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IDGVI News: Media Coverage 2009

Moving Into Higher Gear

Business World | January 26, 2009

CONFIDENT NOTE: (From left) N. Kailashanathan, Pari Natarajan, Subash Menon, Som Mittal, Rajeev Dubey, Sanjay Swamy, Bharat Goenka and Sudhir Sethi

HISTORICALLY, INDIA HAS HAD A CHEQUERED history in developing software products and in creating companies that can live and breathe software products. The sparse few that have been formed, have only made a marginal impact in the global arena. BW and Nasscom organised a roundtable in Bangalore to discuss whether India has a future in the global software products space. Participants included Som Mittal, president of Nasscom; Subash Menon, chairman, managing director and CEO of Subex Systems; Bharat Goenka, managing director of Tally; Sanjay Swamy, CEO of mChek; Pari Natarajan, CEO of Zinnov Consulting; Sudhir Sethi, chairman and managing director of IDG Ventures; and N. Kailashnathan, CIO of Titan. The discussion was moderated by Rajeev Dubey, deputy editor of BW. Excerpts:

Rajeev Dubey: Considering that globally we are moving towards bundling products with services, how justified is this obsession with software products?

Subash Menon: Products have a life of their own. Services go around the products. One cannot stand in for the other. You have a delivery model that is SaaS (software as a service). That is what is prompting this question to some extent. But then SaaS is just that, a delivery model. You still need a product to deliver SaaS. You cannot have a service being delivered as SaaS. India as a country has to get going on the so-called software space, as is understood globally, then you have to have your own products that are expected by the customer.

Dubey: But you could also graduate to higher value-added businesses and various other aspects of services. Do we have to be in the product business?

Som Mittal: For the nation, it is important that we cover up every one of these. I think we cannot exist in the world by just the export model. Today, we have $23 billion of domestic market and we can certainly use this as a test bed to develop products that are relevant to India, and which have similar relevance to developing countries.

Dubey: If we must make products because the domestic market provides us the test bed, is that how Tally saw the market when it entered the domestic market? What challenges did it face invading this space?

Bharat Goenka: I am a sure believer of the fact that the product business consists of only two things - invading and access. Those two challenges were there 20 years ago, and continue to remain today. How do you engineer a product if services are not required? We looked at the domestic market for sheer size. We did not know how many years it would take us. We are now fairly important in the Middle-East. We have started to become important in Africa. But the reality is that the bulk of my organisation in Bangalore still gropes in trying to solve the India problem.

Dubey: And how did mChek go about developing the product? How did you see the opportunity?

Sanjay Swamy: There are a lot of similarities. Ours is much more of a consumer focus. What we found was that there was a niche for a certain category of products where the things that I took for granted are actually not that much of an issue in India, and one can complain about it or one can see an opportunity in it. We ended up looking at it as an opportunity.

Secondly, if there is one market (in India) that is growing faster than in any other part of the world, it is the mobile space. India, especially in the mobile and financial services space, is a microcosm of the whole world. You have customers as sophisticated as in Silicon Valley as well as first-time users as in the remotest parts. You have to serve a common product to the entire gamut of subscribers.

Dubey: A Nasscom study has found that last year was a bumper year for setting up product companies. Why this sudden interest in the product business?

Pari Natarajan: There are a number of reasons. We started comparing with other ecosystems, such as those in Silicon Valley, and looked at factors that made them powerful in creating these numbers of product companies. These factors have been termed possible in India for a number of reasons.

One, we had multinational companies coming into India and starting to make complete products out of the country and starting to file patents from here. And you have the talent pool, which has product capability. Then you have had expatriates coming back to India, and a number of them have built product companies before. These are experienced people, and they are starting companies. They have a domestic market that is very interesting for companies. So one reason is domestic market.

The other reason is in terms of role models. These are companies that have done it before, companies such as mChek and Tally that have been successful, and in spite of an environment where the ecosystem was not there. On top of that, the venture capital industry that has come over the past five years; is one which has been funding. Last year, $156 million were spent by venture capitalists in funding product firms.

Dubey: We must give credit to Sudhir Sethi for this.

Sudhir Sethi: I call it the Brownie movement, which has been seen in the past two years in terms of what is happening on the entrepreneurial side as far as product is concerned. Two to three years ago, the number of venture investors used to be from a financial engineering background. Whereas, in the past three to four years, a lot of industry people have come into the venture world. Many product companies have been funded by people with very deep operating backgrounds who have entered the venture industry. That was a very big thing per se.

Secondly, as a fund, out of our $50 million, we have committed $40 million to products. Interestingly, two of them are serial entrepreneurs. We are finding more incidences of serial entrepreneurs doing the second or third attempt at the company, and it really does not matter whether the first or the second has been a success or not. The experience itself is worth its weight in gold.

Dubey: There are no negative points for failure.

Mittal: I think in the past three years, the economy has boomed here. The demand for IT has been very high. Stock markets were doing well, the valuations are good. That has encouraged people to take risks as well. And I don't think even with the current economic situation, everybody who is in product realizes that it is not a short-term gain. They do not get moved by the shorter term. The confidence that the industry has achieved, the maturity that is coming, is creating opportunities.