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.

Pune Competitiveness Index
This chart shows how the competitiveness index of Pune is on a decline. A number above 1 predicts growth, while a number below 1 indicates that there will be a decline in exports within the next 3 years. This index is calculated based on the underlying trends that have also been plotted in this chart. Click on the image to see full-size chart.

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.

Pune Software Exports
This chart shows the estimated software exports from Pune. The predicted declines is a direct consequence of the fall in Pune's competitiveness index. Click on the image to see full-size chart.

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.

Arun Prabhudesai, who returned to India 5 years ago to start hover.in, is a great believer of the resilience of India. He agrees with the data, but disagrees with the conclusion:

“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.”

In keeping with this feeling, Arun will now focus on educating our engineers. He is taking over as the HOD of the Computer Sciences and Android Studies Department at My Open Campus.

“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?”

Rohan Dighe is even more chilled, “These baap people take too much tension. One should just drink beer, write code and let other people worry about the future.”

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.

33 thoughts on “Pune’s Tech Industry to decline 40% by 2020, Negligible startup activity – Vivek Wadhwa

  1. […]
    I have no idea why my name is being used here and is linked to my website. I have performed no such research and don’t believe that the metrics used here are valid.

    Pune may not be able to grow at its current rates, but I know of no reason why it should decline. To the contrary, it has built a stable of experienced engineers that are likely to want to start companies. They will boost entrepreneurship in the region.

    Vivek Wadhwa

  2. Very well done Navin! Forget the software revenue, if that is the true “Real estate price index” of future, then I am investing all my money into real estate 🙂

    1. Yes, I think that instead of focusing on the negative aspects of this research, we should all look at this as an opportunity. Every line on that graph is a billion dollar market waiting to be tapped.

  3. Now if only we can consider Vivek Wadhwa as an expert. We all *who are plugged into to* silicon valley know most of his research is plain BS and doesnt count any merit what so ever to be taken seriously. I am completely surprised that Punetech, a blog as reputed as it, has decided to publish his findings! What were you thinking Navin? 🙂

  4. This article just makes me think more on things that have already been on my mind –
    Pune has not yet choked like Mumbai, it is on its way there. The corporation/goverment just does not seem to be taking the right steps.
    1. Failed BRTS system
    2. Terrible traffic management – random no entry/one way streets
    3. Terrible public transport (bus) system
    4. Lack of water and electricity
    5. Increasing construction – increasing vehicular traffic both contributing to significant rise in SPM in the air, people who have lived in Pune in the 1990s can comment more here.
    6. Increased number of transport (non-public, non-private) vehicles running on diesel, choking roads and having no driving sense.
    7. Real estate rates soaring to Mumbai levels making it difficult to purchase property.

  5. A teacher myself, I welcome Arun to the fraternity responsible for `shaping the future generation’ but I take great exception to his comment that subjects like Geography are`useless’. This is exactly the kind of narrow mindedness one hopes to weed out from academia and,in fact, society at large.
    Creativity flourishes at the intersection of different knowledge pools and not in isolation.

    Mr Arun Prabhudesai, last great Geography startup you say? Well, what are location based software but `geography based’ applications? Our children’s time will be wasted less if people move out of confined `four square’ walled thinking and embrace a more inclusive approach to education.

    1. Agree with ‘Teacher’. Geography based startup – look at google and every penny it’s earning!

      Oh, what a cheap comment – ” will not rest until Java is introduced as a compulsory subject from the 1st standard in SSC board..”

      Schooling is to learn the concepts and not the tools, baba! God save your kids from your theories! Indian schools are way into analytics, that would lead to good engneers. The quality of engineering has been diminishing due to theories like yours of introducing tools without understanding the basics like Algo, Compl Consru, Discr struc, Data Struc, Progra lang concepts, OS, DB, Graph therory and all!

  6. I support Aghast teacher,
    That was a very baseless statement made that teaching Geography is a waste! It is ridiculous to understand that there are people in the education sector who do not understand Geography!

    Some of the biggest research all over the world today is in Geography and Geology, and not the next generation of iPad or Android!!

  7. I’m shocked at the sarcasm and vitriol in response to PuneTech’s courageous decision to publish these uncomfortable facts. If you don’t like the face in the mirror, better make appointment with beauty parlor, no? What is the use of smashing mirror, it only brings 7 years of bad luck (and incidentally, validates the prediction)?

    My only complaint is that it was published a little early in the day. The right time to issue a stirring wake-up call in this city is at 4:00 pm, just after the 3-hour siesta.

  8. Navin,

    Why on earth do you provide platform to people who have no qualms in calling Pune a “Tier 2” city? Isn’t $8 billion revenue large enough for Pune to be called a “Tier 1” city? Where is your Puneri pride, Navin?

  9. As a certified graduate from one of the premier institutes, I am shocked by the so called CEO’s description about Pune’s graduates. There are a ton of brilliant people who have contributed greatly to all industries, not just technology industry. You are not just insulting the current generation but also insulting and demeaning great Punekars like Tilak and Agarkar who motivated a culture of education and knowledge in Pune. We just tend to believe any stupid analysis done by a so called ‘Expert’ from Silicon Valley no matter how wrong he is. This is the subservient culture to the west is precisely what we need to avoid.

  10. Navin – how could you have been party to such a study. Dont you remember, you yourself had posted an article a couple of years ago how Pune has bucked the economic downturn and come out in front ahead of cities like Bangalore? And where is the newsclip to corroborate this?

    1. @Unmesh, that article was in 2009. And as you will see from the “Competitiveness Index” graph, Pune’s competitiveness index was above 1 in 2009, and it is only now that it has dipped below one. As for video, we’re expecting Times Now to pick up this news item any moment now, and start playing it on a loop.

    2. Good point Unmesh, that video was my introduction to PuneTech and what inspired me to stay in Pune. Now after reading this article, I am thinking if I should move to some other city. Waiting for the final report to come out to decide which city to move to.

      1. Sarang, Don’t wait for reports to tell you which city to stay in. There will always be another report to rubbish the first one. Believe the evidence of your eyes and ears & pitch in to make the city what you would like it to be – instead of deserting the ship at the first sign of trouble. You know the term for those who do that don’t you?

  11. I am surprised at the Puneris who are attacking PuneTech for being open-minded enough to take the study as a valid point of view. Instead we should be giving the study a closer look, validate the findings for ourselves and then, if convinced, join the `Save Pune from Disaster’ group I intend to start.

    Kudos to Navin & PuneTech for being courageous and seeing things for what they are even if it flies in the face of what they might have themselves believed and stood for earlier. Wise is the man who changes his opinion when presented with new evidence that changes things.

  12. Hahaha! I had predicted this 4 years ago when I left that city. I always new that something was wrong with pune and hence I never taken it seriously. I am so glad now.

  13. @Aghast Teacher – Great idea. How do I join the ‘Save Pune From Disaster’ Group?

    1. Great! I plan to hold the first meeting of `Save Pune from Disaster’ below the Hinjewadi flyover – an excellent location to remind us that all around us is disaster waiting to happen.
      I shall announce the date and time soon. Keep tuned in to this space.

  14. If Pune Tech Industry can deliver high quality Software Solution to complex business problem with our innovative & highly professional methodologies.Then they can establish themself as a significant contributor to the IT revolution with an exhaustive portfolio built upon excellence in the field of IT Services and IT Consulting.

    There must not be any negative thought.

    Skype : lalit.mendapara

  15. Dang! Wadhva is too optimistic. I expect the whole industry to go down the tube next year. I should also take over as head of something …

    1. Abhijit – The semiconductor industry might buck the trend. In fact, it might be our only hope here in Pune. What do you think?

      – Eager Student

      1. Eager Student,

        I think semi companies will fare the worst. They should learn some marketing – that’s it; I will be the new head of My Semi Marketing, an informal institute that charges $100K per student per year …

  16. That’s it! I quitting IT! This is the final nail in the coffin. After having toiled my sorry butt off for years, to read this is like Nirvana from all the angst about “Should-I/Shouldn’t I still continue”. I can now maybe go back to farming or raising exotic extinct birds in Khandala. Can even think about creating a startup to hire all disheartened Puneri startup guys and use them for bodyshopping. Hell, after this demoralizing turn of events, they will work for me for 10 pence an hour, (even lesser, yeah probably). Thanks PuneTech, your service to Pune and sentiments for the techy Puneri are much appreciated! Am now off to check my Gmail (Loose) Motion..

  17. There is a fatal flaw in the analysis due to an assumption that Wadhwa et al have considered.
    The study (or excerpt) fails to take into account any spike in infrastructure augmentation and spending
    and assumes that infra will have a linear growth
    wheras it may well truly be exponential
    and this is an important perspective to be considered as infrastructure is apparently holding things back.
    And btw this analysis could apply to most indian cities, similar challenges in most cities.

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