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Outlook for India: Cautiously Optimistic

Posted by Arun Uday on November 14, 2008

At the outset, I have to say that this post is not motivated by any patriotic fervor. In fact, I have been extremely skeptical about the exaggerated claims of India’s emergence as an economic superpower. On many parameters, (share of world trade or per capita GDP for instance) we remain an economic minnow. However, like a prominent PE investor remarked in a conference that I recently attended – for India, God seems to be planning in lieu of the government (in his words, how else can you explain the fact that China and India both launched their family planning programs at the same time. They got it right, we got it wrong and we are left with one of the best demographic profiles in the world). Its in this context that I am inclined to say that the current global economic malaise may actually be a blessing in disguise for India.
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Posted in economy, India | Leave a Comment »

TV content distribution industry in India in a state of flux

Posted by Arun Uday on August 10, 2007

With great change comes great opportunity. And the Indian TV content distribution industry today, with its heady mix of gargantuan size, steep growth and a rapidly changing dynamic presents just that. Before we dive into the giant soap opera that is the television industry in India, lets just look at a few facts that establish the size and growth prospects of the industry:

  • Current size of Indian television media industry: INR 191 billion (USD 4.7 billion)
  • Expected CAGR over next 5 years: 22%
  • Total no of households in India: 187 million
  • Total no of TV households: 112 million (60% penetration)
  • Total no of pay TV households: 70 million
  • Total no of cable households: 68 million
  • Total no of DTH households: 2 million
  • Projected CAGR in cable households over next 5 years: 5%
  • Projected CAGR in DTH households over next 5 years: 43%
  • No of TV channels: 300
  • Expected no of TV channels in 2 years: 500
  • India is Asia’s second largest pay TV market after Japan
  • By 2015, it is expected to be the largest pay TV market surpassing Japan
  • Read the rest of this entry »

    Posted in Cable TV, India, television, TV content distribution | 11 Comments »

    An economist’s viewpoint of the Indian IT industry

    Posted by Arun Uday on July 28, 2007

    The preceding posts on Infy have set a good base for me to discuss something that I had intended to, which is the concept of “value creation” in a capitalistic system. We often come across this phrase “value chain”, a common platitude that we get to hear all the time being – “we are trying to move up the value chain”. It is important to therefore understand what this “value chain” means, who defines it and how one really moves up this “value chain”. I’ll need to delve a little into the fundamentals of economic theory here to make my point and like to apologize beforehand for the atypical long post.
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    Posted in India, Indian IT industry, technology | 1 Comment »

    Globalization and innovation (Part 3)

    Posted by Arun Uday on July 16, 2007

    Came across this article on Economic Times over the weekend, which talks about some of the work that the Honeywell Research Center in Bangalore is doing. It mentions some of the innovations of the exact same nature that I have been discussing over the past few posts on the the topic of innovation in developing markets such as India. For instance, Honeywell has developed a water sensor for farmers in India, which caters to the local needs here, and hence is much cheaper than the ones used in other markets. This can now be taken to other markets. Hmm… so, that means, I am thinking on the right lines 🙂

    Posted in emerging markets, honeywell, India, innovation, technology | 5 Comments »

    CK Prahalad v/s Porter – Who”ll win?

    Posted by Arun Uday on June 18, 2007

    Apart from the Five Forces model, which I discussed in my previous post, another of Michael Porter’s contributions to business economics has been the concept of  the “Diamond Model”, which describes the competetive strengths of a nation. One of the important arms of a nation’s “diamond” is the so called “Demand Conditions” of the local market. This essentially refers to how evolved and sophisticated the domestic consumer market for products and services is, which in turn will dictate how innovative the businesses catering to those markets will be. Its not a difficult concept to grasp. Most often, producers of innovations are cutting edge users of that genre of products themselves.  That explains why most of the mobile innovations come from mature consumer markets like Japan, Korea or Nordic countries or why web innovations primarily emanate from the US.  On the other hand, this could be a discouraging prognosis for innovation in emerging countries like India since that would essentially mean that once we are lagging the technology adoption curve, it would lead to a viscious loop where the market for the most innovative solutions will never exist and hence innovation never happen.

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    Posted in c k prahalad, India, michael porter, technology | 1 Comment »

    Can India become a manufacturing giant?

    Posted by Arun Uday on June 14, 2007

    The common refrain amongst most economic observers and commentators is “India will be the back office of the world and China will be the low cost factory of the world.” Even someone as distinguished as Steve Roach, the chief economist of Morgan Stanley advised that India stop trying to get into manufacturing and instead focus only on services. However, such notions of countries as large as India and China seem a little simplistic to me. Yes, there will be one sector which will always be the dominant one. However, given our size, even a smaller percentage of population or a smaller fraction of GDP coming from other sectors will be huge in absolute nos. Take the case of Indian manufacturing. The Indian manufacturing sector underwent a very painful few years in the early to mid 90’s when it had become very inefficient and uncompetitive.  As a result, manufacturers were forced to cut flab, exit unviable businesses and also lay off in large nos. Consequentially, what we have today is a bright industrial scenario, which seems to be matching the specatacular growth in services step for step. The IIP (Index of industrial production) numbers, which have just came in demonstrate just that. The 13.6% growth for April has been the highest in nearly a decade and augurs well for the prospects of the sector.  I also suspect that there could be vast synergistic effects between services and manufacturing that could get unleashed as we go along. For instance, engineering services (like product design and allied services), which has been a part of the outsourcing story so far is creating a class of skilled manpower who could easily carry over their expertise to high end manufacturing and also vice versa. Hence, I am inclined to think that India may end up carving a different niche for itself from China. It may not become the low cost mass manufacturing hub like China, but it could and probably is poised to becoming an end to end design and manufacturing hub for hi-end manufacturing.

    Posted in India, manufacturing | 5 Comments »

    RailTel and WiMax related announcements

    Posted by Arun Uday on June 4, 2007

    Two articles over the weekend that were important from standpoint of improving broadband connectivity in India. One was by RailTel, which announced its intentions to lease out its giant raliway telecom network to external clients. Railways has one of the most extensive OFC networks in the country amounting to 30,000 route KMs, a lot of which winds into the rural hinterland. Hence, effective use of this infrastructure could make vastly superior economic sense as compared to a greenfield rollout. As I mentioned before in an earlier post, one of the reasons for the stunted growth in internet in India was that – we seem to be caught in a circular loop where in lack of rural connectivity is stalling the development of localized applications and also vice versa. This may be one of the innovative parts to a solution that could help break that gridlock.
    The other important development is w.r.t announcements by telco majors that they were finally preparing for a WiMax rollout in the country. There are still some issues w.r.t the exact spectrum band that are as yet unclarified. But, the fact that operators are going ahead with announcements gives hope that they see resolution of the same in due course. That should hopefully improve the broadband connectivity in cities significantly. I guess if both these announced plans go as per plan, we could see an improvement in internet adoption in our country.

    Posted in broadband, India, RailTel, WiMax | 1 Comment »

    Aerosmith – Brought to you by Accenture

    Posted by Arun Uday on June 1, 2007

    Was in Bangalore the last couple of days visiting some really interesting companies (surprisingly a couple of non-tech as well). The optimism in the entrepreneurial community there was palpable with all of them gearing up for strong anticpated growth. Little wonder that the Indian economy today reported another Chinaesque growth number for the just concluded financial year. Of course, as a part of our evaluation, we need to understand the risk factors as well and not surprisingly, on a macro level, the infrastructure problems was a common complaint there. However, if there was one concern that outweighed even the infrastructural challenges, it was the huge manpower crunch. One VC friend even complained that his secretary got recruited by a rival hedge fund for a salary that would be enviable for the best of techies! Read the rest of this entry »

    Posted in India, technology | Leave a Comment »

    Captives and India

    Posted by Arun Uday on May 25, 2007

    Venture Intelligence points to two somewhat related articles on captives / product development in India. One refers to the closing down of the Bangalore development center of hi-profile startup The other is a report by Forrester on the challenges being faced by captives in scaling up their India operations. In fact, the current issue of Business Today also has an article on the same topic.
    There are various reasons attributed to the inability of captives to replicate the success of third party service providers, chief amongst which are issues like – wage inflation, crumbling infrastructure, attrition etc. But as an erstwhile techie, let me provide the “insider’s view” on this issue. In my opinion, the main problem is not so much issues like infrastructure, high costs etc. After all, that is something even the other regular IT Service cos have to grapple with. The main problem is that in the employees’ minds, the career growth in such places is just not as rewarding as that in other IT services cos – no onsite opportunities, limited scope for graduating from programming to middle mgmt and in many cases, being stuck with repetitive and low end work. Note that for most programmers in India, the aim is to “progress” from being a programmer to team leader to PM etc. However, in US, I have seen folks who are happy being programmers for their whole life. So, it has a lot to do with peer pressure. When an programmer in an offshore R&D center sees that his peer in other regular IT co keeps going onsite or meeting clients or is managing a team and no longer spending all his time coding, there is a sense of insecurity that creeps in. He fears – “Maybe if I continue to do this for long, I may end up damaging my long term career prospects because the moment I approach another co, the first question they would ask is – “Have you managed a team?” or “Do you have client facing skills” and I don’t have a good answer.” Unless startups like Riya and the rest understand the mindset of an avg techie in India, they will always end up with such a conflict of expectations between the co and the employees. Therefore, it should not come as a surprise to such captives or offshore centers of startups etc that it would take them a lot more to get resources on board as compared to the other regular IT service firms. The only way to make it work for such captives would be to provide additional carrots in the form of higher remuneration, or better work or periodic visits to the HQ etc so that the tradeoff from an Indian programmer’s standpoint makes sense as well. They cannot come with a Silicon Valley mindset and hope to make it work only by throwing more stock options. The scenarios in the two places are significantly different and that needs to be taken into account for making a success of it here.

    Posted in captives, India | Leave a Comment »

    Internet in India – Still “Nice to Have”

    Posted by Arun Uday on May 21, 2007

    Generally speaking, there are two kinds of products and services – the “Nice to haves” and “Can’t do withouts”. Talking specifically in the context of India, one way of looking at the market here is that it becomes attractive only when the product or service graduates from the “Nice to have” to the “Can’t do without” category. There are advanced markets in the world, where even the “Nice to have” consumer base is large enough to sustain businesses on those themes. But, India being a value conscious market, as an investor, I’d be interested only if I see that a product has the potential to become a “Can’t do without” in a reasonable time frame. And I feel, internet in India, is still largely a “Nice to have” rather than a “Can’t do without”. And here’s the reason why.
    I am not really so worried about the infrastructure issues like relatively high h/w costs or the lack of penetration of bandwidth etc. There is ample evidence to suggest that such issues pretty much get addressed with time. Rather, if there is any one problem that’s really been a stumbling block for internet adoption in India, it is the lack of compelling applications for the domestic market. Some of the analogies that people typically give in connection with the expected boom in Internet in India are two similar waves in ICT sphere that we have witnessed in the past viz. – the cable and mobile revolutions. Read the rest of this entry »

    Posted in India, internet | 3 Comments »