March - 2005 - issue > In My Opinion
Software Products-a significant opportunity for India
Vijay Anand
Monday, March 14, 2005
India is clearly booming. Here in Bangalore, wherever one turns there are new firms setting up shop and demand for software engineers is high. I’m quite pleased to witness the dramatic rise of the Indian software engineer in the world market. However, I do have some worries.

What am I worried about?
India is definitely a software services major. Indian IT majors are now crossing the $1 billion revenue mark and momentum appears to be building. This has created significant demand for software engineers. Cost advantages coupled with abundant talent and strong project management expertise is distinguishing India from other sources.

While the software services market may be growing and India could take a higher market share in software services, I’d like to see us attempt a more broad-based growth opportunity. And one market that comes to mind is software products.

The worldwide software product market is over $180 billion today and growing. India currently has a minuscule market share in this segment. India’s core value proposition of abundant talent and low cost could be a significantly disruptive force in this industry segment as well. However, there remain some development areas that India must focus on if it wants to be successful in this segment similar to how it was in the software services segment.

What is the Opportunity?
The software products market is quite fragmented. While industry leaders Microsoft, Oracle, SAP and a handful of others dominate this segment; there are many players and various segments within this market. The enterprise software market is the most lucrative, while the wireless domain is the fastest paced. Significant community efforts are rewriting the way the software industry evolves, and the most significant example is Linux. Clearly, the industry is fast moving, full of growth opportunity, fragmented and worldwide. I see this as an opportunity for India.

What are the inhibiting factors?
Organization and Skill sets
Technical depth: James Gosling has a joke that “engineering managers are usually good engineers who have good people and business skills but have failed as top-notch coders”. However, in India, top-notch coders tend to want to become people managers over time given the tightly held perception and social norms that the management ladder is the only growth path. It is imperative to develop a thriving and vibrant career path for technical leaders who can specialize in a domain until they retire.

Management maturity: Project-based management based on statements of work lead to a tendency of managing for a single set of requirements.

Often, engineering manager in the software products space needs the skill to synthesize requirements from a broad set of inputs, make ongoing tradeoffs and decisions, motivate teams to continue specializing for long duration and deeper skill sets and be capable of driving new innovations and breakthroughs in an ever-changing market. This skill set is in short supply but growing.

Product mindset: This is a necessity for an organizational mindset focused on a market opportunity, crafting a solution with the objective of capturing the opportunity, being rapidly customer oriented, highly aware of the competition and differentiation, and having an internal culture that is geared towards rapid innovation and engineering excellence. Successful product firms have such a mindset firmly ingrained in their culture.

Marketing skill set: While engineering plays a key role in differentiating a successful product company from the also ran, the key difference usually lies in marketing. Having knowledge of everything from the customer landscape, vertical market research, product strategy, partner models, and pricing and positioning enables customer orientation is key to a software product firm’s success.

Business Model
Niche focus, differentiation: Success in the software product market relies on doing one thing really well. It is important not to be all things to everyone. Focus on a key business opportunity, do it well and first while keeping the lead. This is the mantra for success, applicable to everything from business strategy, product positioning, pricing and go-to-market models.

Long-term mindset, risk taking: Success in the product market could take years. A long-term mindset is critical to success. Often a product focused on a trend may be too early to market. Also, a balanced risk-taking attitude needs to be fostered for market success. There may be missteps e.g. Go as a failed precursor to Palm but if the fundamental idea is benevolent the trend may prevail.

Go to market: Success in the product industry often relies on obtaining the largest and best go to market partners on your side. Given that India is home to some of the fastest growing system integrators, the advantage is already here to leverage.

Environmental or surrounding issues
University relationships: Today’s Indian University curriculum isn’t geared towards software product development. Programming skills are just one aspect of preparing an engineer for the industry. Other aspects include problem formulation, learning to set problem constraints, avoiding overdesign, learning to use building blocks, attention to software quality and serviceability, and usability. Educating engineers on a complete product cycle, requiring hands- on experience through internships in software product firms and doing complete product development projects for graduation are ways we could build more suitable curriculum.

Access to venture capital: This is key. The leaders in software products today were venture-backed startups at one point. The ability of the venture capitalists to be true business partners to the entrepreneurs and take them from a concept to business success is key to maturing a software product base in India.

Presence of regional market: While India can play a global role and attack global markets, nothing compares to drawing experience from a large local market. The size of the US market is a key reason for the success of US software product firms. It is quite possible to build a large local market for software products in India. Software product adoption across Indian enterprises would boost productivity.

Partner ecosystem: No industry can increase or mature unless there is a strong sense of partnering. Partners can help with go to market for the product firms, provide strong global reach, mindshare and deployment experience, something the budding product firms lack. Here again, the Indian IT majors could play a key role in building this ecosystem for local product firms.
Trade bodies and councils: NASSCOM and the other trade bodies are doing wonderful work for software services. They are now expanding their scope to cover software products as well. It is important to sustain this momentum and strong trade bodies, user groups, open source forums and other such councils . This provides an environment for creating interdependencies.

Government support: Finally, the government at both central and state levels must vigorously encourage this. E-governance initiatives can help support products that can then be sold worldwide. Software products that solve business problems but excel in supporting small to medium businesses, reach out to rural markets and a large population could serve as differentiators. Everything from deregulation, incentives, requiring government units to adopt software deployments largely to improve transparency and build productivity, controlling piracy, and utilizing regional markets and free trade zones to help build a larger local market are a few that can make a difference.

Addressing the above factors and leveraging our existing strengths should help us dominate this market in the same way we are dominating the software services market today.

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