The Obama administration has allocated $19 billion in incentives for hospitals and practices that make meaningful use of electronic medical records systems, and everyone is biting their nails, waiting to find out the meaning of “meaningful.” But sitting 8,000 miles away from Washington, DC, I’m spending my summer internship focused on healthcare IT that’s measured in Rupees crores (tens of millions of rupees) instead of billions of dollars, helping Infosys define their offering for the Indian healthcare IT market.

At roughly $325 million per year, the market for healthcare IT in India is dwarfed by that in the US, which is in excess of $40 billion—more than 100 times as large. So why should you and Infosys care about this tiny market? For the same reason that IBM, Wipro, Tata Consultancy Services, Perot Systems and many local players are elbowing their way in: it’s all up and to the right set to hit $1 billion by 2014.

In this column I aim to give you a primer on one of the fastest moving and most exciting healthcare markets in the world. This is some of what I’ve learned over the last two months, by interviewing doctors, nurses, managers, and C-level executives at hospitals, payors, and third party administrators that are all betting on the Indian healthcare market.

Macro Forces Driving Growth

India has one of the lowest ratios of hospital beds to patients in the world, at 0.7 beds per 1000 people. This is less than a third of the world average of 2.6 and well below other countries such as Sri Lanka, Brazil, and China (2.9, 2.6, and 2.2 respectively).

But incomes are rising rapidly and studies show that when they do, a higher proportion is spent on healthcare. Rapid urbanization will mean a more concentrated population that can be served by larger hospitals located in metropolitan areas. A more concentrated and urban patient population is very attractive to private equity investors, who pumped $450 million into Indian hospitals in the first half of the 2008-9 fiscal year, triple the $150 million in the previous year.

As more and larger (100+ bed) hospitals are built, they will spend more on IT, typically 1-2 percent of their revenue but sometimes as high as …Next Page »

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From Amazon to Zappos, it was an exciting week for deals in the Northwest. A lot of the news was dominated by Amazon’s biggest acquisition to date ($920 million), but there was plenty of other action in energy, biotech, software, and gaming.

—Xconomy broke the news that General Fusion, a Burnaby, BC-based clean energy company, raised $9 million out of a $12.5 million equity offering. The investors were undisclosed but include a syndicate from the U.S., U.K., and Canada, as Luke reported. The company’s board of directors includes members of GrowthWorks Capital and Chrysalix Energy in Vancouver, BC, Braemar Energy Ventures in New York, and Entrepreneurs Fund in London. General Fusion is developing a novel method of energy production called magnetized target fusion, and is currently working on a four-year, $50 million demonstration project.

—Bellevue, WA-based Limeade, a health-IT company, raised $2.4 million out of a $3 million equity offering, as Eric reported. The investors were not announced. Limeade makes software to help companies encourage their employees to reach wellness goals like losing weight or quitting smoking.

—Seattle-based Calypso Medical Technologies formed a partnership with Varian Medical Systems of Palo Alto, CA, to develop products that incorporate Calypso’s radiation-pinpointing technology into Varian’s software and devices for cancer treatment. Financial terms of the deal were not disclosed.

—Amazon (NASDAQ: AMZN) made its biggest acquisition to date, buying Henderson, NV-based online shoe retailer Zappos for some $920 million, as Eric reported. The blockbuster deal is expected to close this fall, and most of the money will come from about 10 million shares of Amazon stock. Meanwhile, Wade contributed an interesting (and surprising) take on how the deal affects a Boston-area robotics company, Kiva, that works with Zappos. Finally, Xconomy provided some more context for …Next Page »

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Wireless telecommunication networks require a constant, uninterrupted supply of electricity. Unfortunately, power outages are a common problem in many parts of India. The electrical grid in those areas can go down for hours every day. As a solution to this problem, Indian telecommunications company ACME Tele Power has turned to hydrogen fuel-cell generators to keep power flowing even when the central electrical grid goes down. As we previously reported, Vancouver, BC-based Ballard Power Systems has formed a partnership with Bend, OR-based IdaTech, and together they are manufacturing these generators for ACME; earlier this month, they completed an agreement to send 310 direct hydrogen-fueled Electragen generators to ACME.

Hydrogen fuel-cell generators are a better answer to backup power issues than coal or gasoline-powered generators for a few reasons. They are cleaner, both environmentally and internally. They have few, if any, emissions from their electricity generation, and tend to require less in the way of maintenance—an important concern especially in the more remote parts of India. This deal is the latest in an upsurge in hydrogen fuel-cell usage, notably, as we reported, in cars.

Ballard Power developed and produces the two types of fuel cell. These first 310 generators are built to use hydrogen directly. Future shipments, this year and possibly in years to come, will be fueled by natural gas to generate hydrogen to run the fuel cells and thus the generator. IdaTech, a manufacturer of backup power supplies for more than a decade, signed an agreement with Ballard in May last year to incorporate Ballard’s fuel cells into some of its generators. When ACME approached IdaTech in October about the generators, Ballard was included as part of the deal, according to Tony Cochrane, director of the backup power market segment at Ballard.

IdaTech was founded in 1996 as a backup-power product maker, specifically low-maintenance machines that run on cleaner fuels, like natural gas, than standard generators. Ballard was originally founded in 1979 to make better lithium batteries, although since then it has moved exclusively into …Next Page »

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As cross-pacific partnerships multiply among life science companies in California and Asia, San Diego biotech companies are increasingly interested in learning how to do business in China, India, and other countries. At least 250 representatives of the international life science community are expected to gather for CalAsia, a two-day conference that begins today at the downtown San Diego Marriott Hotel & Marina.

This is the first year the event has been hosted by Biocom, San Diego’s life sciences industry association. Those attending include established pharmaceutical companies, startups, investors, and researchers, as well as individuals and delegations from China, Singapore, Korea, Australia, India, and other countries in the Asian Pacific region. Workshops and plenary sessions include an overview of opportunities and challenges for the biopharmaceutical industry in key markets, licensing deals with Asian partners, raising money in Asia, and evolving intellectual property rights in China and India,

In a preview of the event, I asked Dr. Hui Cai to answer some questions about doing business in Asia. She is president and CEO of Inflexion BioPartners, which provides international management and consulting services in the life sciences, and she has been involved in international sourcing of drug candidates, cross-Pacific operations, strategic planning, and strategic partnerships. She also serves as chairwoman of the board at the Sino-American Biomedical and Pharmaceutical Professionals Association, although she notes these are her personal comments.

Xconomy: What does it mean that the FDA has opened an office in China?

Hui Cai: Setting offices in China reflects the shift in the FDA’s prevention-focused approach to ensure quality at the point of manufacture and that U.S.-bound goods are safe before they are exported. It also plays a positive role in facilitating better communications, and in sharing information and best practices with Chinese regulatory authorities and manufacturers. In reality, good cooperation is key to maintaining a mutually beneficial practice, and it’s important to ensure intentions remain true to sharing best practices, rather than imposing standards unilaterally.

X: What are the chief concerns today for U.S. biotechs that want to form partnerships in Asia, and especially China?

HC: Many U.S. biotechs are reaping …Next Page »

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El Cajon, CA-based Pure Bioscience (NASDAQ:PURE) today said it has found an Indian distributor for its patented antimicrobial agent, silver dihydrogen citrate. Colorado-based Global Endeavor and its subsidiary Pure-Enviro Biotech in New Delhi have approval from Indian authorities to immediately begin marketing an SDC-based hard-surface disinfectant called Enviroguard in India. Pure CEO Michael Krall told Xconomy this Monday he expects hundreds of SDC-based products to soon hit the market.

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It was a quiet week for deals in the Northwest, with a few partnerships formed in software, biotech, and intellectual property.

—Bothell, WA-based MDRNA (NASDAQ: MRNA), a developer of RNA interference technology for drug development, agreed to license its technology non-exclusively to Novartis in exchange for $7.25 million in upfront fees, as Luke reported. MDRNA also signed a separate deal that gives Novartis an exclusive period in which to form a larger R&D collaboration with MDRNA. Terms of that deal were not disclosed.

—Intellectual Ventures, the Bellevue, WA-based invention firm, inked an agreement with the Indian Institute of Technology-Bombay to license some of the university’s technologies, and to work with its researchers on commercialization strategies. Financial terms were not announced. Intellectual Ventures has similar deals in place with other institutes in Asia, but IIT-Bombay is a particularly prestigious university specializing in electronics, software, and materials, and the partnership epitomizes the firm’s broader strategy to support the invention process around the world—and profit from it.

—Seattle startup Ontela, a maker of photo-sending software for camera phones, has teamed up with T-Mobile to offer its service via the photo-sharing website Photobucket. T-Mobile subscribers can sign up to have their pictures sent automatically from their BlackBerry smartphone or other handheld device to the photo site. Ontela’s software is now available to about half of all U.S. mobile-phone subscribers, and comes pre-installed on four of the top five handset manufacturers.

—Seattle-based Evri, a startup that makes novel Web browsing software, formed a partnership with The Times of London to provide a widget that recommends related articles when a reader clicks on a story of interest. Financial terms were not given. This deal follows a similar one announced last month with the Washington Post, and is part of Evri’s effort to build an audience for its service, which tries to understand connections between people, products, and other entities on the Web and present the info in a useful way. (This news was dampened later in the week when it was reported Evri laid off one-fourth of its staff.)

—Luke reported that Geospiza, a Seattle developer of software that helps researchers sort through mounds of genomic data, received a two-year, $1.1 million grant from the National Institutes of Health, as part of a collaboration with The HDF Group. The effort will support biological software applications that use Hierarchical Data Format, an advanced data capability made to handle demanding and complex tasks like studying genomes and monitoring climate change.

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On Monday, Bellevue, WA-based Intellectual Ventures signed an agreement with the Indian Institute of Technology-Bombay to license some of the university’s inventions and to work on technology commercialization strategies with its researchers, as reported by CIOL, Express India, TechFlash, and other outlets. It’s not really big news by itself—Intellectual Ventures has formed similar partnerships with other institutes in India, as well as in China, Japan, Korea, and soon, Singapore—but it fits into the broader strategy the firm is pursuing around the world to foster invention.

Last fall, Intellectual Ventures opened offices in five Asian countries in an effort to gain access to a much wider pool of inventors and talent. Led by global head of technology Patrick Ennis, a physicist and former managing director at Arch Venture Partners—and other members of Intellectual Ventures’ senior leadership team, including co-founder and president Edward Jung—the company is building relationships with prominent academic scientists in Asia, and setting up partnerships whereby it can license certain inventions in exchange for helping with patents and commercialization. The strategy reminds me a lot of Microsoft Research, which has set up labs in China and India in the past 10 years and built partnerships with local university researchers and administrators. (This blueprint is not surprising, given that Intellectual Ventures’ co-founder and CEO Nathan Myhrvold was the founder of Microsoft Research.)

The reception Intellectual Ventures is getting also reminds me of Microsoft Research. While most university officials see the partnerships as benefiting their researchers and increasing the flow of innovation, critics have rolled out the standard “patent troll” fears that the company is coming in to buy up all the best intellectual property—which will only be assuaged by years of relationship building and repeatedly demonstrating that these sorts of deals can benefit both sides.

Nevertheless, Intellectual Ventures’ Indian operation seems to be off to a strong start. It is now staffed by about 15 people, led by Ashok Misra, the former head of IIT-Bombay and a highly respected polymer materials scientist.

I caught up with the staff of Intellectual Ventures to hear about the workings of the Indian university partnership. Nicholas Gibson, one of the firm’s directors of business development in Japan, said via e-mail, “The agreement with IIT-Bombay is important as it gives [us] more direct access to top flight university-based Indian inventors. The deal also gives IIT-B access to commercialization possibilities …Next Page »

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Boston, Tuesday, January 20–I have been back from India for about two weeks and have had time to reflect on my trip and to view my hometown of Boston with a fresh pair of eyes. The front page news in India was about Satyam Computer Services’ $1 billion fraud and India’s impotence in stopping Pakistani-supported terrorism. Back in Boston the headlines have been been about Madoff’s $50 billion fraud and Israel’s Gaza war. The flat world indeed!

Satyam’s fraud is being compared to Enron, though it is likely that Satyam, with hundreds of Global 1000 customers, will survive. Ramalinga Raju, the former chairman of Satyam, and his brother are being held in jail; Madoff remains in his $7M apartment on bail. As I think about these two events, I am struck by one commonality: the ability of smart people to fleece others in their close communities.

In the case of Madoff, the global Jewish community is shocked at how he defrauded several Jewish philanthropies and individuals of billions of dollars. Raju comes from a tight community of Rajputs (the warrior class who are predominantly in northern India) who came to Hyderabad to serve the Nizam, or King, in pre-colonial times. Raju comes from a landowning farming family with strong connections to the state of Andhara Pradesh (AP), whose capital is Hyderabad. He has a web of connections to the business and political elite in AP, who will find it difficult to distance themselves. Likewise, I imagine the Jewish community is concerned about the negative image of the community as a result of Madoff’s misdeeds.

As is evident from all the strife around the world, humans are still drawn to their communities. The U.S. is increasingly settling into like-minded communities who overwhelmingly vote Democrat or Republican. Having just watched President Obama’s inauguration speech along with a couple of hundred people in the cradle of American democracy, the town library in Lexington, I am hopeful that the divide-and-conquer colonial era is drawing to a close. We have the first brown-skinned leader of a predominantly white-skinned country, son of a citizen of Kenya, a former British colony. In his inaugural speech Obama said “our patchwork heritage is strength not weakness,” and I truly believe that both the U.S. and India share this patchwork heritage. The Indian peninsula has seen inward migration from the first humans to leave Africa 60,000 years ago to Aryans from Central Asia, Muslims from Turkey, Jews from Spain, Zorastrians from Persia, and Christians from Europe. In spite of these migrations, or perhaps because of the relatively peaceful integration of these immigrants, for hundreds of years India was the richest region on the planet. The U.S. is now the richest country in the world, and the citizens of the U.S., in choosing Obama as President, have astonished people around the world, many of whom live in former European colonies.

Barack Obama has a unique opportunity to lead the U.S. and the world into a new transnational era, jumpstart a post-carbon economy, bring about free trade in goods, and solve major post-colonial border disputes (Kashmir, Palestine, several in Africa) that will go a long way to weakening the foundation of Muslim terrorists. Just as he energized a new U.S. generation by using the new person-to-person medium of the Internet to transmit his message, perhaps he will directly communicate to hundreds of millions opted-in cell phone users across the globe with a new message: “Let us build, not destroy.”

Boston and Massachusetts are at the center of this new transnational era. Many of Obama’s close advisors hail from universities and public institutions in the Boston area. The children of the political and business elite from many countries around the world come here to study, and whether they stay or return form bonds with native-born Americans that last a lifetime. A formal social network of Boston-area alumni would certainly span the world and keep Boston relevant in the 21st century…calling all entrepreneurs!

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Mumbai-Delhi, Tuesday, December 23—I boarded the overnight train to Delhi at Bombay Central Terminal (the mixed use of old and new city names for Bombay is a metaphor for old and new India—the old structures retain the original Bombay, and everything new is named Mumbai). I had forgotten to print out my e-ticket and was prepared to battle/sweet talk my way onto the train. My last train ride in India was over 20 years ago, and I have a lasting memory of patiently standing in a queue that never moved to purchase a ticket, as people kept muscling their way to the front of the line. Getting on the train required sharp elbows and more than likely the conductor had sold your seat to the highest bidder. The contrast this time was stark. I had to pay Rs.50 ($1) to get a ticket printed out on the train. The familiar red-clad coolies/porters were still around, but there was no need for their help; the boarding of the train was orderly, seats were assigned, and the conductor was Amtrak-like amiable.

The train departed Mumbai on time, the orderlies prepared my bed in the four-bed compartment with spartan but crisply laundered sheets, and I promptly went to sleep. A couple of hours later I was joined in my compartment by two gentlemen who had boarded at an unknown station. I was on the Rajdhani express, a series of overnight trains between the metropolitan cities in India. My ticket had cost about $65, a flight would have been $110. I wanted to experience train travel and get a sense of the geography of India’s industrial corridor running between Mumbai and Delhi, encompassing the modern states of Maharashtra, Gujarat, the central state of Madhya Pradesh (MP), the tourist state of Rajasthan, and the largest and one of the poorest states in India, Uttar Pradesh (UP). I was traveling on the most expensive ticket on the Rajdhani; the least expensive was about $1.50.

I woke up at the crack of dawn when the porter entered the compartment to offer tea. I watched the sun rise over a misty, flat landscape. Everywhere I have been in India the sky is hazy. I cannot ascertain if it is industrial pollution, winter mist, or smoke from wood fires, or perhaps a mix of all three. Even here in the countryside the sky is hazy. It is as if the entire country is an incense-filled temple. The passing landscape is a dusty brown and is dotted with patches of green marking small farms, stunted trees, and an occasional herd of cows. Every 30 minutes or so we pass through a small town with a train station. Garbage is strewn everywhere on the tracks, and occasionally there is a garbage dump alongside the tracks at the edge of a town, with foraging pigs and cows.

One of my companions is a Sikh gentleman (see photo) whose cell phone jingles a bhangra ringtone every few minutes. He appears to be a little under the weather and sleeps in between calls and occasional visits from people on the train: “Papa-ji kaisay ho!” (How are you, pops?). Just passed a larger town called Ratlam. We must be in MP, since this where my wife used to get off to go to Indore, the capital of MP, and onto the hill station of Mau to visit her aunt.

The landscape is greener now, dotted with yellow fields of mustard, irrigation-fed no doubt as the last rainfall was likely during monsoons in July/August. The train passes over largely dry riverbeds. Power lines and telecom towers are everywhere. Motorcycles and trucks wait at level crossings. Kachrod station passes by in a flash of yellow walls and red bougainvillea. A field of cotton with a dozen men and women hand picking. A southbound flatbed freight train passes by, our train slows down with jerky braking, dwarf palms dot the sides of the tracks. I recall Yasheng Huang of MIT mentioning that India is a tropical country while China is a temperate country and life is more difficult in tropical climates. Two days before Christmas I am sitting in an air-conditioned train looking out at laborers working in what appears to be hot sun. In the bathroom I poke my hand out the open window and the air feels cool. We fly by Nagda, a larger town in MP. I have a conversation with a porter in the hallway. Apparently this is a special Rajdhani that runs during holiday periods. He says that it is not as luxurious as the daily Rajdhani from Mumbai to Delhi.

I don a long-sleeved t-shirt as the AC is slightly chilly. I have managed to avoid …Next Page »

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Pune, Monday, December 22—I visited the cerebral city of Pune, 120 miles southeast of Bombay (Mumbai), on the Deccan plateau. Pune is the closest parallel city to Boston, with a multitude of universities and government research labs. I attended high school in Pune over 30 years ago. The city was unrecognizable, with huge population and industrial growth. While no Detroit, the automobile industry has a big presence in Pune. It is the headquarters of Bajaj, the largest worldwide manufacturer of two-wheelers (scooters and motorcycles), and three-wheelers (those ubiquitous yellow-black auto rickshaws that Hollywood sees as a caricature of India). Tata Motors builds trucks, buses, and now cars in Pune. My father had brought us to Pune, called Poona in those days, to help launch the Tata Motors truck plant in 1970. Pune has also become a growing IT hub of product development outsourcing.

I thought I might escape the crushing traffic jams of Delhi, Mumbai, and Bangalore while I was in Pune; I was mistaken. If there is a symbol of modern India, it is that of honking cars and two-wheelers crawling along at walking pace. The three-lane toll expressway from Mumbai to Pune was just like the Mass Turnpike; we were cruising at 70 miles per hour. However, it took two hours getting out of Mumbai and two hours to get into Pune, covering about 10 miles in each case. India’s transportation infrastructure cannot keep up with the growth of vehicles on the road. Most of the vehicles in India are in the four metropolitan cities, with Delhi alone adding about 1,000 new vehicles per month. India cannot emulate the U.S. and depend on roads alone for transportation; it has to build a public rail transport system in cities.

The intercity railway network is the largest in the world, with over 2 billion passengers transported quarterly. I have decided to take an 18-hour train journey from Mumbai to Delhi in first class sleeper. I booked the trip online at the Indian Railways website in just a few minutes. The Indian Railways is one of the few government departments that has improved service for the public in the past few years. The Railway minister in Parliament is the erstwhile Lalu Prasad, a breathtakingly dishonest politician who as the Chief Minister of Bihar brought that state to terminal economic decline. In true American style, he has reinvented himself as a competent federal minister, earning a case study at Harvard Business School.

Bangalore’s new airport was delightfully efficient and clean ,and I have heard that the new airport in Hyderabad, the life sciences capital of India, is even better. Air travel is cheap and generally a delightful experience within India. Railway station and airports will soon be connected to urban public transport. Delhi, Bangalore, and Mumbai are all building a metro system, with Delhi clearly in the lead.

The electricity grid in India is notoriously unreliable. Most of the problem is due to demand outstripping supply. It is also due to the enormous leakage of power, ie power that is stolen with the complicity of corrupt municipal officials. As a result, there is a huge industry of distributed backup power; every house and office has battery backup, UPSs, and diesel generators. The noise and air pollution from these backup generators can be experienced at any retail marketplace. With the nuclear cooperation agreement signed with the U.S. (and France and Russia), India is embarking on construction of a dozen or so nuclear reactors. India is going to buy this reactor technology from these countries, and there are billions of dollars of business up for grabs. From what I have heard, U.S. companies are in third place.

India’s biggest infrastructure challenge is that of clean water. Most of the country receives rain only during a 2-month-long monsoon season. The rest of the year water is available from the ground or glacier-fed rivers. Municipal water is generally contaminated and available for only a few hours a day. Most people augment municipal water by buying water from private suppliers who ship it in tank trucks. Every house and building has water storage tanks that need to be cleaned regularly so the water doesn’t get further contaminated. Every house also has a water filter to produce drinking water. Bottled water is common and a must for foreigners like me.

Amongst the Christmas greetings I am receiving on my Blackberry is one that has a hilarious comparison of cow economics in various countries: Indian corporation, you have two cows, you worship them; Chinese corporation, you have two cows with 300 people milking them, you declare full employment and imprison the journalist who tries to tell the truth. U.S. corporation, you sell one and force the other to produce the milk of four cows and then hire a consultant to analyze why the cow dropped dead! Feels bizarre reading emails from Detroit about cows while I gaze out at scrawny cows nibbling in the fields we are passing by.

[Editor's note: This is Part 6 of a travelogue written by Xconomist Vinit Nijhawan, who is in India visiting venture capitalists and startups with an eye to bridging the Boston and Indian startup ecosystems. We published Part 1 on December 5, and you can find a guide to all Nijhawan's India posts here.]

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The world might not be completely flat, but a bulldozer has been working overtime on leveling the global innovation playing field—and many previously emerging nations are establishing themselves as serious competitors to the U.S. India is near the top of the list. Previously known in the technology world as a place for cheap outsourcing of IT talent, it is now a hotbed of hypercompetition and entrepreneurial activity, even as it struggles with core issues of health, corruption, and an unfair legal system dogging emerging nations.

For those of you who would like a personal, close-to-the-scene snapshot of India’s innovation landscape, I’d like to draw your attention to the still-unfolding series in our Forum penned by Xconomist Vinit Nijhawan, who is touring the country right now. In five short, easy-to-digest installments, Nijhawan takes readers on a fascinating journey, from New Delhi’s teeming cell phone (and cell phone unlocking) marketplace to Chandigarh, home to a great engineering college and a “nascent life sciences industry forming…around agricultural products” to his most-recent installment from Mumbai and the TiE (The Indus Entrepreneurs) Entrepreneurial Summit.

It isn’t all a pretty tour. Along the way, Nijhawan provides a view of India’s murky property situation, which he contrasts to its much more effective system of intellectual property protection; government corruption and ineptitude; and India’s problems with clean water, which he thinks might lead to a possible collaboration with Boston University, where he is a lecturer and executive-in-resident at the School of Management.

There’s a lot more I haven’t mentioned, but you get the idea. You can take the tour below:

Dispatch from India’s Innovation Front Lines

India’s Innovation Front Lines, Part 2: Of Industry-Targeted Degrees, Water, and Spinoffs

India’s Innovation Front Lines, Part 3: Of Property Markets, Both Physical and Intellectual

India’s Innovation Front Lines, Part 4: Of Hyper-Competition and Corruption

India’s Innovation Front Lines, Part 5: The Emerging Entrepreneurial Class

India’s Innovation Front Lines, Part 6: Return to Pune, the Boston of India

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Mumbai Friday December 19, 2008—The TiE Entrepreneurial Summit in Bangalore was a huge success–the sponsoring hotel was barely able to manage the large crowd. What struck me was how young the crowd was and how aggressive the entrepreneurs were in approaching anyone who looked like they had money to invest.

Speaker after speaker lauded the “demographic dividend” offered by all those young people and to be reaped by India. Implicit in this comment was that this group would be well educated. Everyone by now has heard about the Indian Institutes of Technology (IIT) and the Indian Institutes of Management (IIM) and perhaps even the All India Institute of Medicine (AIIM). These fine institutions graduate just tens of thousands students annually. There are many other engineering colleges and management institutes, but the most are not graduating world-class talent. This is even more evident in high school. The elite private high schools (Cathedral, Campion in Mumbai, and Sriram, Modern in Delhi) are excellent, but most Indian teenagers in the metros get subpar education at public high schools. In smaller towns the options are even fewer.

Nonetheless, the kinetic energy of these young entrepreneurs is infectious. One young man bewitched our table with tales of a multitude of startup companies that had been selected by his cleantech non-profit for fundraising help. These varied from electric scooter companies to biodiesel producers. A couple of us were ready to start a company to import scooters to the U.S.! The unwritten story behind these eager entrepreneurs is the hard work they have put in to get to where they are. It starts in elementary school. Most students put in a full school day (including hours of commuting), and then take extra tutoring to prepare them for entry exams to the elite private high schools. To get entrance to an IIT or medical school, students have to study 5-6 hours per day for couple of years, in addition to attending regular school hours. Only one in a hundred applying get into these elite colleges. It is questionable that all this studying prepares Indian youth better than American youth for real world jobs, but it certainly instills a strong work ethic.

Traditionally, youth is celebrated in the U.S., but in India age (read wisdom) is respected. This seems to be changing, especially in the workforce. An executive search professional I was chatting with said that many executive jobs came with a stipulation that the candidate be younger than 45. With so many young people available, why pay extra for tired, old wisdom?! I don’t know if the average age of Indian companies is lower than that of U.S. companies, but the senior ranks certainly seem younger.

TiE is launching a chapter in Tokyo, and I had a chance to discuss Japan’s new-found fascination with India with the founders. Apparently the Japanese were taken aback that many multinational companies in Japan suddenly began to have Indians as the managing head. Japan has always had a historical fascination with India, the home of Buddhism, but the country was always considered an industrial backwater. With the success of its IT and especially automobile parts companies (Toyota Kirlowsker’s plant in Bangalore produces as reliable parts as Toyota’s Japanese plants, or more so), aging Japan appears to have discovered talented India. There are hordes of Koreans and Japanese on all the elite golf courses in Delhi and Bangalore!

[Editor's note: This is Part 5 of a travelogue by Xconomist Vinit Nijhawan, who is in India visiting venture capitalists and startups with an eye to bridging the Boston and Indian startup ecosystems. We published Part 1 on December 5, Part 2 on December 8, Part 3 on December 10, and Part 4 on December 16.]

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Bangalore, December 15—For 45 after independence, Indian companies for all practical purposes operated without competition. Monopolies were granted by the government for extended periods. Many fortunes were made, both by industrialists and corrupt politicians. Consumers had to wait years for “luxury” goods such as cars and telephones. This began to change in 1992, when in the face of an economic collapse the Indian economy began to reform. Slowly, industrial sector after sector was opened up to multiple competitors, even foreign ones. The IT industry evolved slightly differently, as the government babus (bureaucrats) were so used to regulating physical goods that the industry was able to export its bits and bytes via satellite links without intervention.

Today India has hyper-competition in many industries and consumers are the net beneficiaries. There are five major wireless carriers with about equal market share (contrast this with the U.S., which is rapidly moving to a duopoly of Verizon and AT&T). As a result, cell phone voice calls in India are the cheapest in the world. My monthly cell phone bill in Boston averages $120 or about $4 per day. I am spending about 50 cents a day in India. (But cell phone conversations in India still tend to be quick and short, which I can only attribute to how costly phone calls used to be just a few years ago.)

There are a multitude of startup companies offering value-added services in this vibrant ecosystem. I met a young engineer who had bootstrapped a company to offer mobile Internet advertising services to brands. He was saying that the growth of mobile Internet usage in rural cities was exploding as small scale businessmen had no other way to access the Internet for relevant content such as local weather, crop prices, etc.

Similarly there is significant competition amongst domestic airlines. The customer service on these airlines reminds me of flying in the 1980s in the U.S. Call centers that respond within seconds, ground staff that is friendly and efficient and best of all, in-flight service that astounds (I just had a flight attendant service a bathroom after a particularly long-winded customer!). My sister-in-law just flew from Delhi to Toronto on a Jet Airways flight and said it was the best business class experience she had ever had, and she is a frequent and demanding flier. I was conversing with an executive at the biggest training school for airline staff and she said that they train about 2,000 customer service reps annually. Only the crème de ala crème make it on to planes as flight attendants, and yes, looks are an important criteria.

In contrast, almost any government-run service is horrendous. Delhi’s domestic airport was mobbed at 5:30 a.m. for early morning flights. Security was overwhelmed and chaotic. I witnessed a shouting match between a patiently queuing customer and someone jumping to the head of the line because they were late for a flight.

There are exceptions, of course. The entire city of Delhi appears to be under construction, with an extensive expansion to their 4-year old metro (subway) underway to be ready for the Commonwealth Games in 2010. Crews are literally working 24×7 with minor disruption to traffic. I contrast this to the Winter Street exit off Rte 95 in Waltham, MA, where the repairs on a single bridge have been going for over three years with no end in sight.

Interestingly, elections are hard fought in India because politicians end up in personally lucrative monopolies. Since they may be in power only for a single term, they try to extract as much graft as they can. Government-led corruption is the bane of emerging economies from democratic India to autocratic China. Fortunately, India has a highly competitive press corps that is valiantly trying to inform the public about government’s misdeeds. In the aftermath of the Mumbai terrorist attack, some politicians’ heads rolled as a result of press coverage of their ineptitude. In the U.S. no leader lost their job as a result of the security lapses in advance of 9/11.

Nevertheless, the Indian public would gladly trade the U.S. public sector for India’s. Perhaps our multitude of outsourced government contractors should set up in India and begin lobbying for outsourced services from the Indian government, a win-win situation for both countries!

[Editor’s note: This is Part 4 of a travelogue by Xconomist Vinit Nijhawan, who is in India visiting venture capitalists and startups with an eye to bridging the Boston and Indian startup ecosystems. We published Part 1 on December 5, Part 2 on December 8, and Part 3 on December 10.]

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New Delhi, December 10—The housing meltdown in the U.S. got me thinking about the property market in India. With the dramatic urbanization and growth of Indian cities property prices have skyrocketed. In good neighborhoods in Delhi prices have increased 100x in 30 years. I met a small dairy farmer who supplied a neighborhood with milk from a few cows by bicycle who had sold his property for $2 million (see picture below).

Property and property rights, or the lack thereof, is a central theme in free market India. India has national, state and municipal laws supporting intellectual and physical property but enforcement of those laws is weak. This is especially the case in housing. In India possession is more than 9/10 of the law—it is the law. In a situation similar to rent controlled properties in some U.S. cities (remember rent control in Cambridge?), there are millions of tenants who occupy properties, pay nominal rent and cannot be evicted.

Land is an emotional issue in India. Hundreds of millions of farmers still make a living off their land. The size of the average farm has decreased since independence as generation after generation has subdivided land among their children. In the cities single family homes have grown into multi-story apartment buildings with each floor given to a child as inheritance. Even the mighty Tata Motors was forced to move their Nano car plant from one state to another because small farmers protested against having their land taken by eminent domain. While India is a mobile society, people tend to retain their ancestral land. This creates a shortage of properties for sale, especially in old established neighborhoods in cities.

Most Indian families I know have a property dispute within the family, generally resulting from inheritance. The legal system is slow and corrupt and it can take upwards for 10 years to resolve disputes (it is very easy to delay the legal process by bribing clerks and even judges). As a result possession has become the instrument of choice in such disputes. When the second parent passes away the children start moving themselves or their relatives into parts of the property to stake a claim. Naturally this creates discord within families. Feudal India is never far from the surface of 21st century India.

In contrast, intellectual property is well protected in India. Partly as a result of joining the WTO and the fact that most ordinary people are not affected by IP, it is not politicized and the courts generally act quickly to resolve disputes. A colleague who returned from California to take care of an ailing mother with Alzheimer’s is running a product development outsourcing company. A couple of his employees naively showed software source code they were working on to a competitor in the process of a job interview. Subsequently a major U.K. competitor of their U.S. customer came out with an identical product. My colleague was able to sue in the Indian courts and put his employees in jail.

[Editor’s note: This is Part 3 of a travelogue by Xconomist Vinit Nijhawan, who is in India visiting venture capitalists and startups with an eye to bridging the Boston and Indian startup ecosystems. We published Part 1 on December 5 and Part 2 on December 8.]

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Chandigarh, Sunday, December 7—I drove straight north from Delhi to Chandigarh about 300 km, on a much improved four-lane highway. Chandigarh is a planned city that was designed by the French architect Le Corbusier in the late 1950s. It remains a delightfully livable city that the rest of India has failed to emulate. I am attending the wedding of my cousin’s daughter, a recent dental school graduate, to a young engineer who works with Tata. The local TiE chapter has also invited me to speak to their members tomorrow.

I have met several entrepreneurs who have returned from the U.S. to take care of aging parents and then set up businesses here. Chandigarh is considered to be a tier 2 city (tier 1 being Delhi, Mumbai, Bangalore, Kolkata, and Chennai), in the same league as Pune and Ahmedabad. In reality those cities are far more industrial, including technology-related industry, than Chandigarh. There is a nascent life sciences industry forming, especially around agricultural products: Chandigarh is the capital of Punjab, India’s bread basket. However, most of the entrepreneurs I met had small outsourced information technology businesses with customers primarily from the U.S..

There is an excellent engineering college in Chandigarh, and I had the chance to meet with the director of the college, Manoj Datta. He is busy setting up new degreed programs to respond to industry needs. For example, he was evaluating a graduate program in biomedical instrumentation in conjunction with a local biological institute. We had a vigorous debate about the viability of that degree, along with the head of Philips Labs from Delhi. Philips Labs are creating new products for emerging markets by launching them first in India; they support all Philips divisions, including the medical division in Andover, MA. For instance, they recently launched a UV water purifier that is more effective than charcoal filters. Tainted water is a big problem in India, as many tourists have found. The public water supply is invariably contaminated and almost everybody has a water purifier at home. Boston University has a world-renowned public health department that has projects in India; I need to connect them to Philips Labs and Punjab Engineering College.

I had an interesting conversation with the CEO of the Usha Group, which has been making ceiling fans and air conditioners for many years. He showed me a cell phone that they have launched in tier 3 and 4 cities in India. The cell phone is manufactured by an ODM (Original Design Manufacturer) in China to their specifications and distributed via thousands of cell phone retail distributors. Usha has been struggling to differentiate itself on grounds other than price. To illustrate how powerful this can be, the CEO told the story of an upstart competitor that had inferior products but had stumbled onto a need in the rural marketplace for phones that had long battery life. Electricity is not readily available in most India villages and is unreliable when it is.

I asked him if he had considered differentiating on the cell phone user interface, perhaps by using the Google Android operating system and then customizing the UI for rural India consumers. I will discuss this further with him when I return to Delhi.

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Editor’s note: Xconomist Vinit Nijhawan is in India visiting venture capitalists and startups with an eye to bridging Boston and Indian startup ecosystems. This is the first in a series of dispatches.

New Delhi, Thursday, December 4—I arrived in Delhi near midnight off a packed flight and to a crowded international airport, no sign of any slowdown in activity as a result of the recent terrorist incidents in Mumbai. The cool winter air is thick with construction dust, there is a new airport being completed and an extensive subway system, including a line running to the airport.

My first task was to get a local SIM for the Sony Ericsson phone I borrowed from my son. I went to a Bharti Airtel customer service center in a south Delhi market in Lajpat Nagar. It was packed with about a dozen customer service reps, a payment kiosk, and about 20 customers. The rep looked at my phone and said that it was locked to the Rogers network (my son goes to college in Canada), and I should go down the street to a shop to get it unlocked, and that it would take two hours.

I then went to get a passport photo taken at a nearby shop called ìKodak Expressî and paid $1 for 8 color photos. I went back to the Airtel shop and filled out an application for a prepaid account: my photo, passport information, and local address was attached to the application. I was told that my SIM would take a day to activate after my application information was verified. This was a new procedure as a result of foreign terrorists acquiring India cellphone accounts to escape being tracked. Seems like the recent terrorists were a step ahead: they bought satellite phones in Dubai to communicate with their handlers in Pakistan.

The entire experience with getting a local phone service was much more cumbersome than activating a phone in the US or Canada. Then again, I imagine if I was an Indian citizen visiting the U.S. and walking into an AT&T store, I might also have to wait a day to get activation. I was astonished by how many stores there were all over south Delhi offering mobile phones and services. With 300M subscribers, up from about 100M when I was last in India two years back, it is becoming a huge industry here.

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EMC, the software and data-storage giant based in Hopkinton, MA, is announcing today it has formed a new company called Decho. The new organization is composed of two formerly separate EMC businesses—American Fork, UT-based Mozy and Seattle-based Pi. The merged operation will focus on cloud computing services having to do with managing people’s digital information, including the online backup and storage of personal data.

Xconomy is very familiar with EMC (NYSE: EMC) and Mozy. Back in October 2007, we wrote about the story behind EMC’s acquisition of Berkeley Data Systems, which developed Mozy, the online backup service. The Mozy desktop application automatically uploads copies of key files and folders to Mozy’s servers, and is best known for its popularity among consumers rather than companies.

As for Pi, the software startup was acquired by EMC last February, and has always been pretty stealthy about what it’s doing. (Its name stands for “personal information,” not the transcendental number we know from geometry class.) The firm was originally founded by ex-Microsoft exec Paul Maritz, who became CEO of VMware (also part of EMC) in July. Maritz will remain at VMware, and is on the board of Decho. The new company has more than 100 employees based in four cities: Seattle; American Fork, Utah; Montreal, Canada; and Bangalore, India.

Charles Fitzgerald, Decho’s vice president of product management (also an ex-Microsoftie), sat down with Xconomy last week to tell us more about the direction of the company. First of all, its name stands for “digital echo,” referring to the data bouncing around between a user’s devices—phone, laptop, desktop—and the Internet cloud. “If you look at the new Decho entity, we are a cloud-based service provider focused on personal information. We’re beyond the startup stage,” says Fitzgerald. “We have eight figures of revenue now and are growing nicely…The revenue is all coming from Mozy.”

Why focus on personal information management? Fitzgerald cited four catalysts: the sheer volume of data out there (70 percent is from individuals—things like photos and documents); redundant information scattered across many devices; the desire of customers to save data for decades; and the need to categorize and tag our information in an automated way. “Today’s world is very device-centric,” Fitzgerald says. “Instead of a device-centric world. we’d like to have an information-centric world where the core information is something I can act on and protect and manage and enrich very explicitly.”

To that end, Decho will be combining Mozy’s technology—cheap disk storage with advanced software algorithms—with Pi’s …Next Page »

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How does a giant company like EMC build an image as an innovator when it employs only a handful of full-time researchers, has a reputation for acquiring rather than inventing new technologies, and sells some of the unsexiest boxes in the IT back room—file servers, disk arrays, and other backup systems that, if they’re working properly, no one ever has to think about?

Holding a two-day innovation conference open to all 42,000 employees, and getting 1,000 of them to attend either physically or virtually, might be a good start. And that’s exactly what EMC (NYSE: EMC) did in Franklin, MA, last week. It was the second time the company has hosted such an event, and it attracted more than twice as many participants as the 2007 inaugural version (which Bob chronicled here).

I attended the first day of talks and discussions, which culminated in a science-fair-like “Innovation Showcase” where 30 teams of EMC employees—winnowed down from nearly a thousand entrants—gave poster presentations to a panel of judges. They were competing for trophies, cash prizes, and, more importantly, the resources and attention that could help their ideas blossom into new products.

The winning poster: a concept for bringing cloud computing into consumers’ homes, developed by EMC employee Manu Fontaine, a senior director of marketing and business development in EMC’s Washington, DC, offices. Fontaine proposes selling inexpensive, networked storage devices that make creative use of peer-to-peer networking to store users’ data for life.

Of course, you aren’t likely to see EMC selling these devices right away. (Although one of last year’s winning ideas, for a sort of automated bibliography service for business documents stored in EMC’s object-based Centera archiving system, is already being piloted with customers.) The point of the innovation conference and the showcase, according to Jeff Nick, the Hopkinton, MA-based company’s chief technology officer, is to get EMC employees thinking about products or services that might cut across existing business units, and to highlight ideas that deserve to be nurtured further by his office or by EMC’s Centers of Excellence, a cluster of advanced technology development groups in Brazil, China, India, Ireland, Israel, and Russia.

“There isn’t enough money to take all of these ideas and turn them into major, funded programs,” Nick told me in an interview between presentations. “We don’t have the capacity to do that, and it would be irresponsible. But if you can seed these ideas with just enough water and nutrients and light, with the joint support of the Centers of Excellence and the corporate CTO office, you can incubate them to the point where we can take [and develop] the ones that appear to be the most fertile.”

The message seems to be that EMC can make do with a grassroots approach to creating attractive new products that help customers manage digital information, carving out resources here and there when needed. (The way Nick sees it, by the way, EMC is in the business of “not just storing and optimizing and managing and protecting information, but enabling the derivation of value from information…technology can be commoditized, but information cannot.”) Nick calls this bottom-up strategy “targeted idea incubation.”

But he admits that the model is “still in its formative stages.” And given EMC’s recent history, incubating any kind of innovation has got to feel like an uphill battle. In 1999—the year Joe Tucci was appointed president and COO–EMC was named as the New York Stock Exchange’s “Stock of The Decade,” in recognition the company’s phenomenal growth in the 1990s as it pioneered a series of new storage systems for minicomputers, mainframes, and corporate data centers. But under Tucci’s leadership, EMC has been far more aggressive about acquiring smaller companies—including Data General, Documentum, Legato, VMware, SMARTS, Rainfinity, Captiva, nLayers, RSA, Infoscape, Avamar, Berkeley Data Systems, Voyence, Pi Corporation, Conchango, Iomega, and more than a dozen others—than about building new products inside its own walls. Its biggest seller, the Symmetrix line of storage servers, dates to 1990 (the first version stored a then-massive 24 gigabytes). As the company has diversified into software and services in recent years, nearly all of its major new product releases have hailed from acquired subsidiaries.

Unlike Microsoft or IBM, moreover, the company has no dedicated research and development organization charged with scoping out the future and making sure EMC has products customers will want five or 10 years down the road. The closest analogs with EMC are the …Next Page »

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Charles River Ventures of Waltham, MA, is one of the lead participants in an $11 million Series A funding round for Mumbai, India-based Webaroo, according to several reports this week. The mobile software company sells SMS-based systems for group messaging. Charles River was joined in the round by Helion Venture Partners.

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It’s 10:15 pm, and Patrick Ennis is in a taxi bound for the airport in Delhi, India. He’s getting ready for a 1:00 am flight to Beijing. The streets of India are legendary for displaying 2,000 years of transportation history in one place—animals, pedestrians, carts, bikes, cars, buses, trucks—and it sounds like tonight is no different. “I learned to drive in New York, but this is much harder,” says Ennis. Though it’s late at night, he adds, “It’s still 10 times as much traffic as Seattle.”

Ennis is the global head of technology for Intellectual Ventures, the Bellevue, WA-based firm focused on invention. He joined about six months ago; before that, he was a managing director at Seattle-based Arch Venture Partners, where he funded and built technology startups, many coming out of universities and national labs. And before that, he held senior positions in technology and business at Lucent Technologies, AT&T, and Bell Labs. He did his Ph.D. in physics at Yale, and did scientific research for about eight years before joining Bell Labs.

As we reported last week, Ennis is currently part of a high-powered traveling team that includes Intellectual Ventures co-founders Nathan Myhrvold and Edward Jung. They are on a three-week, five-country tour of Asia to meet with the local communities and launch new offices there. I hope to sit down with Ennis for a more comprehensive discussion after he returns, but in the meantime here are some thoughts he provided by phone—through a dicey wireless connection in Delhi. He touched on some details from the tour, his impressions of the various Asian cities (including the food), and how the VC industry compares with the invention industry.

Ennis said he’d been in Tokyo, Singapore, and Delhi so far, spending three to four days in each city. Next up: Beijing and Seoul. “We’re in the middle of our tour,” he says. “It’s going very well. Our focus on invention is being well-received here, it’s truly a global world now.” Ennis says that in each city, they’ve been putting on events where they have a reception and invite local inventors, university professors, and administrators of research institutions. They’ve also been meeting with local university officials privately. “We have an inventor network we’re building in Asia…We want to get to know the whole ecosystem…and we do presentations. It’s like in Silicon Valley, you invite people who are interested in what you’re doing, to mingle and network.”

Ennis is no stranger to Asia. In the mid-to-late ’90s, he worked in optical networking and sold a lot of products to Asian national carriers like Korea Telecom. And when he was at Arch Venture Partners, several of the firm’s portfolio companies had partners in Asia. So Ennis has worked in places like Taipei, Tokyo, Shanghai, Beijing, and Singapore. “A trend you see more is VCs, even if they don’t have formal offices or deals in Asia, spend more time there,” he says.

He didn’t give details of his meetings this week, but he provided some general impressions. “Asia is so dynamic in terms of growth, innovation, and optimism,” Ennis says. “The energy here is palpable, it’s similar to the energy that exists in places like Seattle and Silicon Valley, both in the technology …Next Page »

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