Why tech companies like Microsoft, Bosch are rushing to open startup accelerators in India?

From fin-tech to retail to ed-tech, a majority of Indian IT companies are tracking startups closely today.

These companies are investing startups that offer technical expertise, hand hold them in creating the go to-the-market strategy, and in turn get their hands on some of the most coveted innovations.

While some, like Infosys and Wipro, have set up dedicated startup funds, others are tracking disruptive technologies in their own sectors.

Microsoft, for instance, gives a chance to the incubated startups to work closely with its Indian partners such as Wipro and TCS. The IT giant also encourages the startups to adopt their cloud platform Azure, creating a cross-selling model.

“It is a win-win proposition for us as well as the startups to work together. The clients are also demanding integration of advanced technologies available today. It is a cross partnership and we definitely want these startups to generate revenues for us,” Ravi Narayan, Global Director for Microsoft Accelerator says.

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The company was also one of the earliest startup accelerators in India - Microsoft accelerator was established around 2012.

Technology giant Google has also shortlisted six Indian startups this year for the fourth batch of its accelerator programme, to be conducted at its Developers Launchpad in San Francisco.

The startups will receive equity-free support and credits for Google products. Technology major Oracle also kicked off its first startup accelerator program recently.

According to a report by Nasscom and Zinnov, India now has the third-highest number of startup incubators and accelerators in the world after China and the US.

Although, India still has a wide gap to fill compared to 2,400 accelerators in China and about 1,500 in the US, the report states. India has about 150.

For their own benefit

Why are these big IT companies vying for startups? The heads of accelerator programs at Microsoft, Wipro, and NetApp feel it is imperative to work with startups at a time when impending automation is threatening to make several job functions outdated.

“Working with startups definitely opens up the innovation logjam. We are looking at unique ideas that address specific problems. These innovations will be absorbed in the larger market that will drive adoption of new technologies,” Ajeya Motaganahalli, Director of NetApp India says.

Moreover, it is becoming increasingly difficult for the big IT companies to attract the best technology talent, which is forcing them to back startups, in order to fill the talent gap. Also, the products and services offered by such companies are becoming irrelevant at a faster pace than we can think.

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To keep pace with the latest advances the easiest way for big corporate is to tap startups.

“The average lifespan of a company on the S&P 500 has decreased from 90 years in 1935 to 18 years today. For several organisations, growing in size and becoming process-heavy has resulted in an innovation bottleneck that needs to be addressed. Innovation has become a cornerstone for organisations of tomorrow, with the landscape evolving into a disrupt-or-be-disrupted mode,” Zinnov says in its report.

Infosys founder NR Narayana Murthy also recently indicated that the IT manpower needs to be re-skilled instead of laying off staff, to tackle the threat of automation.

Tech Mahindra and MindTree have set up startup segments within the organisations to encourage employees to work on disruptive technologies.

Wipro and Microsoft are also encouraging their existing employees to look at new technology avenues through hackathons and fun training modules.

“The need for re-skilling talent is a reality that we have to address. To keep up in a fast-evolving technology environment, the IT industry must reinvent itself by re-skilling its employees in new and upcoming technologies,” R Chandrashekhar, President, NASSCOM, said.

The industry body also announced the launch of its future skills work group that is working in partnership with big IT companies on a two-pronged approach to enhance the skills ecosystem - Skills vs ‘Job-specific’ Curriculum and Tech enabled Learning Ecosystem.  The initiative is aimed towards skilling/reskilling 1.5-2 million people - both aspirants and current employees - over the next 4-5 years.

With large corporations acknowledging this trend and bolstering themselves for the future by investing in innovation, startup accelerators are emerging as the most preferred engagement model.

Pure business

The Startup India guidelines by the government of India also recognise contributions made towards startup incubators as part of Corporate Social Responsibility.

“Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government” will be part of mandatory CSR contribution, the guidelines state.

In 2014, the government made it mandatory for big corporate to allocate at least 2 percent of average profits towards CSR. Post that companies like SAP, Tata Motors, and Bajaj Electricals are reported to have invested in such accelerators that are set up in top institutions such as the IIMs and the IITs.

However, the startup incubators set up by the large tech companies are not part of the CSR initiative.

“We don’t look at it as charity. It’s a strategic decision which is in favour of our own company as well as in favour of the startups. The idea is to create an ecosystem of innovation and learning. If we don’t work together with the ecosystem as a whole will not grow,” K R Sanjiv, chief technology officer of Wipro says.

durba.ghosh@nw18.com