In The Spotlight

The Israeli Innovation Engine – can India match it?

Data Quest Article, 12/2009, Ganesh Natarajan

A recent delegation of the NASSCOM Executive Council to Israel on a strategy cum study tour was an eye opener for all us who were visiting the country for the first time. A truly first rate country built in the face of relentless strife and adversity, there are many lessons to be learnt for us as leaders of companies, as the IT industry and indeed as a nation that has achieved much in the past decade or so but today stands at the brink of major opportunities in the post recession world !
Israel is nothing short of a modern miracle. A nation with less than eight million people has emerged as a leader in High technology product innovation in the world boasting of over one hundred and twenty companies listed on the tech heavy NASDAQ, over three thousand entrepreneurial technology firms with five hundred having crossed the twenty million dollar revenue mark and two hundred startups every year powered by twenty four technology incubators and software exports exceeding five bullion US dollars. With the global market for outsourced products and services expected to cross a trillion dollars in the next decade, it is an intriguing thought to imagine how much more India can do than its current fifty billion dollars in exports if it could take a leaf or two from the Israeli Innovation book!
The unique approach to young business incubation is revealed by the fact that for every idea that the venture accelerators identify, eighty percent of the initial half million dollar funding is provided by the Government primarily by the Office of the Chief Scientist. With twenty fours active private sector incubators and some more embedded in the Universities, the risk appetite for creation of startups is indeed unprecedented with a fairly high success rate of moving into the first stage of venture capital funding. Nearly two billion dollars of funding was raised by technology companies in the year 2008 alone and if there is one area where there is still concern, it is the “build and sell” approach where many first time entrepreneurs do not stay the course for obtaining mezzanine finance and private equity for scaling but choose to move on to the next venture. 
Indian IT is at a crossroads! The two hundred billion dollar opportunity that beckons us by 2020 is not going to be realized by a “more of the same” approach and the industry will have to build defensible scale in areas beyond IT and BPO – Engineering Services, Animation and Gaming, Embedded Systems and Products are each multibillion dollar opportunities but each of these needs a fresh approach and long term commitment of the entire eco-system – industry, academia, financing agencies and in some respects the Government to reach the scale that can and should be attained. In comparison with the Israeli startup story, ours has been more of accessing private equity and the capital markets and building companies that have sustained into the long term thanks to the large pools of manpower available for expansion. However in many of the new areas the  Israeli model of venture incubation and early stage funding has to be embraced as well and it would be excellent for some new age research education and incubation models to emerge that will produce enough talented entrepreneurs and firms for the industry to get its next boost of adrenalin.
There are myriad opportunities that loom in front of Indian companies – e-Government, Embedded Systems, Engineering solutions, Media and Animation are just a few! Each of these will need eco-systems to be built that enable best of breed product and service providers to collaborate  effectively and offer solutions that incorporate the best of multiple domain competence, technology and marketing prowess. The good part of this unique visit to Israel was that it also included the opportunity to visit some amazing Christian shrines like Bethlehem, Nazareth and the Dead Sea and as eighteen CEOs took a morning off to float with abandon on the waters of the mineral rich Dead Sea, one could not help wondering if this inclusive culture that we have created within the industry that now extends beyond Indian shores to Vietnam, Egypt, China, Bhutan and now Israel could well be the strongest weapon in our arsenal for the future. The future of outsourcing and technology belongs to those who embrace collaboration and that is one attribute our industry demonstrates in ample measure!