You could argue that the developed world owes India something like the MIT Media Lab. The West has been siphoning off Indian brainpower for a decade and has profited handsomely in the process. So, too, have many smart young Indians. Witness the vibrantly successful Indian communities in Silicon Valley or in Boston's high-tech corridor or at MIT itself.
But despite the software-development miracle that is Bangalore, India, and the success of India's myriad ex-patriots, the nation's IT corporate base remains relatively shallow and its consumer market tiny. Its chances of breaking out have not been helped by India's political instability or by a governmental approach to IT that too often has been heavy on regulation and light on the kind of investment and incentives that would unlock the sector's potential.
The news that MIT is looking at India as the site for its next Media Lab, a 16-year-old tech incubator funded largely by corporations which then have unlimited access to the lab's research, suggests this is changing. Indeed, it is one of a number of positive signs during recent months that India's high-tech future might be a little less dependent than its past.
Private-sector money has been flooding into India of late, most obviously from blue-chip U.S. and European companies, including Nortel, Deutsche Bank and Cisco , investing in software development, either through outsourcing or building their own facilities. India's IT diaspora also is feeding money and ideas back to the old country, and the supply of venture capital funding for Indian IT companies is showing strong year-on-year growth. India's coalition government also has become more proactive.
In part, this stems from an awareness of the opportunity on its doorstep and a determination not to let it slip. But it also might reflect a fear that its window might soon begin to close as low-cost rivals – led by China, which is investing heavily in educating a new IT-savvy generation – hone in on the software development market India still owns.
Whatever the reasons, change is on the way. The government's recent budget bent over backward not to discourage the IT sector, proposing a new tax on services but granting IT companies a retroactive exemption and putting forward a raft of proposals to encourage foreign investment. The nascent deal for the new Indian Media Lab also follows a strong lobbying effort from the government that helped beat out competition from China, among others. Although specifics, such as where it will be based and precisely how it will operate, are still being worked out, what has been released is impressive.
As much as $1 billion will be invested in the project over 10 years, 20 percent of that from the government and the rest from corporate sponsors, making it better funded than the existing labs in the U.S. and Ireland. It also is likely to be spread over multiple sites and to focus on areas of domestic concern such as technology uses in health care and education.
Indian IT luminaries in the U.S. see little but upside in the Media Lab's imminent arrival. Vinod Khosla , who co-founded Sun Microsystems and is now a partner at VC firm Kleiner Perkins Caufield & Byers , says, "India desperately needs this kind of project to leverage its knowledge base."
With a few exceptions such as Infosys, he adds, "There are very few role models for the development of great ideas in India. When you know something is possible, the chance of doing it is orders-of-magnitude greater." The Media Lab, he says, "could help seed the ground. It could be very powerful."
Phaneesh Murthy, an Infosys board member and head of the company's sales and marketing worldwide, is similarly encouraged, arguing that the arrival of the Media Lab and other R&D ventures "would mean people didn't have to go out of the country for opportunity. That would be a terrific thing for India."
"It is good all around," agrees Rakesh Mathur , co-founder and chief executive of PurpleYogi. "India will get to attract research funds, and it will get MIT's expertise, bottled and presented to it." He adds that the Media Lab "could help India transition from the professional services model – writing software, for instance – to the intellectual capital model" – developing and manufacturing new products.
However, he also says that India needs to generate IT graduates in larger numbers, adding that the five Indian Institute of Technology schools that have produced the cream of India's IT establishment, and a steady flow of students to MIT, should not be ignored in the enthusiasm for the newcomer. When MIT opened its Media Lab in Ireland last year, some cash-starved academics were stunned at how much government money was suddenly available to the prestigious new arrival. India's IIT's also could benefit from an injection in funding and resources, Mathur said. He added that MIT could learn plenty about "how to operate in an Indian environment" and help generate a larger and more qualified talent pool for the future.
The devil, as always, is in the details, which are still being hammered out between MIT and the Indian government. MIT says it hopes to have a plan for the first year's activity, starting with academic exchanges, in place by this spring. One thing that can be said at this stage is that in sifting through the candidates for its next Media Lab, MIT could not have lighted on a more deserving host.
