What's wrong with India's software product eco-system?

DQI Bureau
New Update

India has been ahead in software services, but it has failed to see the same traction in the software products segment, despite having the right minds. Recently, it seems like we've been heading in the right direction-with the formation of bodies like iSPIRT and NASSCOM's Product Council that are working for a better eco-system for this industry.


In an exclusive interview with Dataquest, Sharad Sharma, a founding member of iSPIRT (who previously chaired the NASSCOM Product forum) speaks about the pressing issues our software products industry faces and discusses how iSPIRT intends to create an open community that will guide entrepreneurs.

Do you feel that the Indian government provides MNCs with better support?

The government is not favoring the domestic software products market. For instance, a Sequoia-funded product has been bought by almost every foreign bank as well as private players. However, in our country, every public sector bank has bought a foreign product. Our government itself buys products from foreign companies. Some policies have to be put in place to change this situation and support the deserving domestic companies.


Foreign companies have found ways to surpass tax issues and royalty issues. In fact, a foreign company selling its product to India gets preferential taxing when compared to local product companies, the government does not realise this aspect.

Why does India need to change its ways for the software product industry?

The economic argument: 10-15 years ago, India consciously said they want to be successful as an Asian tiger. We've been following a service-led path which has worked so far, but that won't take us much further. Our economy today is service oriented, as 55% of our economy constitutes services, and there's a trade deficit. This year alone, there's a 10% of merchandise trade deficit. Next year, it is expected to rise to 14%. The country will hit a brick-wall if we do not create a product industry. It is a large part of aero, health, mobile and many other industries in India.


Local players for real progress: If India needs to solve its problems, we need product solutions. For instance, the top 400 hospitals can afford to get an Infosys or IBM to create solutions for them, but the next 500,000 clinics need affordable software products. This goes for healthcare, education, retail stores etc. Over 40% of India's economy is driven by SMEs and their future depends on software products. Especially with the advent of mobile and cloud phenomena and the product industry favoring the young, we have a chance to create a vibrant and domestic sector.


Not a number game: We need to create winners, not more players. India has three times the number of product companies listed compared to Israel, but the eco-system here is not close to Israel's - quantity will not take care of quality issues. We don't have the culture of a product industry in India - there is no product mindset. For eg, we're strong in software for the automobile industry, but if every aspect of the auto design is left to us, we don't stand a chance.


There is an excess of engineering graduates in India and a good software product eco-system can absorb this excess productively.

Indian entrepreneurs spend significant time on product development and are building IP/patentable products, but investors advise entrepreneurs to move it outside India. What can be done to retain this talent within the country?

Some successful product companies are leaving India in search for a better eco-system to thrive in. India has to learn to retain these entrepreneurs. The government has a vital role to play as it creates policies on collaboration with trade bodies, thus we cannot do away from government bodies. There is an absence of thoughtful policies in this industry and companies need to come together to bring such issues forward to keep Indian innovators within.


We have created four blue papers on taxation, restrictive trade practices by foreign MNCs, promotion of investment in R&D, and ownership structure. The blue papers come from internal discussion forums. We're formulating trade briefs and handing it over to the established trade bodies like NASSCOM so that they can urge the government. Rather than compete, we want to partner with existing bodies to bring out our issues and be heard.

India is known for its talent in software and products but there aren't many software products coming out of India. Why?

An institutional void needs to be filled to fulfill the true potential of India's vibrant software product industry. This void is traditionally filled by governments, but this isn't the case in India. People often ask, 'why there's no Google or Facebook coming from our country, though we are capable?' Google was backed by Stanford, Facebook by Harvard, and Red Hat is backed by the open source community. We can clearly see the lack of such support and its effect on the industry here. The leading engineering universities, government labs don't promote such a culture, to begin with. We hope the Indian Software Product Industry Round Table (iSPIRT) can back up our software product industry so that products like Google or Facebook are created and do well in India too. It can even be stronger in software products when compared to its services industry.



Why do you feel a domestic software product industry will be stronger than services?

In the last year, we witnessed some companies coming out of the country worth over a billion dollar. Thus, products have a higher chance of entering the billion-dollar club. Last year, there was Zoho, this year, we see InMobi. We see this kind of potential in products and not in services. Even Mindtree, a leading player in services is valued at about $400 mn.


How does iSPIRT plan to implement the growth of software products in India?

iSPIRT's 'ProductNation' blog is the first step to create of a knowledge platform and bring forth new ideas in business strategy, product management, user experience design, and cutting edge technologies - areas which can most impact Indian start-ups in their journey to greatness.

It is the software products community that drives ProductNation. It showcases stories that are of interest to other similar companies. For instance, there are entrepreneurs interviewing co-founder and MD of Tally Bharat Goenka. These interactions include more relevant information that the community can relate.

Software product companies need good playbooks - a peer learning model, and creating the right playbooks is a focus area. About 250 posts have already been published by volunteers who want to share information. Software product companies in India need good playbooks and a peer-learning model. For instance, Capillary and came up with models that worked and these are models worth sharing. iSPIRT wants to encourage sharing information that companies can benefit from by pooling in information and success stories that can be replicates. There's a lot of guidance that can be given with the right playbooks.

We have divided the software products community into three, based on three stages:those who don't have a product market fit, those in mid-stage (content, but confused) and those who are concerned about growth. We are conducting workshops for the mid-stage on revamping for giving the right message and positioning. Attendance of the workshop is free but only for a select few who are chosen based on their application areas.

What is the ideology behind iSPIRT?


We believe grand innovations are possible when you share ideas. We have seen this happen in the open source community, people interact from all around the world and contribute to open source projects. They have no qualms about sharing information, and this has only helped to develop a stronger eco-system and better innovations.

Similarly, we want to convert actions of self-help communities into market catalysts for the software product industry. iSPIRT will move around the lines of the free software foundation - the community will draw energy from its people and harness it to uplift the community, making the eco-system stronger. This involves events and volunteers. We are not a member-based industry body, but a mission-based community open to all. iSPIRT is a think-tank where anyone can contribute, time and energy into bringing the software products community up. Using this platform people can share business models, discuss issues and seek guidance from each other. Our approach is multi-pronged- we will be hand-holding by way of workshops and other modes, that will help address common problems product companies face.

It's been a few months since iSPIRT was formed. What difference do you believe you have made so far within the industry?

ProductNation is being used as a platform for enabling crucial conversations around issues concerning the practitioners. We are already seeing some progress from playbooks. It uses an evidence-based methodology to shine light on successful playbooks.

People are sharing information about their own company's models and there's been appreciation from the community. Product companies need a different mindset than IT services businesses. They need to anticipate customer needs rather than just react to them. They need to brand themselves in very different ways and create IP that will disrupt the marketplace. They need deep technologists rather than fungible engineers.

We also convert actions of self-help communities into market catalysts for product industry. Many intractable eco-system problems can't be solved at the firm level, but can be solved by a self-help community of individuals or companies. We have been seeing progress in supporting a self-help community model to build market catalysts for the industry.

Recently, everyone was talking about members breaking away from NASSCOM to form iSPIRT. Was there a conflict of interest?

iSPIRT is not an industry body that threatens or competes with NASSCOM. We were surprised by the reactions to the iSpirit's creation. Some members of iSPIRT's community are still members of NASSCOM. We as iSPIRT intend to work along with bigger industry bodies like NASSCOM that can make a difference at a policy level as it would be easier to address issues.

A separate body was created because NASSCOM cannot afford to equally focus on all the emerging groups within the IT industry. Mohandas Pai has rightly suggested that it's time NASSCOM becomes an association of associations. He said, "The Indian IT industry is a $100 bn industry which employ nearly 3 mn people." He added that it is time NASSCOM morphed in to an umbrella organisation just as Federation of Indian Chambers of Commerce and Industry (FICCI).