Product development can generate $7 bn by 2010

IN CONVERSATION

Nasscom Product Forum chairman and i-flex Solutions (India) CEO, Deepak Ghaisas, shares his views with Business Standard on the product industry as Nasscom plans its annual product summit in Pune on June 13.

How many product development companies are there in India and where are they concentrated?

There are 175 product companies in India concentrated in Bangalore (38), National Capital Region (35), Pune (25), Mumbai (25), Hyderabad (19) and Chennai (12).

The field is attracting a bulk of the NRIs from Silicon Valley to return home and set-up their own IP-led firms and employ an additional 20-25 people.

For instance, of the 175 entrepreneurs we met for Nasscom product directory, 75 were Indians who had worked abroad and had now returned to set-up their own organisations.

What is the market potential of this industry?

The product development industry is currently estimated to be somewhere around $400-450 million. It has the potential of generating revenues to the tune of $7 billion and creating one million jobs by 2010, according to a report - 'Indian software product sector: Challenges and a Roadmap' by the IIM, Bangalore, faculty.

Indian companies are said to generally avoid VC funding. Is that true?

While over 80 per cent of companies here are self-funded by friends and family, the Indian growth story is attracting global venture capitalists (VCs), high net-worth and private investors and fund managers.

The year 2005 witnessed over 68 investment deals in India with a total funding of $1.8 billion. Of this, the IT-ITES sector got over 33 deals accounting for $422.90 million "� the highest level of investment in the country.

Other sectors that attracted significant investment in the country in 2005 included manufacturing, healthcare and life sciences, BFSI and textiles.

Do Indian entrepreneurs file patents and protect their intellectual property (IP)?

Patent filings in India have increased fourfold in the last five years. However, they are still low at 17,000 patents filed per annum in 2004.

Nasscom expects patent filings to increase significantly over the next five years as major revisions were made to the country's patent laws in 2005 and more Indian IT companies move up the value chain and focus on developing software products and embedded software for new consumer electronic devices.