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INFY bags two US patents: What does it mean for Indian Outsourcing

June 5, 2008

Yesterday, leading newspapers across the country carried the news in bold print.

Infosys bags two US patents for innovation in mobile, holograms

-Business Standard

Although being celebrated for the “Ahh-patents!” tilt in the media, there are wider and far reaching ramifications to this.

News, Views and Strategic Hues

Back in late 90’s (circa 1998-99), Infosys surfing easy waves of outsourcing and labour arbitrage, in a very strategic and far seeing move, set up a dedicated research center for inhouse innovation.Known as Software Engineering and Technology Labs called in short as SETLabs, has started churning out what looks like a formidable return on the balance sheet, at least in the coming years.

Back in 1999, Infosys rightly understood that, simple cost arbitrage software project added with extra frills is not going to add any stars to its badge, rather pushing it more and more deeper into red ocean[red ocean on wiki].

And this indeed was the case with the tradional business model, which didn’t safeguard the business from competitive onslaughts from other giants like Wipro and TCS, doesn’t safeguard from market downturns and is not really helpful for the future.

But apparently in a major coupe de grace, Infosys has returned to innovative designs and innovation in a much bigger and better way.

SETLabs: Cradle for innovation

Infosys in a strategic move has created not one but many disruptive channels of innovation and business lead management. SETLabs which is effectively organised as a
hub and spoke innovation organisation connecting Centers of Excellence (CoE) in numerous fields and domains. Some of them so advanced and technology oritented that Infosys seldom even deals with it.

The innovation paradigm in Infosys truly seems to be lifted straight from the Hondas of the world.
Although Infosys has minimal presence in the mobile sector, almost negligible in pervasive computing and others and perhaps its present business processes have very little to do with either of them, but its pursuing them as seriously.
Its very focus on innovation as a necessity rather than as an appendage is refreshing. Just to give you an idea of the innovation and its scale, SETLabs has its focus on at least eight or more different domains, with already each of them having its own dedicated Center of Excellence(CoE). With strong impetus of nearly 9 years, it has been off late since last year has generated a steady stream of patents. Check this out:
Infosys filed for 100 patents in the last 18 months.
Last year, the 2 patents in context were cleared by USPTO. One dealing with the name
“Method and system for providing reliable and fast communications with mobile entities” proposes a seamless way to integrate mobile phones and existing mobile communications irrespective of the underlying technology used.
Whoa! Infosys has traditionally nothing to do with mobiles or hi-tech engineering. But again, in business tradition is perhaps the most deceptive answer. Its impressive. And yes, the second patent deals with hologram communication.The work titled as
”Displaying holographic three dimensional (3-D) images” describes actual 3-D communication using CG holography to exchange information and the associated optical elements required to make a lightweight handset.
Think of it! Infosys is well on its way to actually encash on the next wave of software co-operation.

Future Forward: Indian outsourcing, what does it mean then?

What exactly then this news mean for Indian outsourcing?

First, innovation is strongly becoming the buzzword in the industry. It will no more be a million hires-hundred project business model, but one in which the margins are set by quicker innovation cycles, better innovation quality, degree of empowerment a client feels after adopting a particular innovation and of course, higher margins. [Its trying to shun the linear growth model]

Infosys is just not satisfied with maintaining the world’s software projects, it wants to actively develop, tweak and improve them, which of course means higher margins. And the software projects need not come from the IT giants of the world.
Infosys is preparing itself for the mother of all transformations.
Upping the innovation ante, it is bringing on the table a whole new range of technologies which other players, who were untapped till now will find interesting. This opening of the door, into other parallel industries like mobile, shipping, travels, airports, logistic, supply chain management will definitely propel mean better profits, faster profits, higher profits. And lets not be bash in naming it as outsourcing, lets just call it innovative cooperation. 🙂

But all is not well yet for Infosys, as India’s largest software vendor, Tata Consultancy Services is also close on its heels, nipping away at any innovation lead it had till now. A bit slow, but in the last five years, TCS has steadily applied for 200 patents, mostly into telecom and software.
Which is exactly what, an investor of Infosys should be bouyant about.
Yet in the hindsight, it has often proved to be difficult for patents to actually transform into something tangibly business generating and profitable for quite some time. So the next challenge lies in front of the Indian software firms is, how to shorten the innovation cycle and how to quicken the application chain.
Very ironically, other IT giants, more typically, Wipro, Satyam, Cognizant seem to be lethargic in waking up to the need of the hour.

So as, the fog clears out and in a mature innovative market (read : a decade hence), there will be a clear segmentation in the market, with each being masters of a handful of domains. And with clients clearly choosing the appropriate guy from the table based on the IP cache it has, there seems to be a distant dream of Indian software services moving into the blue oceans of business cycle.

[The author takes a passionate interest in business,technology and strategy. An avid Elliott Wave Theorist,and an analysis blogger. When he is not blogging on markets, technology and their business issues, he spends his time conceiving and executing projects for a hi-tech electronics startup based out of South India. Mail him at sohamdas at gmail dot com. He is listening]

2 Comments leave one →
  1. June 5, 2008 12:34 pm

    i completely agree …
    if companies remain sluggish and dormant.. they can never compete , innovate and improve in this very demanding market … they all need to be on their toes..

  2. Soham Das permalink*
    June 5, 2008 5:51 pm

    Exactly, but now that one of them has woken up… it won’t be long enough when others will take the torch(innovation torch that is) and start running by themselves which in the long run will be immensely beneficial for India.

    As these are the companies which the young engineers of today want to be in (sigh!), they will get a clear signal that innovation is always rewarded.

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