Pune’s Tech Industry to decline 40% by 2020, Negligible startup activity – Vivek Wadhwa
(Update: This article was a PuneTech April Fools Day Prank. A full
apologyexplanation, is published here.)
(For the last 6 months, Vivek Wadhwa, an entrepreneur academic, has been conducting a detailed study on the competitiveness of the tech industry in India, China and Indonesia. His detailed report is due next month, but since PuneTech was a data-collection partner, we have been given an early preview of a rough draft of the report. The full report goes into comprehensive detail for the tier 1, tier 2 and tier 3 cities of all three countries, and we don’t have permission to publish that data, but we have picked a few excerpts relevant to Pune. Many thanks to Hetal Rach, Western Region Co-ordinator for Wadhwa Research for helping us make sense of the report.)
The India Story – Not Shining
(The next few paragraphs are taken from Chapter 2 of the report)
Much has been made of the rise of India as an IT powerhouse in the last 2 decades. The story has been nothing short of miraculous – with $76.1 billion in revenues, the IT software and services sector constitutes 6.4% of the GDP of India, and 26% of all Indian exports (up from just 1.2% and 4% respectively in 1998). Looking forward, the general consensus, especially of experts based in India, is that the next decade will continue to be one of high value-added growth. A popular opinion amongst industry watchers is that while the first decade of growth in Indian IT/ITES industry was fueled by IT/BPO outsourcing, and the second decade of growth was fueled by software product outsourcing, the next decade will see the rise of software products being built and marketed out of India. The thriving startup ecosystem in India (for example, national forums like Proto and Headstart, and the even more resurgent local forums like Pune Open Coffee Club) are seen as leading indicators of this change that is sweeping India.
It has been clear to everybody concerned that this growth cannot really be driven by Bangalore, the poster city for the revolution. Bangalore and other tier 1 cities are already bursting at the seams as far as infrastructure is concerned, and there exists a massive problem of talent acquisition and retention. The general consensus was that the primary drivers of growth in the next 5 years would be tier 2 cities like Pune and Chennai, and tier 3 cities like Indore and Nashik would start contributing after 2015.
Most of these predictions have been based on very superficial data, and in many cases, just on the gut feel of the experts. There hasn’t been an attempt at a systematic collection of data until now, and this report is based upon the findings of a first of its kind research project that we have conducted by going all the way down to tier 3 cities. Unfortunately for India, the results are not promising.
A Pulse of Pune’s Future
(The next few paragraphs are taken from Appendix E of the report)
The young and dynamic city of Pune, often referred to as the Oxford of the East, is an example of the second wave of growth of the Indian IT Industry. Although a historically very important city, since the merger of Mumbai into Maharashtra in 1960, Pune has had to live in the shadow cast by its big brother, and has often not gotten the recognition it deserved. However, with its large student population, much better quality of life than Mumbai, and the famous Puneri attitude, it was perfectly positioned to take advantage of the IT revolution, and had done so admirably.
Starting from almost nothing in the ’90s, it managed to reach the $1 Billion mark in software exports in 2004, and now, at $8 B, it is widely believed to be on the verge of exploding.
Unfortunately, though, all is not well. Just a half hour spent in the city (especially on a Thursday) will give an idea of the persistent problems that plague the city. Roads are a mess, and traffic is an increasing problem. The electricity board can barely keep the city on right now, and the problem is expected to get much worse in the next few years. A bigger problem is that the city’s famed educational institutions are turning out, to quote the colorful phrase of a frustrated city CEO, “half-illiterate idiots,” and finding talent is becoming more and more like looking for a needle in a haystack.
As a consequence, Pune fares rather poorly on the Wadhwa competitiveness index, and based on that, the projected figures for Pune show that while it will see modest growth in the next two years, after that, there will actually start a period of decline for 7 years straight. See Figure 1 for more details.
(The full report is expected to be published next month.)
Reactions in Pune
PuneTech caught up with some prominent personalities in the Pune tech community to gauge their reactions to this research. As expected, opinion is divided. Some have already seen the writing on the wall and started taking steps accordingly, while others simply see this as a challenge to try harder.
Santosh Dawara, one of the founders of the Pune Open Coffee Club, and founder of Dubzer, agrees that there is not much of a future in doing a technology startup out of Pune, but believes that the future of the IT/ITES outsourcing industry remains strong:
“A huge advantage Indians have is that most of us are multi-lingual, and learn 3 different languages as a matter of course,” he says. “This will be a growing advantage in an internationalized and localized software world. As long as we continue to produce millions of people proficient in English and 2 other languages, we will continue to get maintenance, testing, l10n, and i18n work.”
As of last week, Santosh has quit Dubzer, and is joining Infosys as the head of their Software Language Services practice, where he will be responsible for translations of more than 20% of the world’s software products.
“The key point this report makes is that we are not producing software engineers who are good enough to take on the competition. We fix that, and the problem is solved.”
“The two biggest problems our education system faces are these,” says Arun, “First, our most talented people, he ones who have the potential to be the best teachers and professors for our next generation, are becoming slaves to the lure of the dollar. I am setting an example by quitting that game right now, and joining academia. The second problem is that we waste so much of our children’s time by teaching them worthless stuff like history and geography. Tell me, which is the last great Geography startup you’ve seen? I will not rest until Java is introduced as a compulsory subject from the 1st standard in SSC board.”
Shrinath Navghane, better known as @MrShri, rejects the entire argument of the Wadhwa report:
“I don’t know what trends they’re seeing, but I think they’re completely wrong,” he opines. “It’s a joke to say that the tech industry in Pune will be just $5B by 2020. I expect just the Foursquare Based Services (FBS) industry in Pune to be $4.16B by that time, so the whole SoMe market will clearly be more than $5B. Come to Foursquare Day Pune 2011 and find out for yourself,” he challenges.
Younger entrepreneurs whom we contacted are apparently less worried. “#FAIL! B***nch*d,” responded Sahil Khan via twitter, “but no worries. Whatever the f**k happens with the software industry, people still have to eat. And the healthiest and cheapest food is eggs. Anyone care for a silky omelette?”
Amen to that, we say!
Update: As noted at the top, this article was an April Fools Day prank. To ensure that comments on this post did not give away the prank too early, some comments were held in moderation until the end of the day. All these comments have now been approved, but we have prefixed these comments with a [***]. Hence, when reading the comments below, please note that comments beginning with the [***] were not visible to anybody on 1st April.