1. Unlimited Opportunities
of your Making
SOM MITTAL
FORMER PRESIDENT & CHAIRMAN, NASSCOM
OCTOBER 2014
Som Mittal
2. 2
What we will discuss today
• Where are we today, what does the present hold for us
• What are the disruptions that are happening
• What opportunities are these disruptions creating
• How do we make most of these
Som Mittal
3. 3
India – the country
7th largest country
780 dialects spoken, 86 scripts used
2nd largest population
>50% below 25 years
>65% below 35 years
2nd largest pool of
scientists and engineers
Largest democracy
815 million voters
Internet users
2nd largest
215+ million
Teledensity
75+%
920+ million subscribers
Source: IAMAI, New reports
Mix of contemporary and traditional
Poverty rate
1994 45%
2012 22%
Som Mittal
4. 4
Indian market presents a huge global opportunity
Source: IBEF, McKinsey
Healthcare spending to be
USD 160 billion by 2017
Consumer market to be over
USD1.5 trillion by 2025
Growing rural market –
potential to add USD 1.8
trillion to economy
Attractive FDI destination
25% of world’s skilled
workforce by 2025
Infrastructure investment
– USD 1 trillion over next
5 years
Growing middle-class –
~600 million by 2025
Broadband growth –
expected to have 1.38%
multiplier effect on GDP
Retail industry – expected
to be USD 750-850 billion
by 2015
A fast growing e-commerce
industry – USD 100 billion
by 2015
World's second-fastest
growing auto market
Banking sector to become
fifth largest in the world by
2020
Som Mittal
5. 5
Technology can also play a key role in India’s
transformation
GROWTH
500 million skills needed over the next decade
400 million people need stable electricity
INCLUSIVENESS
650 million people need proper nourishment
120 million rural households need bank accounts
GOVERNANCE
#134 out of 189 countries on ease of doing business
#94 out of 176 countries on corruption perception index
KEY
FOCUS
AREAS
FOR
NEW
GOVT
Technology can help in bringing about a positive change in the lives of millions
Som Mittal
6. 6
IT-BPM industry: Highest impact sector
8.1%
Relative industry share in national GDP
45% Offsets nearly half of India’s oil import bill
38%
Spearheading the Indian MNC story
Largest share in total services exports
Highest attractor of PE/VC investments
3.1
mn
Largest private sector employer
Largest private sector women employer
Promoting balanced regional growth
60-
70%
>1 mn
>60
Total cross border
M&As;
28% share
in total
$2.4 bn
Total investment;
IT-BPM share:
47%
99
Operational
IT SEZs;
44% in
Tier II/III
Highest net value add sector
Source: NASSCOM
Som Mittal
7. 7
Services industry providing value addition across five
distinct levels
Som Mittal
8. 8
India leadership drivers
BENEFITS IMPACT ON CUSTOMERS
Cost
Competitive
Human Capital
Customer
First
Scalability,
Security
Strong
Ecosystem
3X
cheaper than US
>5 million graduates
>3 million workforce
100%
coverage of outsourcing
engagements
~75 countries
~600 ODCs
43
Tier II/III cities
• Optimum cost
• Operational flexibilities, efficiencies
• Largest employable pool
• Diverse background
• Customer centric business outcomes
• End-to-end services
• Niche, domain capabilities
• Global delivery network
• Best-in-class governance frameworks
• Competitive infrastructure
• Emerging potential locations
Maturity USD 118 billion
industry
• Scale: 16,000 firms
• Depth of services: across IT-BPM
• Vertical-wide presence
1
2
3
4
5
6
Source: NASSCOM
Som Mittal
9. Diverse industry structure: Future growth driven by innovation
9
Large
11 players
Mid-sized
120-150 players
Emerging players
~1,000-1,200
Small sized
~15,000 players
%
contribution
to total IT-BPM
revenues
>40 per cent
~35-40 per cent
~9-10 per cent
~9-10 per
cent
• 1% (~150) companies contribute 80%
of industry revenues
• This segment needs facilitatory
environment, policy predictability &
stability, ease of doing business;
• 99% (~16,000) companies contribute
less than 20% of revenues
• Future growth driven by innovation, IP
& valuations rather than revenues
• Need support, markets, incentives and
simple regulation
• Can contribute 50% of growth by 2020
Incentivize expansion to Tier 2/3 towns &
integrate with new cities program
Som Mittal
Source: NASSCOM
10. India will continue to play a dominant role in the KPO market
10
Som Mittal
Key trends in KPO services
• Expansion in breadth and depth of services
• Services are likely to be offered in near-shores
along with language capabilities
• Emerging verticals and non-traditional
markets will be the growth engine
Scope of
services
• Many knowledge services deal with
regulatory standards across nations
• Data compliance with respect to regulatory
standards (especially those defined by the
United States, Canada and the European
Union) will be required
Awareness of
regulations
• Domain expertise in sales and marketing
team to sell appropriate services to client
• Collaboration with client will be required to
access business related data for performing
value-added analysis on it
Investment in
sales and
marketing
capabilities
Exports KPO - Split by verticals (2020E)
100% = $11.3bn1
• China for key phases of clinical trial process
• Philippines for number of key areas,
including healthcare outsourcing
• Sri Lanka for specific service lines such as
equity and credit research
Emerging
geographies
32%
14%
13%
9%
4%
6%
2%
20%
Hi-tech/ Telecom
BFSI
Healthcare
T&T
Retail
Manufacturing
Construction &
Utilities
Others
Source: NASSCOM
11. 11
Four major trends are driving investment in ER&D
Som Mittal
Increasing use of
electronics
Fuel efficiency/
Alternate Fuels
Electronics / Communication technologies increasing across
verticals (e.g., Automotive, Construction, Energy)
Enables real time monitoring, greater operational efficiencies and
higher comfort
Higher fuel efficiency and sustainability becoming a priority
1
2
3
Products for
local markets
Required customized products for the emerging markets
Leverage local talent (India and China) to develop products for the
emerging markets
Convergence of
Technologies
4
Devices and products with multiple functionalities (e.g., Consumer
Electronics, Mobile handsets, Medical Devices)
Source: NASSCOM
12. 12
India also emerging as hub for products and innovation
Tectonic Technology Shifts Underway
• Software / Hardware / Services silos merge into “Solutions”
• Majority of new software delivered "as a service”
• Hardware of all kinds embed software intelligence
• India is uniquely positioned to deliver innovative combinations of
world class product, services and hardware
India's Young will Invent the Future
• Innovation landscape worldwide is more youthful, agile, capital
efficient and multi-disciplinary than ever before
Goal: Transform India into an “Innovation Nation”!
Som Mittal
13. 13
Govt Support Increasing for Startups plus the Digital India
initiative
• Rs 10,000 crore debt and equity fund
• Widespread incubator and accelerator network
• Simplified laws for setting up and closure
• Focus on rural entrepreneurship
Som Mittal
Impact 2020 50,000
tech start-ups can
add 2% to India’s
GDP and 3 million
jobs
14. 14
Vision of Digital India
Announced by Modi Govt
Centered on 3 Key Areas
1. Digital Infrastructure as a Utility to Every Citizen
2. Governance & Services on Demand
3. Digital Empowerment of Citizens
Som Mittal
15. 15
Nine Pillars of Digital India
Som Mittal
1. Broadband
Highways
2. Universal
Access to Phones
3. Public Internet
Access
Programme
4. E-Governance –
Reforming
government through
Technology
5. eKranti –
Electronic delivery
of services
6. Information for All
Electronics Manufacturing
7. Electronics
Manufacturing –
Target NET ZERO
Imports
8. IT for Jobs
9. Early Harvest
Programmes
16. 16
Composition of Monitoring Committee on Digital India
Som Mittal
Special Invitees
• Principal Secretary to PM
• Cabinet Secretary
• Secretaries of Expenditure,
Planning, DoT and Posts
• Secretary, DeitY – Convener
Prime Minister – Chairman
Finance Minister
Minister of
Communications & IT
Minister of Rural
Development
Minister of HRD
Minister of
Health
17. 17
What Is Driving the Opportunity
New disruptive technology evolving fast
Most of these are consumer oriented
Consumer and people behaviors are getting impacted
This is creating completely new green field opportunities
Som Mittal
18. 18
What do these things have in common?
Technology is constantly shaping our lives...
19. Revenge of the Nerds..CHANGING established behaviors!
Apple iTunes
Retailing of digital
Wearable Devices
Wearable devices for pathological usage
Napster’s growth and
industry response
1992 Global adoption
music – Legal
alternative to p2p
sharing
Arrival of Napster –
Artists can produce
15 users in 1999,
32mn in 2000, 80 mn
in 2001
19
PGGroiPnoStg eBldea NMseaadvp iTgsoamtioTonm Ap&p Garmin Sleep HealthCenters
Overnight stay to diagnose sleep ailments
Launched in 1997, revenue of $10mn in 2004 & $30mn in 2010
Abruptly shut down in 2012
Book Stores Music Industry
on MP3 std
their own music
Revenue in 2012 –
$4bn
East is east, west is west!
Dominant role of film music & recording companies
Limited power to artists
Bezos waited for
exponential imprv in
storage, battery life &
display tech(E Ink)
2011 – eBook sale
exceeded that of
printed books
Winning combination
of Mobile & Payment
tech to disrupt FS
supply chain?
Amazon Kindle
What next?
Innovators aren’t targeting your business. You’re just collateral damage.
Som Mittal
20. 20
Increasingly rapid adoption of innovative technologies
Big Bang market adoption with disruptions
It is no longer a 'bell curve'
but a 'shark fin'...
Time to reach 1bn users has
been halving with each new
technology!
Telephone – 110 yrs
TV – 50 yrs
Mobile – 20 yrs
Internet – 15 yrs
Smartphones – 8 yrs
Messaging apps – 2 yrs
Next 1bn in less than 5
years?
Increased Re rsautelt ionfg a idno sphtoiornte dr upero tdou mctu litvipelse factors
Som Mittal
21. 21
Big Data and Analytics break entry
Virtual shopping in subways-Korea US health insurer
New platforms make interactions
social
Mobile Virtual N/w Operator, UK Telefonica
• Social forums -
customers are
rewarded for
answering other
customer queries
• P2P lending, free
SIM and other offers
barriers
• Better health care at
lower costs using
interactive devices
• Monitor members,
through remote
detection/ advisory
Physical footprint much less relevant
today
• Add to cart by scanning code
with smart-phone
• Home delivery after work
Clinical visits reduced by 50%
130% increase in online
sales
90 secs avg waiting time for
complaints
Disruptions are triggering a PARADIGM SHIFT
Disrupts physical retail! Disrupts medical consulting & pathology
labs!
Disrupts Call Centres & BPO!
Intelligent personalized
public transport (Finland)
• Personalised public
transport - Travel
almost door to door
using shared
transport
• Tailored trips without
transfers & parking
concerns
Kutsu plus offering new kind
of bus service
Disrupts public transportation,
private car ownership?
Som Mittal
22. 22
...some could impact MULTIPLE INDUSTRIES
Disrupts energy, home automation?
Google driverless cars
• Self-driven car will
reduce automobile
accidents, nullifying
speeding, drunk/
distracted driving - 6.5
bn hours of on-road
driving time to be
available
• Use as automatic taxis,
cars for disabled
Disrupts automotive industry?
Escorts Group –
Tractor Health Monitoring Internet of things
• N/w of low-cost sensors,
wireless NFC devices
• Smart devices connect
to mobile wallet & auto
debit
• Big data gets bigger with
interacting machines
• Early warning
messages
Disrupts service centres?
New platforms make
interactions social
• 3-D printing consumers
could save 50-60% in
costs per printed product
• Rapid prototyping, rapid
manufacturing, mass
customization, bioprinting
Disrupts manufacturing!
Som Mittal
23. E-Comm and Retail players are the true poster children of Big
Data …
23
“Customers who bought this item also
bought…”
“You need baby products now”
Som Mittal
24. 24
… with applications going beyond business, to creative
arts and public health
“We know what you like to see”
"We own the Netflix customer experience from the moment they
sign up, for the whole time they are with us, across TV, phone
and laptop," - Todd Yellin, VP of product innovation.
"We climb under the hood and get all greasy with algorithms,
numbers and vast amounts of data. Getting to know a user,
millions of them, and what they play. If they play one title, what
did they play after, before, what did they abandon after five
minutes?"
“We can predict flu trends better and quicker than CDC”
Google flu tracker USA CDC flu report
Som Mittal
25. 25
Will require a lot of out of the box thinking
How to inculcate a problem solving
mindset in students school level onwards?
How to partner with academic institutions?
In a country of a billion plus people, how to
encourage free flowing ideation?
How to create next generation leaders
from current Indian talent?
Som Mittal
Skill-set
Social Media
Analytics
Mobility
Cloud platform
Domain skills
Solutions/Recommendations
India level -
Hackathon / Codefest
Collaboration with
industry external
partners
Collaboration with
Universities
Problem Solving Leadership training
How to fuel disruptive innovation in India?
Source: NASSCOM
31. 31
If we act now we can still make it happen
• We have to re-energize our colleges; improve the output;
Som Mittal
MOOCs; new ideas
• Get entrepreneurship kicked in; set up incubators ; invite
industry; create mentors; increase visibility
• Focus on local solutions; tie up with Digital India vision
• Do not start with trying to convince Government; they will
follow
• If need Govt., support be very specific; find a champion
• Encourage participation in forums outside; expand
network
32. 32
In Summary: Fortunate to be at this time
• World is changing fast; globalization has made world almost a
Som Mittal
border less market
• Technology has evolved and is now consumerised
• New ideas and innovation are threatening old models and
business as usual
• India itself offers large opportunities to solve its problems
• Government will itself be a key customer and driver
• The eco system is encouraging entrepreneurship. Young
people have more career options
The future is of our own making - Will you be the next Disrupter?
Notas del editor
Knowledge service outsourcing in India has experienced growth of ~13% between 2008-12. Over the next 5-7 years, the growth rate is expected to range between 15.0-19.6% to reach a market size of $8.6-11.3bn by 2020. With digitization of data and increasing complexities, organizations are looking more towards data to drive business decisions. In the KPO industry, there is significant growth in analytics and business research segments.
Service providers will be required to invest significantly to develop specialized knowledge and domain expertise required in the KPO industry. Sales and marketing team will also need to enhance their capabilities and industry knowledge to engage clients in relation with their domain specific business problems.
Specialized services such as legal research, analytics, business research, etc. require significant client interaction. Hence, KPO industry will adopt global delivery models with higher proportion of on-shore employees to facilitate better understanding of clients’ requirements and deliver the required results.
Penetration in emerging markets and new customer segments (mid market, geography, verticals) will be one of the key drivers for growth in this segment in the next few years. Indian BPM players and their subsidiaries will also leverage on KPO growth in other geographies by opening centres in these locations. For example, China offers a significant pool of potential patients and is growing as a major hub for clinical trial processes; Philippines is growing in Healthcare outsourcing (providing industry-specific services to hospitals and healthcare providers); Sri Lanka has a significant number of qualified accountants, boosting the growth for specific service lines such as equity and credit research.
Printed Maps
For the most of 20th century, printed maps industry was dominated by companies like Thomas Guide, Rand McNally
Then came internet based maps giving driving directions from companies like MapQuest & Yahoo
Then came stand alone devices using GPS to generate optimal routes – Garmin, Tomtom. These devices were luxury items costing $ 2500 in 1991 and $120 in 2000.
Then came Google navigation app – free of cost
Bookstores
It is important to pin point your market entry and time it right
Amazon waited for maturation of E Ink that could emulate readability of paper (display tech), sufficient storage and battery life
Bezos says “If you place your bets right and early enough, none of them are ever betting the company”
In 2011 – sales of eBook exceeded that of sale printed books by Amazon
In 2014 – E-books now make up around 30% of all book sales in US
However growth is slowing due to increase in tablet sales. Consumers who use tablets buy fewer titles compared to e-readers
Specialized medical lab sleep HealthCenters
Patients suffering from sleep disorders like apnea needed expensive overnight visits to sleep clinics
Launches in 1997, expanded quickly to earn revenues of $10mn in 2004 and $30mn in 2010
With rapid improvements in price & performance of wearable monitoring devices changed the business, gradually at first and then suddenly.
Sleep healthcenters shut down in 2012 as insurance agencies decided to cover the less expensive option.
Music Industry
Initially there was dominant role of film music and there was limited power to artists
First wave of disruption came with arrival of Napster and sharing of audio files
Industry responded with cases of copyright violation. However technological efforts continued
Second wave came with retailing of digital music by Apple through iTunes. Growing role of mobile platforms was visible
Shift from album sales to individual track sales
Next wave will be that of streaming videos
Artists can produce & distribute their own music at relatively low cost in Do It Yourself model
When Big Bang disruptions arrive, the slope of market adoption is nearly vertical.
Thanks to social network and other information exchanges, customers in every segment now have instant access to nearly complete information about new products & services.
Today there are only two kinds of buyers – trial users and everyone else.
These markets exhibit winner takes all results and short product lives.
Google Car
Piloted already & working prototype by early 2016
Internet of Things
Apple announced a new ‘smart home’ platform
Google - Android and purchased Nest (smart home appliance maker) for $3.2 billion
Samsung smart home can be controlled with a single app
Vodafone to buy Cobra automative Tech – electronic services for car industry - The combination of Vodafone and Cobra will create a new global provider of connected car services
Cisco offer internet of things solutions for utilities, manufacturing, mining, oil and gas. Network plays a critical role as the connectivity platform for control & operational systems, sensors, machines, and devices.
Kutsu Fi - Intelligence personalized public transport
Available on certain restricted routes in Helsinki, Finland
Next step – country wide availability
The Startup ecosystem in the country is nomore at a ‘nascent stage’. Almost every leading venture capital fund has set up shop in India. The early stage funding landscape is fragile though with limited number of ‘active’ angels yet over $1b of institutional funding was pumped into early stage startups in 2014 with another 3 months to go!
Source: E&Y (http://articles.economictimes.indiatimes.com/2014-10-03/news/54599711_1_nexus-venture-partners-suvir-sujan-200-crore)
In India we have about 20 private accelerator programs (which fund and accelerate) including Tlabs, Kyron, AngelPrime, VentureNursery etc. We have 70+ Institutional / Academic Incubators, some of which fund as well. There are also a number of purely mentoring based accelerator programs.
The recent phenomenon that’s struck the acceleration landscape is that of Corporate accelerators. Most of these don’t necessarily fund but identify reasonably early stage startups (that are clocking revenues) and helping them with mentoring, industry connections and market access. This is also a true recognition of India’s startup talent by these companies as most of these programs were erstwhile only being run in Silicon Valley.
In terms of evangelization, knowledge sharing and business skills workshops there is tremendous action happening primarily in Bangalore, Delhi, Mumbai, Pune, Hyderabad and Chennai. In 2014 alone over 100 hackathons have been conducted by various support groups like Startup Weekend, In50hrs, Weekend Ventures, Angel Hack etc. These are helping aspiring entrepreneurs to get a flavor of building a business in a very short period of time.
By 2012, India has produced 3500+ tech startups. This number is set to go up by atleast 1000-1500 by end of 2014. I am hoping Zinnov to revisit those numbers at the NASSCOM Product Conclave this year in end of October.
(http://www.nasscom.in/indian-software-product-companies-building-global-business?fg=826467)
Bangalore and Delhi NCR have so far dominated the tech startup movement in the country and Bangalore is clearly a leader in terms of a better ecosystem. However, I expect Pune to pull off a surprise in the upcoming Zinnov report as it has produced some of the most promising tech startups in recent times particularly in the enterprise space.
However, it must be noted that you don’t need to be in any of these cities to build a world class tech startups. But founders from these cities do have a advantage or knowhow, connections, local market and access.
From Job to Marriage, from Bus tickets to Airtickets. from booking movies to restaurants, from plumber to tutor, today most of us in at least the bigger cities rely on some online brand or the other.
Not just that, we have also build one of the world’s largest Mobile Ad platform, one of the biggest big data and analytics firm, the most popular presentation sharing website, one of the most reliable anti-virus solution to one of the world’s most impressive online helpdesk. We have India tech success stories in almost every sphere of life.
While the first rule of starting up is to identify a problem / an area that you are truly passionate about, I am often asked about some of the most promising opportunities for tech entrepreneurs.
I am therefore sharing this slide for your reference.