Software products firms carve fiefs in niche segments

Written by P P Thimmaya | Bangalore | Updated: Nov 28 2013, 11:23am hrs
The countrys 1,300-odd software products companies generating annual revenues of $2.2 billion may not be large contributors to the $108-billion IT space. However, many of them are working on promising ideas and, with a bit of

luck, could grow quickly more than fivefold in the next five years, according to one estimate.

Krishnakumar Natarajan, chairman, Nasscom, points out that while Silicon Valley's ecosystem was built over 30-50 years, it's just 15 years old in India.

We will see a big product company from India over the next 3-5 years. But we need to accelerate investment and drive the product industry to be innovative and create real value for global customers, says Natarajan, adding start-ups are going places.

The trick is to focus on niche areas without larger competitiors, feels Sharad Sharma, CEO of Brand Sigma and founding member of iSPIRT, a forum for software product firms. Given that the top end of the IT products and solutions space is almost saturated, it's better to target 50,000 mid-size businesses rather than going after 400 or 500 accounts, says Sharma. The next big opportunity lies in the layers below where the companies are targeting millions of customers entirely through the use of internet technologies, he adds.

Among the promising players are Zoho and ApartmentADDA, who have successfully tapped a wider array of customers with superior products.

InMobi, a fast-rising mobile advertising network, is eyeing a bigger market share in the mobile display advertising space, which is tipped to grow to $5-6 billion this year.

The Bangalore-based outfit, which earns two- thirds of its revenues from North America and Europe, points out that many of the apps developed here have audiences in the US, UK and other developed markets.

Similarly, the Chennai-based Freshdesk, launched in June 2011, is a customer support tool provider and caters to clients like Stanford University and Pearson Education Group.

More of an underground movement all these years, these outfits are becoming part of the mainstream; Nasscom plans to support over 10,000 start-ups not just financially but also with marketing support. There has been a fair bit of support from venture capital players to firms that are creating solutions.

Venture capital investments in software products companies have risen in the last two years as investors see it as a viable business model, a sharp change from a few years ago when services were considered the safest bet.

According to industry estimates, in 2006-07, there were about 300 start-ups, while now its close to 1,500.

The capital invested was a little over $600 million in 2006-07, which is now estimated to be $2.3 billion every year in just technology start-ups.

Sharma says India has three times as many start-ups as Israel, considered the global hub for software products companies. We are now seeing what further steps can be taken to support these companies, he says.