Indian technology companies are donning the venture capital (VC) hat to incubate business ideas generated by employees.
With the industry maturing beyond process-oriented cost arbitrage solutions, it has become imperative for these companies to be innovative. Some want to incubate ideas that could help them enter areas they are not present in, others to create IP (intellectual property)-based frameworks and service offerings that are complementary to their existing offerings. Internal funding of ideas is useful also to retain talented employees who otherwise look to start their own ventures.
Mphasis, which does not have a play in the fast growing product engineering space, has just sanctioned funds to a team that is incubating projects in this area. The company is also incubating a team in the payments solutions space, which could strengthen its core focus in banking, insurance and capital markets.
?We are looking to develop mini-CEOs who have the flexibility and freedom to grow the business. The plan is to integrate them into the company at a later stage,? Ganesh Ayyar, CEO of Mphasis said.
Cognizant calls its VC model Cognizant Capital, where employees are encouraged to suggest innovative business ideas. The company has a fund dedicated for this but did not disclose the size. There is an internal board that vets business plans and allocates funds in a staged model patterned after Silicon Valley VC firms.
The company?s Cognizant 2.0 platform, a knowledge management and web 2.0 platform with social computing characteristics, was incubated from an employee?s idea. ?We have spent over 1000-person years in building and managing this platform, which would translate to well over $10 million of spend on it,? said Sukumar Rajagopal, global head of innovation in Cognizant. He added that innovation had become key for customers as they undergo structural shifts because of globalization, consolidation and virtualization.
Infosys Technologies has incubated companies like On-Mobile in the past, but this was proposed from an external party and there was no formalized process in place then. Now the company has established a structure where vertical heads would mentor employees with investable ideas. These would be passed through an IP (intellectual property) commercializing wing and funded at a later stage if found viable.
Infosys also plans to go a step further in adopting a Google Ventures like model where it will take stakes in external startups with innovative ideas. Subhash Dhar, who heads business innovation at Infosys, said that creating fundable ideas within the organization could breed differentiated and disruptive technologies.
Even global companies like SAP are following the incubation model in their India operations . Clas Neumann, global head of SAP Labs, said that several ideas for new products and solutions from India are submitted to the company?s business incubator group. ?We have created a culture of innovation and incentives that is similar to that in our European centres.? Neumann added that solutions for the emerging markets in areas such as textile , footwear and oil and gas are being incubated in India.
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