the $2.2 billion products sector to quadruple in the next seven years. Venture capital (VC) investments into software products space is also picking up as investors are seeing it as a viable business model to park their funds.
The Indian connection has been a regular feature in the product innovation cycle of the worlds technology giants for over a decade now. Even as the Indian arms of these multinationals have grown from being small software support teams to product builders in their own right, the countrys $108 billion IT-ITeS industry now has the software products space firmly in its sights.
For Indias IT services industry, the move into products needs an approach thats in complete contrast with its globally renowned services model. While some of the top players have tasted success with their early attemptslike Infosys with Finacle and TCS with BaNCS, both products in the finance sectorthe lure of getting into the big league is now attracting smaller companies and even start-ups.
Experts feel over the last few years there has been a gradual shift in the way product innovation is perceived despite a nascent ecosystem and lack of right talent even among the IT-services organisations in the country that hire in large numbers.
We have been in the products-space for only less than a decade. Building products is risky and difficult. It requires knowledge, domain expertise and customer interaction. These expertise takes time to develop than building a services company, says Mukund Mohan, director at Microsoft Ventures, who heads the Asia-Pacific and Africa operations, largely out of Bangalore.
Mohan points out that the lag in building global products out of India is due to the gap in knowledge and the ability to take risk. I see that improving though. InMobi, PubMatic, Visual Website Optimizer and Freshdesk are firms that are making a difference. Entrepreneurs with expertise in building products will drive that change, he adds.
According to angel investors and venture capitalists, while the first wave of entrepreneurship was largely services oriented here, the new generation entrepreneurs are more focused on building products with usually a global market in sight. Services have now become a big boys game and hence everyone is keen on developing global products.
According to Rishikesha T Krishnan, professor of corporate strategy and policy at Indian Institute of Management-Bangalore, the country needs to move from Jugaad innovation to systematic innovation as well as move fast from prototype to incubation for start-ups. In his book, 8 Steps to Innovation, co-authored by Vinay Dabholkar, he highlighted that Innovation happens when an idea is implemented to create an impact. It has three elements: idea, implementation and impact.
Among the current breed of home grown products companies, InMobi, a fast rising mobile advertising network, is eyeing greater market share in the mobile display advertising space, which is set to grow to $5-6 billion this year. The company which has two thirds of its revenue coming from North America and Europe says that many of the apps developed out of India, have audiences in the US, UK and other markets. They may not be as popular as some of the best known mobile apps globally, but we feel it is only a matter of time before we see apps emerging out of India that are truly global, notes Bikash Chowdhury, head, marketing, Japan & Asia-Pacific, InMobi.
Chennai-based Freshdesk, which was launched in June 2011, is a customer support tool provider that caters to global clients including Stanford University and Pearson Education Group, feels building consumer products targeting India as a market is a more appropriate business model because of its closer proximity to customers. Examples include Flipkart, Makemytrip and RedBus.
Building global B2C products based out of India is very hard as each market is very different, says Girish Mathrubootham, founder-CEO, Freshdesk, adding that to build business-to-business (B2B) enterprise apps you need to have relevant domain expertise which is hard to get without experience. However, we are starting to see that now, he adds.
Building the ecosystem is the key focus of the IT industry lobby, Nasscom, which aims to generate $10 billion from IT products by 2020. The industry body has announced initiatives to help the $2.2 billion products sector to quadruple in the next seven years in emerging spaces like cloud, analytics and social along with internet and mobile. It also feels that the domestic market is now big enough to serve as a springboard for the 2,400 odd IT product companies in India before they go global.
India can and certainly will leave a significant mark on the global product ecosystem. We have the raw talent, a rich pool of global in-house centres, an excellent group of volunteers, great support staff and patient investors. Across the nation, we now have high potential startups in a state of the art facility, says Ravi Gururaj, chairman of the Nasscom Product Council and the founder of Harvard Business School Alumni Angels.
Experts point out that venture capital (VC) investments into software products space is also picking up as investors are seeing it as a viable business model to park their funds unlike few years ago when IT services was the only option.
It is nothing short of dramatic with little over 100% growth. In 2006-07, we had around 300 start-ups and now its close to 1,500. That coincides with the growth in number of early stage investors. In 2006-07, we had around 40 early stage and venture investors and now there are 83. Amount of capital invested was little over $600 million and now it is $2.3 billion every year in just technology startups, says Mohan of Microsoft Ventures.
Technology giant Microsoft has started its own venture capital fund called Microsoft Ventures around two months back to support entrepreneurs with incubation facilities, seed-fund and in customer acquisition for scaling up the start-ups.