Dr. Ashok Jhunjhunwala
Professor of the Department of Electrical Engineering, Indian Institute of Technology
Thank you very much. Though it was said that this session was not going to be on IT alone, I am not going to talk about IT but if you kind of generalize IT to IT and telecom that’s what my expertise is so I cannot not talk about it. However what I will try to do is that I will talk in a very general level and try to draw some lessons from that which I believe is very much true for other industries. I will title my talk leveraging India as India stands up through innovation and technologies business models and policies. My belief is that innovation is the key not in just technology

And in India in many different ways and I think the best way to understand is to understand what the income levels of people in India are and what the paying capabilities of the people in India are. You really find that India is a large country, a billion people and that’s why potentially a very large market but never forget the price point at which people in India will buy. You get the price point, you understand that yes out of the 135 million rural people most of them earn not more than 60 dollars per month and urban household yes you can talk about 200 dollars per month. That’s where the Indian market booms. If you are looking at those who are going to earn only a thousand dollars yes the market is small, you must understand where you are and what are you going to land up with. I want to point this out because the story of telecom in the last ten years is the story of understanding the Indian market. We were barely 5-6 telephones in 1974, in ten years we crossed 100 million and we crossed because we understood that we will not earn from a subscriber if we go 100 million more than 300 rupees. if we understand that that is what the paying capability is for what we have to offer then we work back and say can we work on technology business organization, business models, can we work on business policies such that capex and opex should be such that finally at even 250-300 rupees per month we make money and I think that was a key. The capex for telephony was almost a thousand dollars in 94. Today it is about 100 dollars, it is almost impossible. That time even talk in these terms were ridiculed and yet this happened and today it is booming, this is not the first time that something like this has happened. I don’t know how many of you know that even in 1991 the telecom boom took place. there are two major factors, one factor was of course cable TV, availability at 70-80 rupees per month at that time, today it has gone up, that is less than 2 dollars a month, it is far lower than anywhere else in the world. Nowhere can you get a cable TV for less than 15 dollars, 20 dollars, 30 dollars, 4 dollars and suddenly we worked out a business model with very fragile technology, the cable TV business model which was delivered at 2 dollars per month. It is not a bad quality, there were weaknesses but the weaknesses were taken care of by youngsters who will be paid very small amount but will be running around and fix your cable if anything goes wrong even on a Sunday at 10 pm in the night. I think one has to really understand India leverage that. the second very important thing that took place is that Chinese and others at that time came up with kits where we can assemble TV black and white for 1200 rupees, I am not saying that it will be 1200 rupees black and white television for ever, no. that was a point that suddenly brought a very large section of people within the purchasing capability. After that people started buying better and better TV, second hand TV and the price went up, today you don’t hear of those kits. But bringing that kit was so important, I am told about 25 million such TVs were sold in a period of 3-4-5 years so I think that’s a kind of thing. In fact telecom itself the next 300 million after we grow to around 200 million, the next 300-400 million is going to come at a very different price point. We have to look at rural areas as an average per revenue user of 100 rupees per month. And there are already telecom technologies and business players who are working on technology and business model for that. Anybody you talk to all over the world will say 100 rupees per month, 2 dollars per month, how can you actually do that. Today for a company like Bharati the cost of acquiring a subscriber, managing a subscriber, for billing and collecting money is 2 dollars per month. How do you really earn money at 2 dollars per month? I think these are the challenges that we really need to answer and telecom industry is much geared towards doing this. A very important proposition comes when you are started doing this in India can we go and repeat it in the rest of the world. Infact in one of the meeting of international telecommunication union this issue was raised will the Indian telecom players become the players for the world tomorrow because rest of the places is still being offered still at 10 cents per minute or 20 cents per minute and the south Korean ambassador was there and he said we will not allow Indian and Chinese companies to come in and operate our telecom network, still somebody pointed out that they wont allow it in the products of Hyundai and LG to be sold in their country and they immediately backed off. I think the key reason is that we have been able to understand, mind this market, learn in the process, improve the quality as he was pointing out and now we are ready to go to the world. I believe very similar thing is happening in the Indian airline industry. You have seen that, you know about this, how the prices have fallen, we have problems with our airport infrastructure but suddenly you are getting in our huge population onto that guerilla. Very similar thing with auto sector, auto sector of course slightly different , the Tata one lakh rupee car I think is the right model in that sense but I think I want to briefly mention that the Scorpio and the Tata cars that came out recently completely designed in India, a huge RND effort. I don’t know how many of you know it was 500 rupees plus RND effort run by two people, one of them was my classmate -Goenka, another was my student Sumantran and they lead that effort there was confidence and today we have a product which is world class. And we know the weakness, we still know that we need to go there but today we have the capability to move in that direction. Similarly in auto components we have already recognized that this is the place which will become the leaders of the world and there are very interesting projects coming up. There is a conference next week in Bangalore driven by what is called CAR’s project which idea is can telecom industry RND academia and government get together and we should become leaders in the world. I mean this is the kind of thing that is happening. IT, IT enabled services you people know. There is this book written, I think most of you may have seen the book called world is flat and I remember meeting the author of this book and also saying well this is fine but you haven’t really seen it yet. What will happen if 700 rural people of India start coming into the forefront. Today the urban people are able to provide the service what will happen tomorrow and this is something to be watched. These were more visible sights. Let me quickly talk about some non visible sights. One very important thing that we have today in India is 400000 engineering students graduating every year, 1500 engineering colleges. This is up form 25000 people who are graduating when I joined academia in 1981-82. We are reluctant to privatise it, we used quality as an issue but I agree that even quality is a big problem and we need to overcome that. But this is a problem we couldn’t bottle up and close things and that is not the answer, the idea is to open it up and then fix the problems. And this is what is going to be engined tomorrow. I don’t want to get into details, I already hear the first bell, and very often we think politics is our obstacle to growth and politics is an obstacle everywhere, not just in India and yet I could’ve given you an example in detail of how our politics responded versus how European politics responded. With 3G technologies there was a wireless technology, there was a problem all over Europe and the politics just could not respond to it and the industry went down. Whereas in India there was a serious problem with telecom policy, 99 almost all telecom industries were collapsing and even though there were very high, large bids the policy makers were courageous enough driven by RND people, driven by academia to really completely turn the tables. I have tremendous confidence in the politics of the country. I am like what most people kind of believe. I’ll also briefly talk about our own group. Tele communications and computer network group. Group which is within the university, incubating entrepreneurs, balancing economic growth and social development. We actually learnt somewhere in mid late 80’s or mid 80’s that if you have dreams for the country, entrepreneurship is the best way to drive towards it. That was a very important lesson that many instances I’ll pass on these slides for those who want to take a look at it but basically in 1994 we dared to dream that India should get 100 million telephones. We were laughed at, we sort of said that it will happen at – of 200-300 rupees and we not only pushed the policy, we helped all the new telecom players but we actually also created a company called Midas which basically introduced the wireless local loop was the primary capex bottle neck, we sort of said convert the copper --- into a wireless. At that time the research RND were not good enough to sort of say that this will be a cost effective. We kind of pursued this; the interesting thing is that while India did cross 100 million lines, this particular product sold 1000 crore rupees worth. I mean coming from an institute a product like this growing to a 1000 crore and now pretty much year after year doing about 700-800 thousand crores. This is something that we couldn’t have even dreamt of. Somewhere around 2001 when telecom was already starting to make an impact we sort of said well that is happening but rural areas are being left out and we took up a dream statement that connect every village in India and we created a company which works on a very innovative business model and technology which goes and puts internet chaos in every village run by an entrepreneur just like a STD PCO. Soon we realized the focus for rural India is not just connectivity but used connectivity like education, health care and micro enterprise. And we changed our vision statement to uphold the per capita GDP by 2015. It may look as an impossible dream but I am absolutely certain that we will either surpass it or come to close to it. And we have done many companies. When people say that there is illiteracy in the rural areas we sort of say if they can’t read and write they can do video conference and we created a very interesting video conferencing company. We create an Indian language office package completely from scratch, spread sheet data base, word processing at a much lower cost. We were already putting doctors in the town with patients in the villages using video conferencing and doctors said only if I could get the pulse beat of the patient and we created a small box which now sits there in the village and it has the remote heartbeat, you put the patient the stethoscope and the doctor is hearing the heartbeat, remote temperature measurement, remote blood pressure measurement, remote ECG measurement and all at around 12000 rupees. This is the kind of innovation that is possible. We know the doubling per capita GDP will not happen unless we drive businesses in rural areas and for driving businesses in the rural areas we have to drive finance in the rural areas. We started working with banks saying why cant banks go to the rural areas with internet chaos. ----, ICICI Chairman told me well Ashok if you could only get a low cost ATM, today ATM costs 7-8 lakhs rupees. We started working form scratch; today we are delivering an ATM at 50000-60000 rupees. Lots of innovation if you do and understand things, with the print authentication I think these kinds of breakthrough is possible and today we are trying to do a distribution in rural areas using internet more as a means of clearing that. We believe that IT enabled services made so much difference to India by taking work from the west into India, can we not go to the next step and take work from urban areas to rural areas. And believe it or not something like this is being done today in rural areas as a product which has been taken, as a service which has been taken, one village does the translation, another village does the animation, third village does the voice-overs, fourth village does the integration and delivers it to our client. With computer and communication possible this is the potential of India and this is where we really need to go. Moving to urban areas we believe that time has come to try to put 50 million broad band connections in India by 2010. And towards that on the one hand we focus on connectivity, on the other hand we focus on something called the think ------which can enable driving something like this. We believe that India needs to create its own billion dollar products companies; this is again something that we are starting to drive. Why? Because telecom companies in the west we are finding are receding, the void is being filled by Chinese companies. We are using all kind of things to see how you can create a million dollar product companies. On the one hand we are driving companies like Midas which we believe in the next 4-5 years will reach numbers like this. Companies like Tejas which recognizes the void in a certain product in the telecom industry in the west. In fact if we acquire partners with Norton, Nokia to compete with -----. Today when some the products developed by this company are sold by Norton back to India but it is with its own brand. It is not that the whole thing the product is developed there, they co-brand the thing and do something like this and we believe that things like this need to be done. We also recognise that training is one of the major things; I don’t want to get into the thing because while we are creating 400000 students unless we polish them we are not going to get anywhere. And once again we believe that we need to work towards becoming leaders in a few technology areas and wireless is one area where 37% of all the RND people working around the world are Indians. And this is where we say that we will become number one, two or three in the next 7, 8 or 10 years. Let me quickly end by 4 slides on what I believe is a learning for the industry. I talked primarily about telecom but also things like ATM, electronic driven things. For leadership in the world market India is a large market with a large price point, in innovating for products on this market and making it affordable here you naturally become a leader. I think this is something that we have to do. Once we are winning here it is only a little more learning for us to become leaders of the world because in serving this market and making it large we have to come up with this product. One of the main issues that were given in the brief that was given to me was how to attract talent and one of the biggest problems especially in Bangalore technology and innovation with the aim of doing what has not been done elsewhere alone could capture the imagination of the young engineering and business talent. You stray away from it; you are not going to retain it. You focus on this the world’s talent will come here. Today it is the Israelis and Europeans who want to come and work here in India on these kinds of problems because challenging problems are coming here. In fact the good thing is that today in Silicon Valley a start up venture in telecom and IT will not be funded unless the primary works get done on that. This is already starting to happen. ----, how do you retain talent? One of the key things at least in our areas half life of knowledge today is two years. We believe that in two years what we consider new, two years half of it has become absolute. This is the fast changing knowledge in the world; continuous training is the only way to -----. And I think we don’t take care enough in something like this. We have to find innovative models. And I think one of the biggest thing that I learnt from the IT and telecom industry is really something quite different form the industry that I saw. I come from the family background, I am a Marwari industrialist. The key thing is that you really have to empower the individual ----, empowering is even more important than sharing and I wont say one order. Just because you are a managing director of a company you cant just over rule head of marketing, head of marketing has their role, you can fire the person when that person doesn’t perform, and you can’t start interfering. I think we need to build businesses which have this, without that we are not going to get there. And India has changed immensely over he last 15 years, IT and telecom industry has triggered the change. I disagree that it will be one sector, we are already multiple sectors, and we are becoming the leaders. Today India can be leveraged and India can be leveraged by most industry in what it ----it strength. India is a large market, the right price point provides enough learning ground to become world leaders and India has huge human resources, we just don’t invest enough in sharpening them. Thank you very much.

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