Mumbai: The explosion of the Internet in China offers an environment that is more conducive to the growth of Internet-based technology companies compared with India which focuses more on information technology, or IT services, concluded industry experts on the final day of the three-day Nasscom India Leadership Forum in Mumbai.
“There are many innovative technology start-ups that have done well in China and gone public successfully. But India, being more IT services driven, has lacked heroes that can champion the cause of Internet-based start-ups with the exception of
makemytrip.com,” said Rebecca A. Fannin, the author of
Silicon Dragon and
Startup Asia, who was speaking at the ‘Chinovation vs Indovation: Competition or Coopetition?’ session.
She added that pioneers like Alibaba.com founder Jack Ma and Baidu Inc. founders Robin Li and Eric Xu inspired a whole second generation of Internet start-ups that are now finding their feet, but India is still years behind China in developing technology innovation despite having the third-largest venture capital base and a developed technology cluster in the form of Bangalore.
China’s Internet usage has exploded since 2006 with nearly 35% of the country’s population now being recognized as users at the end of 2010, according to the latest available data from the World Bank. The Chinese government said in September last year that the country’s Internet population had exceeded 500 million—the world’s largest user base—of which 130 million are rural users, accounting for 27% of all Internet users.
In comparison, India has lagged with a mere 8% of the population being recognized as Internet users as the country crossed the 100 million users landmark only late last year, according to the latest Internet and Mobile Association of India report.
Raghav Bahl, the founder of the Network 18 group and author of a book that compares the two countries, attributed the lag in Internet numbers to several factors including the fact that the Internet is the only relatively-open medium for expression in China as compared with India, which being a democracy, has several avenues for the expression of opinion.
The Internet is also the only space where 100% foreign direct investment can be made without approval from the Foreign Investment Promotion Board, including in news, Bahl said. This ensures that even start-ups in India have to compete with the likes of Google Inc. and Yahoo! Inc.
In contrast, due to users primarily using Chinese as the language of choice, Internet start-ups in that country could copy existing net-based companies and capture market space, he said.
Bahl said the only opportunity for Internet-based start-ups in India is to find niches that Western companies are not interested in. This includes the likes of flipkart.com, which has succeeded because of the Indian habit of preferring to pay cash on delivery, while Amazon.com prefers to work in an environment where payments are made by credit card at the time of the transaction.
Fannin, meanwhile, pointed out that Chinese companies had made inroads into niche IT services spaces over the past six to seven years while the Chinese government was fast creating infrastructure for these, which could cause a worry for their Indian counterparts. “When it comes to China you better be worried, cause they are excellent executioners of strategy,” Bahl agreed.
john.k@livemint.com