To go local India needs to embrace outliers, pump more money in education

Prime Minister Narendra Modi’s call of “Vocal for Local” signifying self-reliance has rekindled an age-old debate about whether the country is capable of manufacturing its own products without relying on imports.

Indian products not on par?

While Indian manufacturers have produced cars to aircraft, there hasn’t been a single software product which commands a ready acceptance in the global market. Azim Premji, one of the stalwarts in the IT services sector when asked the reason for the industry not being able to come up with a world-class single software product is learnt to have remarked that his company would rather stick to what it knows best.

But his remark made nearly two decades ago has come to haunt the industry more than ever. It is a widely accepted theory that services and products are not offered by the same company, but it is no longer valid. In the late nineties, Wipro set up a venture which was all set to make software products but failed disastrously. Infosys’ banking software product, Finacle is good in parts, but has lacked the commitment from the company to become a full-scale software product. It continues to get traction from domestic banks and a few others in the developing countries but has not found full acceptance in major geographies even though it has been around since 1999. Revenues from Finacle are still not as high one would expect from a software product launched two decades ago.

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Around 1999 when Finacle was launched, Microsoft launched Internet Explorer 4.5 and 5 versions and the blockbuster Word 2000. Microsoft made billions out of this software product whereas efforts from Indian IT companies have at best been abysmal.

An oft-repeated defence from the Indian government as well as the corporates is that the software products do get engineered and made here by engineers in India for foreign IT software products’ companies, but the IP rights for them are held by the parent companies who first conceived them either in the US or in Europe. For example, India too has ERP products made by local companies but doesn’t stand a chance in front of biggies like the German company, SAP Labs. Perhaps the only big success story has been Tally, an ERP accounting software package which has found huge traction among the small and medium enterprises but hasn’t left the Indian shores so far.

Degree-driven talent search the culprit

There are various reasons for the Indian IT companies not to foray big-time into developing software products. One of them is the way the Indian education system works. Most of the Noble Prize winners come from research institutes attached to educational institutions. For example, Bell Labs in the US has produced several Nobel Prize winners, so has MIT and research institutes attached to universities in Europe like Basel and Berlin universities.

Our own IITs and IIScs are yet to produce a single Nobel Prize winner even though they are completely funded by the government, unlike the private ones whose access to funds are limited. According to a recent article in Business Insider, companies like Tesla, Apple, Google and Netflix have said that a university degree is no longer mandatory to apply for a job in their respective companies.

This is quite a bold claim to make, considering the fact that students spend a lot of money and hard work to get graduate degrees from some of the best universities in the world. What it also means is that some of the biggest multinationals in the world firmly believe that there is nothing about the job that requires a university degree. Such a shift in mindset cannot be seen in India where corporates still prefer an IITian or an IIM even though someone who has far better talent and skillsets without a university degree can add value to these companies more than those from such institutes.

According to a Quoran, Joydeep Sen Sharma, one of the reasons for Indian companies not being able to crack the code is because the Indian education system is hostile to outliers. Someone who loves to code all his life may just be able to get passing grades at an Indian college even though he would be celebrated in the US because the premium is on his skills and not on the kind of degree he holds. Another reason, according to Sharma, is that venture capital firms are wary of funding risky, path-breaking ventures.

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Even though the Indian government keeps talking about how it is important to develop our own products, it fails to follow it up on its words as it continues to reduce the budgetary support for education and research. Writing for IndiaSpend, Jyostna Jha and Madhusudan Rao have pointed out that the share of the Union Budget allocated to education fell from 4.14 per cent in 2014-15 to 3.4 per cent in 2019-20, the period during which the Bharatiya Janata Party headed the central government.

As a percentage of GDP, the spend on education is as low as 3 per cent as of 2019. Comparatively, neighbouring countries such as Bhutan spend 6.6 per cent of its GDP and Nepal 5.2 per cent. So, it is obvious that the initiative should come from the government by allocating more funds for education and research if India has to become self-reliant, a point largely missed by successive governments at the Centre.

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