traders/shopkeepers information. supplied with a list containing info graphic ofSome (select) services that can be offered are- commodities with the corresponding code and© Finpro - 54 -
    • India Runway: Guide for understanding ICT Agricultural tools and machines supplies on a the service number. Concerned person provides rental basis to farmers updates on selling and buying through audio Community meeting for farmers used for entry. Matching profiles for trade would be classes on various topics notified to either party. Various study materials through interactive  Knowledge Database for Students: Database of info graphics in the kiosk colleges with relevant information on courses, Information on financial schemes and benefits Mobile phone alerts on registering the number Acts as a window to aid all financial along with college ID, customize settings to transactions through efficient security network chose relevant alerts Information about government schemes and  Job Portal: Subscription to the portal would the procedure to apply, interactive interface to enable to receive messages to mobile phone navigate and chose the schemes. User related to the areas chosen, availability of work validation technology through thumbs canner, info can be updated to a service centre by the RFID etc. people looking forward to get their work done, user can send a message with the area pin code and he would receive an automated call or message about the opportunities available in the nearby areas.  Financial Transactions: Financial transactions with the application linked to bank accounts  Alerts on specific healthcare concerns: Database of mobile users from service provider used to identify and target customers for specific information.Telecentres/IT training centres Branchless Banking through ShopkeepersSome (select) services that can be offered are- (Business Correspondent Model) Telecentres for women: Collaborate and Some (select) services that can be offered are- extend facilities of SHG to educate women  Attractive and customized schemes for different through ICT, create small scale industries in people depending on the occupation and needs line with capabilities and availability of  Minimal amount to open an account and materials and ICT support for trade of goods incentives for enrolling into the bank IT training centres: Training in ICT tools for  Mobile alerts and money transfer facilities youth, children, local artisans to increase through ICT system at these banks employability, enhance livelihood means,  Run by selected members in the village who are develop skills and build capacity. respected and trusted by the community (Business Correspondents)Healthcare Centre at Village level Community Forum for Networking Link doctor or practitioner in the community Some (select) services that can be offered are- into the medical helpline loop and set up an  Register people in the community into the ICT enabled health centre network forum Trained locals handle front-end operations of  Subsidized call rates for people within the collecting medical information from community community and serve as entrepreneurs for the initiatives  Conference call facility for women in the at the village level community to socialize These practitioners connected to other doctors  Option to record calls and share audio files© Finpro - 55 -
    • India Runway: Guide for understanding ICT in the city hospitals who would provide expert  Platform to discuss, chat, provide advice, raise opinion concerns Referrals made depending on the severity of  Replace automated calls to live calls, especially the medical condition to better hospitals for the rural population Additional helpline number for any healthcare  Platform to promote and provide tips on other assistance sectors such as healthcare, education, Dedicated personnel to collect information on governance, finance etc. difficulties, concerns, complaints on  Promotional activities to rebuild trust in health government services services in the community 2nd largest in terms of wireless connection6 Finnish Experiences, Opportunities & Challenges in India6.1 Experiences of Finnish ICT Companies in India Finnish companies need to look at India as a long term strategic market that can be tapped not onlyfor the abundant skilled workforce and huge domestic market besides cost effectiveness but also as abase to tap clients located elsewhere. As with other countries, there can be challenges at the beginningbut these get resolved soon, overcome by the immense opportunities that the Indian market has to offer. Finnish Strengths Weaknesses in India o Solid research base and pioneering o Convince top management to have technology especially telecom and operations in India biotechnology, green technology o Bureaucracy leading to delays o Finnish credibility and o Visa issues: frequent employee travel is technological expertise is well established required at short notice o Proven telecom technology and solutions, o India perceived as a complex market with potential for implementing and testing thesecomplicated tax laws, rules & regulations in Finland for Indian companies o Infrastructure bottlenecks, high infrastructure o Finnish innovation system costs, connectivity o Telecom is a major contributor in Finland o Despite MNCs‘ R & D set ups in India, not o India is weak in hardware/manufacturing – much innovation (esp. product related) is this can be a crucial area for collaborationtaking place o Innovative ideas and technology from o Differences in work culture o There may be some cultural issues Finland that have been doing well in Europe can be brought to India and some o Political atmosphere can have impact at customization undertaken to meet market times on teleco/operator side and customer requirements o Challenging work environment – need to engage closely with client, on 24x7 basis o Aggressive marketing is required to showcase Finnish companies‘ offering Opportunities in India Important Considerations for Finnish o Long term strategic market companies o Fast growing Telecom sector incl. software o Develop India-specific strategy: Finnish© Finpro - 56 -
    • India Runway: Guide for understanding ICT solutions, services, system integration, back business and HR practices may not office operations, Value Added Services necessarily work o High IT maturity levels o Bridge the cultural gap o Skilled workforce: sourcing right people for o Be visible: aggressive marketing and media right job presence are essential o Service-oriented o Closely engage with client at all times and o Strong English-speaking workforce constantly evolve offering to meet o Huge base of engineers/graduates, strong requirements university base o Overcome fear of entering India: India is o Huge domestic market diverse but good local knowledge, team and o Cost-effective R & D contacts are useful o Working in a challenging environment o Complement each other‘s strengths, greatly helps in product development, move establish R & D linkages with up value chain industry/research institutes/academia. Adopt o Good place to do business suitable R & D cooperation model – o As a late adopter, India has the advantage of inhouse/partly-outsourced/fully outsourced leapfrogging to latest technology o Decision-making for Indian markets needs to be quick and execution very prompt6.2 Summary of Finnish Opportunities in India SWIP (SoftWare products & Information Processing services)  Innovative product designs, new concepts and product ideas  Embedded software  High end technology development and technical consultancy  R&D collaboration (i.e. open source)  Application-specific integrated circuit (ASIC)  Application software based on SaaS  Cloud computing TPS (Telecom Products & Services)  3G Services  WiMax  Mobile solution for enterprisea  Innovation and advanced value-added services, especially for mobile Value Added Services  Mobile TV applications  Development of video-based applications  Managed services (managing infrastructure and networks)  Enterprise telecom services (VoIP, IT-infrastructure-enabled unified communication services)  Value Added Services o Rural, especially e & m-education, healthcare, governance, banking, agriculture o M-commerce applications (ticket booking, bill payments) EM (Electronics Manufacturing)  Hi tech and high value items  R&D in the areas of medical, mechanical and communication applications© Finpro - 57 -
    • India Runway: Guide for understanding ICT  Production automation DM (Digital Media)  Mobile-internet based application  Online gaming and game development, co-development of games  Online gaming moving towards MMORPG games ensuring consumer stickiness and multiple revenue streams  Games as a premium VAS segment: Aggressive marketing by telecom companies especially through app stores  End-to-end development of mobile and casual games, many international publishers are setting up captives in India  Animation OTHERS  RFID technology  Cross industry application  Green technology ( low energy solutions, environment protection)  Nanotechnology  MEMS and sensor technology7 Service offering by Tekes & Finpro7.1 Tekes’ offering Tekes offers companies funding and expert services for challenging development projects that helpcompanies to promote international growth; rejuvenate their business; boost growth and success on the Finnish market; and increase networking and international competitiveness. More information about Tekes‘ offering http://www.tekes.fi/en/community/Small_businesses/548/Small_businesses/1420 http://akseli.tekes.fi/opencms/opencms/OhjelmaPortaali/ohjelmat/INTO/en/etusivu.htmlYou can contact directly 1. Senior Adviser: Kari Ryynänen Email: kari.ryynanen@tekes.fi (+358 40 5805167)7.2 Finpro’s offering Finpro‘s Global Software and Digital Media industry team consists of more than 40 experts. The teamsupports Finnish ICT companies in various issues such as testing the opportunities of products on thetarget market, developing customers skills, building international sales and marketing channels, anddeveloping business operation models as well as securing new clients and strategic partners. All this ispossible through team members‘ industry expertise and excellent networks with localtelecommunications operators, media houses, and software companies to mention a few.© Finpro - 58 -
    • India Runway: Guide for understanding ICT India‘s economic strength and market dominance is here to stay. Finpro‘s team, with its Finnish andIndian experts are ready to help the Finnish software and digital media companies to benefit from thevarious opportunities that India offers to them. More information about Finpro‘s offering in Software andDigital Media industry: http://www.finpro.fi/en-US/Business/Industry+Knowledge/Software+and+Digital+Media/default.htmOr you can contact directly 1. Head of Industry: Hanna Marttinen-Deakins Email: hanna.marttinen-deakins@finpro.fi (+358 40 3433 348) 2. Senior Consultant, India: Ambika Oberoi Email: ambika.oberoi@finpro.fi (+91 9811840329)© Finpro - 59 -
    • India Runway: Guide for understanding ICTTitle image - http://www.sevensheaven.nl/imagedetails/illustraties/gestyleerdeillustraties/india-als-ict-provider© Finpro - 60 -