New Delhi Times

While I agree with the gist of your argument (i.e., software services requires innovation), I think it’s also overly simplistic in disregarding an important difference between software production models in India and the US.
Apple and Microsoft differ from Infosys and Wipro in that they invest significantly in “new” product development. Of course they provide services to support these products, and in several cases, make a significant percent of their revenue through such services. But this model is still fundamentally different from that of companies that receive specifications and deliver results.
Note that I am not arguing about which is more innovative: just that they are different. I would go so far as to claim that ‘true’ product development is a more sustainable long-term growth story, because of the intellectual property it generates, the reinforcing cycle of innovation it spurs, and its (relative) immunity from labor-market arbitrage.
IMHO, the bigger question that this begs is why this difference between India and the west. There are several possible answers to this question, some more controversial than others. A greater aversion to risk in indians, under-developed consumer markets, inability to maintain a consistently high-quality technical workforce in a competitive market, absence of a mature capital market that encourages innovation, etc.
Of course, each of these are changing, and we will slowly but surely see their impact on the structure, composition and strategy of Indian software firms. In the meanwhile, like you, I’ll drink to the continued success of services companies!
PS – Hey Bhat, long time no hear

While I agree with the gist of your argument (i.e., software services requires innovation), I think it’s also overly simplistic in disregarding an important difference between software production models in India and the US.
Apple and Microsoft differ from Infosys and Wipro in that they invest significantly in “new” product development. Of course they provide services to support these products, and in several cases, make a significant percent of their revenue through such services. But this model is still fundamentally different from that of companies that receive specifications and deliver results.
Note that I am not arguing about which is more innovative: just that they are different. I would go so far as to claim that ‘true’ product development is a more sustainable long-term growth story, because of the intellectual property it generates, the reinforcing cycle of innovation it spurs, and its (relative) immunity from labor-market arbitrage.
IMHO, the bigger question that this begs is why this difference between India and the west. There are several possible answers to this question, some more controversial than others. A greater aversion to risk in indians, under-developed consumer markets, inability to maintain a consistently high-quality technical workforce in a competitive market, absence of a mature capital market that encourages innovation, etc.
Of course, each of these are changing, and we will slowly but surely see their impact on the structure, composition and strategy of Indian software firms. In the meanwhile, like you, I’ll drink to the continued success of services companies!
PS – Hey Bhat, long time no hear

Although you have made great points but product development and services differ in the aspect of working for self vs working for others. The technical challenges and innovation will be similar but a services company does not own the intellectual property and also does not take the responsibility of the success of the idea. This responsibility makes a product company special because it makes long term revenue for the company. I do not know a lot about services industry but have heard they also depend a lot on price competitiveness. How about an article on that?

Although you have made great points but product development and services differ in the aspect of working for self vs working for others. The technical challenges and innovation will be similar but a services company does not own the intellectual property and also does not take the responsibility of the success of the idea. This responsibility makes a product company special because it makes long term revenue for the company. I do not know a lot about services industry but have heard they also depend a lot on price competitiveness. How about an article on that?

I partially agree with u. My perception is that we have more space to innovate in product rather than a service. Look at IBM global services,it can never meet and match the heights of MS which is ofcourse a product company.

I partially agree with u. My perception is that we have more space to innovate in product rather than a service. Look at IBM global services,it can never meet and match the heights of MS which is ofcourse a product company.

Perhaps the only thing that I think I’d agree with you on is that we should give credit where credit is due – Indian service companies have indeed innovated on many different levels to come out tops in the global software services market.
I think I understand the sentiment behind your post in the first place. It can be pretty frustrating to continually hear that Indian companies suck, we do low-end service work that mostly takes advantage of labour arbitrage, we can’t innovate, etc., etc. Like you, I believe that India is indeed capable of throwing out the next wave of companies that are truly world-class and generate IP. However, I don’t believe that we are quite there yet (we are trying), and to not give the product companies their due is not fair either.
Let me expand a bit. A product company is not necessarily great because it innovates. What makes a (good) product company truly stand out is its ability to place its bets on building something in a way that nobody else has, and then giving it all the company’s got. Product companies invest in R&D, they take chances, and in their DNA is the ability to know *what* to build without somebody telling them to. The what is a very key element.
Lastly, I disagree entirely that doing software services is a great first step towards becoming a product company. I would argue that the mindsets required are are quite the opposite, and if you’ve been a service company long enough, you probably have lost the fire that gives you the courage to take big bets. Your workforce is almost most likely tuned to deliver to customer expectations, not set the vision itself and then work together in making that a reality.
I would love to expand more but I think I’ll end here for now
Btw, I just wanted to say, you have a great blog so definitely keep writing! It was Raji Harikrishnan (my classmate from undergrad) who first told me about your blog and as she said, it’s definitely interesting.
I have great respect for entrepreneurs such as yourself, even if I our vies on service companies differ!

Perhaps the only thing that I think I’d agree with you on is that we should give credit where credit is due – Indian service companies have indeed innovated on many different levels to come out tops in the global software services market.
I think I understand the sentiment behind your post in the first place. It can be pretty frustrating to continually hear that Indian companies suck, we do low-end service work that mostly takes advantage of labour arbitrage, we can’t innovate, etc., etc. Like you, I believe that India is indeed capable of throwing out the next wave of companies that are truly world-class and generate IP. However, I don’t believe that we are quite there yet (we are trying), and to not give the product companies their due is not fair either.
Let me expand a bit. A product company is not necessarily great because it innovates. What makes a (good) product company truly stand out is its ability to place its bets on building something in a way that nobody else has, and then giving it all the company’s got. Product companies invest in R&D, they take chances, and in their DNA is the ability to know *what* to build without somebody telling them to. The what is a very key element.
Lastly, I disagree entirely that doing software services is a great first step towards becoming a product company. I would argue that the mindsets required are are quite the opposite, and if you’ve been a service company long enough, you probably have lost the fire that gives you the courage to take big bets. Your workforce is almost most likely tuned to deliver to customer expectations, not set the vision itself and then work together in making that a reality.
I would love to expand more but I think I’ll end here for now
Btw, I just wanted to say, you have a great blog so definitely keep writing! It was Raji Harikrishnan (my classmate from undergrad) who first told me about your blog and as she said, it’s definitely interesting.
I have great respect for entrepreneurs such as yourself, even if I our vies on service companies differ!

A product company uses its people to create intellectual property.
A services company rents its people out so others can create intellectual property.
A product company takes a $20/hour Java programmer and uses her skills to create a $20 million product.
A services company takes a $20/hour Java programmer and rents him out for $25/hour.

A product company uses its people to create intellectual property.
A services company rents its people out so others can create intellectual property.
A product company takes a $20/hour Java programmer and uses her skills to create a $20 million product.
A services company takes a $20/hour Java programmer and rents him out for $25/hour.

As a non-IT guy, I have only my common sense and 29 years of business experience to rely on. So this may sound a little naive to some of you.
The classic definition of a product is something the user buys and owns. I don’t see consumer software products, which is what you are comparing to services, continuing as pure products in the emerging era of internet based software. As a wise sage once said, and it wasn’t Bill Gates, that if you need to light up a room, you don’t go out and buy a power plant – you hook up to the electric company. Can you imagine people continuing to buy MSOffice for hundreds of dollars a copy when you can accomplish the same tasks by subscribing to some online software for a few dollars a month and not having to pay for all the apps you never use? When this model becomes the norm, consumer software will come a lot closer to being a service.
There will always be the big, complicated products like SAP or an Oracle database, but these are already so service intensive that they are barely products.
My point is: in software, service will eventually be king. The Indian IT aspiration should not be about entering the product arena but climbing higher and higher in the value chain of service. In other words, provide original, hard-to-copy services rather than providing low-end, rote services to western problem solvers.

As a non-IT guy, I have only my common sense and 29 years of business experience to rely on. So this may sound a little naive to some of you.
The classic definition of a product is something the user buys and owns. I don’t see consumer software products, which is what you are comparing to services, continuing as pure products in the emerging era of internet based software. As a wise sage once said, and it wasn’t Bill Gates, that if you need to light up a room, you don’t go out and buy a power plant – you hook up to the electric company. Can you imagine people continuing to buy MSOffice for hundreds of dollars a copy when you can accomplish the same tasks by subscribing to some online software for a few dollars a month and not having to pay for all the apps you never use? When this model becomes the norm, consumer software will come a lot closer to being a service.
There will always be the big, complicated products like SAP or an Oracle database, but these are already so service intensive that they are barely products.
My point is: in software, service will eventually be king. The Indian IT aspiration should not be about entering the product arena but climbing higher and higher in the value chain of service. In other words, provide original, hard-to-copy services rather than providing low-end, rote services to western problem solvers.

A product company uses its people to create intellectual property.
A services company rents its people out so others can create intellectual property.
A product company takes a $20/hour Java programmer and uses her skills to create a $20 million product.
A services company takes a $20/hour Java programmer and rents him out for $25/hour.
Get real.

A product company uses its people to create intellectual property.
A services company rents its people out so others can create intellectual property.
A product company takes a $20/hour Java programmer and uses her skills to create a $20 million product.
A services company takes a $20/hour Java programmer and rents him out for $25/hour.
Get real.

Sorry for the multiple posts. It hung the first time I hit submit.

Sorry for the multiple posts. It hung the first time I hit submit.

Don’t Google,Yahoo and other web based companies qualify as pure product companies. They provide services directly to the consumers, and most of the engineers there supposedly do great work.

Don’t Google,Yahoo and other web based companies qualify as pure product companies. They provide services directly to the consumers, and most of the engineers there supposedly do great work.

success of Indian IT industry is just a temporary state. As long as We are able to provide low cost services , We are in the business. If in the future other countries like China , Russia will able to offer more cheap Labor , India will lose its advantage. So favoring this SAFE services based business model is itself very risky.

Product companies work on innovation , courage and passion. There is nothing like
glorifying “product companies”, They actually deserve this . They add value to this world by providing new facilities, which make ours life easier. Products like Search Mail messenger have changed our way of living.

“Firstly, there aren’t really any true product companies” There is nothing pure truth in this universe either. Yes Product companies do have services based requirements. But this is the easiest part of all the work . So it is not good that We (Indians ) get the easiest part. We can work on the most difficult things also.

About the innovation in service industry, a bit Innovation is required everything in life. Even typing in MS word have too many options of changing fonts and styles.

Working on new technologies frequently is like Jack of all , Master of none. And also it is more for companies not for employees. Employees have a very restricted work area to perform .

“Finally, doing software services is a great first step towards building software products.” I think opposite is true. Developing new products is not full filing some requirements , Its all about showing a new way to others. For this you need to develop confidence in yourself , which is not feasible in services industry Where Client is GOD.

Finally , yes We can give credit to Indian IT companies , but We have to do something in the areas where we are lacking. We have got some speed , but this much is not sufficient. We will have to come up with some great products , So that we can not only compete with Silicon Vally , but can beat them.

success of Indian IT industry is just a temporary state. As long as We are able to provide low cost services , We are in the business. If in the future other countries like China , Russia will able to offer more cheap Labor , India will lose its advantage. So favoring this SAFE services based business model is itself very risky.

Product companies work on innovation , courage and passion. There is nothing like
glorifying “product companies”, They actually deserve this . They add value to this world by providing new facilities, which make ours life easier. Products like Search Mail messenger have changed our way of living.

“Firstly, there aren’t really any true product companies” There is nothing pure truth in this universe either. Yes Product companies do have services based requirements. But this is the easiest part of all the work . So it is not good that We (Indians ) get the easiest part. We can work on the most difficult things also.

About the innovation in service industry, a bit Innovation is required everything in life. Even typing in MS word have too many options of changing fonts and styles.

Working on new technologies frequently is like Jack of all , Master of none. And also it is more for companies not for employees. Employees have a very restricted work area to perform .

“Finally, doing software services is a great first step towards building software products.” I think opposite is true. Developing new products is not full filing some requirements , Its all about showing a new way to others. For this you need to develop confidence in yourself , which is not feasible in services industry Where Client is GOD.

Finally , yes We can give credit to Indian IT companies , but We have to do something in the areas where we are lacking. We have got some speed , but this much is not sufficient. We will have to come up with some great products , So that we can not only compete with Silicon Vally , but can beat them.

Gaurav, IBM Global Services may not be the best example to drive your point across.
Cringley has written two articles on the IGS LEAN program (http://tinyurl.com/ysp4ek) which talks about some of their business practices. I suggest you read atleast some of the comments (there are over a 1000 comments by existing and past IBMers).

Gaurav, IBM Global Services may not be the best example to drive your point across.
Cringley has written two articles on the IGS LEAN program (http://tinyurl.com/ysp4ek) which talks about some of their business practices. I suggest you read atleast some of the comments (there are over a 1000 comments by existing and past IBMers).

Product companies are about innovation, service companies are about understanding, listening to clients and addressing the solution within deadlines. The processing of listening to the market is the common aspect of both. However, the kinds of people required for these roles are fundamentally different. Think consulting firm, and you can imagine the big B school MBAs in client relationship roles. There is a lot more emphasis on soft skills,on formal processes, less empahsis on precision or sustainability,less time for innovation, less thought on the code line and more on getting to a solution that works in time. Product companies require more creative people, but their social skills might not be as good. I for myself would never work in a consulting firm,because I know thats not where my strengths are. (Starting one of my own is a different thing, because then I am an entrepreneur). So it all depends on what your strengths are.

Product companies are about innovation, service companies are about understanding, listening to clients and addressing the solution within deadlines. The processing of listening to the market is the common aspect of both. However, the kinds of people required for these roles are fundamentally different. Think consulting firm, and you can imagine the big B school MBAs in client relationship roles. There is a lot more emphasis on soft skills,on formal processes, less empahsis on precision or sustainability,less time for innovation, less thought on the code line and more on getting to a solution that works in time. Product companies require more creative people, but their social skills might not be as good. I for myself would never work in a consulting firm,because I know thats not where my strengths are. (Starting one of my own is a different thing, because then I am an entrepreneur). So it all depends on what your strengths are.

Hey ya!
I am in Newcastle for long have been visiting and enjoying Delhi. There is an adjoining city in New Delhi called Gurgaon. Appears good for shoppers. They even got a website
http://www.GurgaonShoppingMalls.com
the city is good but the infrastructure, like most of the so called developed city needs to be taken care of. Even the embessey area in Delhi is very different than the rest of Delhi. Why?
There is a lot that needs to be done on that front to gain reputation. Let’s see how the commonwealth games 2010 are held there.
Cheers,
Chris

Hey ya!
I am in Newcastle for long have been visiting and enjoying Delhi. There is an adjoining city in New Delhi called Gurgaon. Appears good for shoppers. They even got a website
http://www.GurgaonShoppingMalls.com
the city is good but the infrastructure, like most of the so called developed city needs to be taken care of. Even the embessey area in Delhi is very different than the rest of Delhi. Why?
There is a lot that needs to be done on that front to gain reputation. Let’s see how the commonwealth games 2010 are held there.
Cheers,
Chris

Hey ya!
I am in Newcastle for long have been visiting and enjoying Delhi. There is an adjoining city in New Delhi called Gurgaon. Appears good for shoppers. They even got a website
http://www.GurgaonShoppingMalls.com
the city is good but the infrastructure, like most of the so called developed city needs to be taken care of. Even the embessey area in Delhi is very different than the rest of Delhi. Why?
There is a lot that needs to be done on that front to gain reputation. Let’s see how the commonwealth games 2010 are held there.
Cheers,
Chris

Hey ya!
I am in Newcastle for long have been visiting and enjoying Delhi. There is an adjoining city in New Delhi called Gurgaon. Appears good for shoppers. They even got a website
http://www.GurgaonShoppingMalls.com
the city is good but the infrastructure, like most of the so called developed city needs to be taken care of. Even the embessey area in Delhi is very different than the rest of Delhi. Why?
There is a lot that needs to be done on that front to gain reputation. Let’s see how the commonwealth games 2010 are held there.
Cheers,
Chris

Embassy areas are always different in every country. They always set up shop in the best districts.

Embassy areas are always different in every country. They always set up shop in the best districts.

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Product companies work on innovation , courage and passion. There is nothing like
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