the Reliance juggernaut - how far?

discussion following last week's documentary by thomas friedman on outsourcing to india brought out the point that there has to be a need for innovation in the IT industry in order to not remain "cyber-coolies" (sad as it may be, this term seems to be gaining acceptance more and more). that way, the industry will be able to survive even when the outsourcing bubble finally bursts for India and the west moves to cheaper markets. i am not at all advocating that Indian companies should not exploit the present need for outsourcing, but i am also suggesting that while the dollars roll in on service contracts, there has to be a sustained effort to try and build a platform for the days when this stream will run out of water.

a similar thought started after reading the NYT article on the Reliance Group - A Giant So Big It's a Proxy for India's Economy. the statistics are staggering - the Reliance juggernaut has been moving on at full steam quarter after quarter - beating expectations again and again and again - even in the face of a worldwide recession. exports have gone up - and today, the Reliance group is bigger than the entire indian outsourcing industry. they have diversified tremendously - starting with selling cloth - to making it (Vimal) - to making raw material (PTA) - to making ingredients (p-xylene) and - now refining - and finally culminating in oil exploration. the reliance oil find in the krishna-godavari basin was the world's largest of 2002. all this vertical backward integration has been accomplished by licensing the best technology available - and beating the competition purely by sheer production volume and obliterating competition. but again, there has not been an effort by the company to invest in R&D or technology development or innovation towards better products. critics (including myself) have kept thinking that some day this will catch up with them - but that does not seem to be anywhere in sight. the fact that reliance is politically probably the most well connected company in india provides help in that regard as well. the same tactic has continued over in the telecom sector where reliance got in tried and tested CDMA technology from qualcomm and beat the GSM players by some shrewd politcal manipulations.

so the point comes up - is there really a need for them to innovate? they are content that some company (UOP/Qualcomm/Motorola etc.) is taking care of business as far as investing money into R&D and developing technology - Reliance comes in with a tremendous amount of capital (thanks to investors who know the proven track record - and are not hesitant to invest in the reliance group ventures) and licenses that technology (normally while it is sizzling hot off the presses and before anyone else in the indian or even the world, [e.g. technology for the jamnagar refinery was licensed from UOP ahead of anyone else in the world] has seen it) and beats everyone in the market by sheer numbers. perhaps thats the way to do business - why waste time, money and resources on innovation and research - money can buy them love ... and a lot more money for their investors :)