3 Learnings From a Fintech SaaS Offering For Indian SMEs

One of our key clients using SahiGST suddenly placed a lead on our website. After seeing a few of these leads, I pinged my sales lead and asked him, are they looking for an alternative software? Didn’t they buy a bigger package from us just a few days back? My sales lead calmly replies, ‘oh those leads’. That must be the new users from this company trying to login to the software via the home page lead capture form.

The above situation should give you a hint of what it is like to offer a SaaS solution to Indian businesses.

Over the past one year, building a tax compliance software from scratch and selling it to Indian SMEs has been a great learning curve. Some of these learnings was very curious and insightful for us coming from a media / B2C background. There are several learnings that we got from this experience. Here are a few that may be repeatable for a lot of you.

On Sales:

Even if your service is fully delivered over the internet, it would be foolhardy to expect Indian businesses to complete the buying and on-boarding by themselves. Less than 10% of our customers were closed without a face to face meeting. In most cases we did online demos and product walk through 1-1 but conversions were low. Most sales came after a visit by one of our channel partners or sales executives. One of our channel partners couldn’t demo the technicalities of the software, but closed sales on the trust of his relationship with the client and managed by just showing a demo video of the product!

There could be several reasons why a in-person meeting is needed for closing sales with Indian businesses. Online demoes aren’t as easy to pull off for a product where there are a lot of questions from the customer and internet connectivity for a screen share isn’t always reliable. Add to that the customer set not being very savvy and comfortable with a Google Hangout or Skype. At the same time the trust that is generated when the sales guy says ‘main hoo na’ is unparalleled. What is also unparalleled is the amount of support calls the sales folks get in coming months 🙂

Phone Support:

For a digital entrepreneur it is hard to believe that the customer demands phone support six days a week from 10AM to 8PM even before seeing your product! Good phone support is an emotional connect and while software UX matters, without phone support we found that in our industry adoption would be zilch.

A well trained army of phone support agents was built before launch and we braced ourselves for the deluge of calls that may come our way. On a bad day (tax filing due date) we saw over 40% of our customer base calling us for support!

We were compelled to take a PRI line from Airtel and set up a physical call centre at our office. The same was preferred over cloud systems because of the voice clarity landlines give. We even got high quality Plantronics headsets for each of our support execs.

A lot of my startup friends debate this point and argue that we should work without phone support to change consumer habit. That may work, but in our experience no tax filing software in India survives without it. There are stories of mid size CA firms buying multiple softwares just to have backup options w.r.t. phone support availability. The saying is ‘jiska support phone uthaye, usko use kar le na’.

Pricing Is Key, ARPU would be low

Having run a high margin & content heavy venture before starting SahiGST, adapting to low ARPU and low cost operations was new for us. Our customers are more willing to pay for services (training etc) than the product. We kept our costs low and could keep our end pricing low as a result. Some services revenues tricked in but our focus remained on the product.

The saving grace is that once the Indian business consumer is used to a product, it is hard for them and your competitors to change that habit (eg: Tally)! So we expect the Life Time Value of our users to be very high.

As a policy we always kept our pricing consistent for all clients and did not discount for anyone. This built a reputation in the market and we could proudly tell our customer, this is the best price. Magic happens when the customer sees a reasonable price and knows that no one else gets it below that price!

So how has your SaaS experience in India been?

Piracy and freemium killed the Indian software buyer

Nobody in India buys software.

If the above sentence draws your attention, read on! If you are based out of India, think of the last time you bought software (yes packaged products). Now think of all your friends and guess when they bought software. Now, here’s the clincher, “When was the last time you bought software made in India?”. 99% of the people, irrespective of their socio-economic status will respond in the negative. lr-processed-0399

Product evangelists will now talk about the cloud/SaaS and the subscription economy, and how it is the great leveler when it comes to software products. As an entrepreneur selling a SaaS software in India, let me be the first to tell you that it is really hard work. Most entrepreneurs have told me that the Indian customer is price sensitive, I say, a majority of them are insensitive. Now don’t get me wrong. I don’t wish to rant. I am trying to catalog and present reasons why selling SaaS software is hard. Here’s what I think it is:

Let’s talk a little bit about the Indian software market

In the last two decades, India has seen two revolutions which helped create a large software market. Firstly, the economic deregulation in the 90s which enabled a steady growth of the economy, disposable income and import of technology. Secondly, the telecom, and subsequently the PC and mobile revolution that has created a (supposedly) large software consumption market. PCs, Laptops and tablets are now commonplace in Urban and Semi-urban India and the latest numbers indicate 15 Million broadband and about 100 Million mobile internet users. A look at these gargantuan numbers and you might begin to assume a large consumption market, but to give you a sense of reality, let me ask you the same question one of my mentors asked me – “Name 5 large Indian software product brands selling in the Indian market”

Enterprise software is probably your best bet

If you are selling software, the enterprise market is probably your best bet. Bharat Goenka, co-founder of Tally solutions, said that “In developed economies, SMBs act like enterprises and in emerging economies, SMBs act like consumers“[2]. Many of our customers are SMBs who are looking to use technology to grow some component of their business. And most of the times, we don’t deal with the company, but with empowered employees. The ones who have a budget at their disposal and are forward looking in their outlook. What we found was that the same stigma that existed in the 70s and 80s in the US software markets exists in the Indian SME customers of today. A lot of them look at software as something that will displace them in the organization and are extremely defensive in the matters of adoption. But we all know how that worked out in the US and UK markets and I am hoping India follows a similar trend.

Oh wow! I never knew you could do this

A lot of people we have met have been genuinely surprised at what our product does. It’s tough to manage these customers because we spend a lot of our acquisition time on sensitizing them about the problem before we present the solution. Even if you are doing something radically new, it is easier to bucket yourself into a genre that is popular and accepted. For example, we are a customer conversations player, but it helps if we refer to ourselves as a Social CRM or a marketing insights product. Ignorance about a genre of products has a big pitfall – customers don’t know how much to pay for the solution. This is really tricky because it usually leads to a customer deliberating on paying for the solution.

“But we can do this for free on Google”

Freemium is both a good and bad thing. Almost every customer of ours expects a free trial for a few days. In the products eco-system it’s become a norm,  but a lot of productized service companies I know have been asked for a free trial on bespoke software. Most users don’t understand the price they are paying when using services like Google or Facebook and usually expect the same when we tell them about our “use on the browser” service. Usually this means we have to get into a lengthy explanation about  why our product costs so much. The best experience I have had was when a customer, who understood the online advertising economy, asked us if he could use an ad supported model of our service for free!

Freemium might be a viable option early on but when looking at growth and scale, I don’t believe freemium is a sustainable economic model. It is a marketing tactic at best!

“muHive crack codes”

One morning, while peering through our website analytics, we were surprised to find a search keyword “muHive crack codes” in the list. This was a good and a bad thing: good because some customer actually found our service good enough to look for a cracked edition, and bad because we knew this customer wouldn’t pay. And yes, if it’s crack worthy, then it is probably good software – that’s the Indian psyche. Industry estimates put the total value of pirated software used in India to be upwards of $50 Billion[3]. Why won’t we pay for software? That’s a long post in itself, but to be brief: piracy was not controlled in the early days of the PC revolution and hence the assumption that software is free. Also, cost of software has always been calculated based on the affordability and costs in developed markets. To illustrate my point, I will end this section with a question – If Microsoft Windows were to cost Rs 1000 instead of $149 (Rs 9000) would the piracy numbers be different?

The pricing slope

Researchers put the Indian middle class at earning $10/day or roughly $300/month. To give you an estimate of why this matters, the urban poverty line stands at $14/month – yes, a month. The Indian middle class is about 100 million people and $300 per month usually supports 2 to 3 people on an average. Now when you think in these terms, you can imagine what the cost of ownership of a $149 software sounds like. Add the fact that software is a non-tangible artifact and you understand why Indian customers are extremely cautious when it comes to software purchases.

Even with enterprise customers, your pricing strategy has to be “just right”. And you have to account for discounts. A majority of the Indian customers we meet ask for some form of special pricing. Now, this might not be a trait which is unique to the Indian market, but understanding the cultural and economic context of the demographic becomes very essential when it comes to pricing. Marketers talk about using tricks like prepaid accounts (India has a large prepaid mobile subscriber base), daily subscription and data based pricing but all of them have the underlying assumption that the customer is willing to pay and understands the cost of the solution.

In conclusion

All these are what we have found to be the issues with selling software in India. Even though we have good answers to some of the questions our customers pose, in my opinion, it will still take a long time for the Indian software buyer to evolve and for good product companies to make a mark. Rather than end on a dismal note, I will now list down what actually seems to be working for us, and also some insights from other producteers.

– Customer don’t mind paying for bundled software. Hardware, especially mobiles and tablets might actually help in software sales.

– Customers will pay for immediate utility. What someone referred to as “First order business” solutions; meaning something that can make them more money instantly. Example: Email and SMS marketing solutions. Customers don’t mind paying for advertising and reach.

– Customers usually pay when they feel they are missing out on revenue or an opportunity. A loss averse technique to selling is what we have seen work best.




21st #PlaybookRT – 13 Sales Mantras for Product Selling in India – Part 1

Last weekend, we had a playbook roundtable on sales(mainly B2B) at the Ozonetel systems office in Hyderabad. Aneesh Reddy from Capillary led the RoundTable. The focus of the roundtable was on sales in product companies. This included early stage sales as well as issues faced during scaling sales. A lot of points were covered and the participants were involved in very lively discussions with almost everyone learning something new from the others experience. So without further ado, the following were the main learnings from the roundtable:

Ozonetel office
1. Sales solves everything. The panacea for all the problems of a startup is sales. Somtimes even a PPT is enough to do sales. This was explained by Aneesh how in their Capillary journey they showcased their to be built product on PPTs to prospective customers and made the sale.

2. Initial sales has to be done by founders. This was universally accepted by all the participants. So every founder has to become a sales person. There is no second way about it. Once you scale to a certain level, you can look at hiring dedicated sales head and building a sales organization.

3. Freemium model does not work too well in India. Get a customer to pay something(maybe even Rs.100). Make the customer also invested in the product. Only then will they give the time necessary for your product and evaluate it properly. Pilots work well, but try to make them paid pilots.

4. In India Push sales work, for outside markets, consultative sales works. In all cases, your sales person should be willing to listen to the customer and understand his pain points.


Payment Collection

Payment collection is a big problem for SaaS products. Following up every month for the collections is a full time job. Some pointers to help in this are:

5. Quarterly, Yearly payments. See if you can push your customers to pay quarterly, yearly upfront. Give a discount two sweeten the deal. This is ok as you receive the money up front and you are reducing costs on processing collections.

6. Disconnect services. Most participants agreed that disconnection of service works as a deterrent to the customer. Give enough indications/alerts about the pending disconnection and follow up with a phone call for collecting your payment.


Lead Sources

7. List rentals. Aneesh suggested that buying the list of conference participants gave a better RoI than sposoring some event. So identify some good conferences in your domain and buy the participant list from the conference organizers.

8. Attend exhibitions. Exhibitions in well known places like HiTex in Hyderabad gave a lot of leads to the NowFloats team.

9. Subscribe to local magazines. Local magazines are a good source of business listings as all good businesses advertise in local magazines. Build your list by mining this data.

10. Employ a good PR agency. Once you are at some level of scale, it makes sense to employ a PR agency. The PR agencies have good contacts in the media and they will get you good coverage. Though, they may not directly get you leads, they will help in brand recall, hiring and fund raising efforts.


Inside sales:

11. Start with a 2-3 member inside sales team. Aneesh was of the strong opinion that inside sales is the way to go for B2B sales in India. Start small and monitor the team closely.

12. Invest and be patient. Sometimes, it takes around 3-4 months for an inside sales team to show some traction. be invested and be patient. Things will slowly pick up.

13. Team composition. One combination could be 1 data collector and 2 tele callers. Try different approaches and see what works best. To get started, you can out source the process, but that may turn out costly.

In the next part we will look at some metrics that will help us monitor sales.

Software Products can Spur Economic Growth

Over more than two decades, India earned a reputation as the global leader in software outsourcing, but product companies – perceived as the mark of a true technology powerhouse – have been few and far between. While India is still a long way from showcasing a Microsoft or a Google, unobtrusively, technology companies have sprung up across the country to create products and solutions that meet the demands of local businesses. Quite unlike an Infosys or a Wipro, which are the creatures of global demand, product companies are coming up with innovations made in India, by Indians and for Indians. From helping capture fingerprint and iris data for the Aadhaar card to crunching numbers so that chicken live healthier and longer, these companies are using cutting-edge technology to provide tailor-made solutions for Indian needs.

Software product firms are critical as economic growth is directly related adoption of IT by both trading and non-trading firms. Most macroeconomic and industry studies are based on the growth accounting framework, where the contribution of each input to production is assumed to be proportional to the corresponding share in total input costs. Increases in production above the inputs‟ contribution are ascribed to growth in multifactor productivity (MFP), i.e.: technological progress not embodied in production inputs. Since the mid 1990s, the patterns of productivity growth between Europe and the United States have been diverging.

  • 1950-1973: productivity growth in Europe follows a traditional catching up pattern sustained by strong investment and supporting institutions. This process came to an end by the mid 1970s.
  • 1973-1995: productivity growth in both Europe and the United States began to slow down. However, average annual labour productivity growth in the EU-15 was still twice as fast as in the United States and the productivity gap was very narrow by 1995.
  • 1995 onwards: the U.S. productivity growth accelerated while the rate of productivity growth in Europe fell.

The causes of the strong U.S. productivity resurgence have been extensively discussed. A growing body of research points out that the U.S. acceleration in productivity growth reflects underlying technology acceleration. The findings of this research stream, along with considerable anecdotal and microeconomic evidence, suggest that Information and Communication Technologies (ICTs) have played a substantial role. In the United States the MFP (Multi Factor Productivity) uptake in the late 1990s was supported by the industries using ICTs rather than by those producing them.

Europe and Japan showed that investment in IT capital would not automatically lead to productivity gains. To leverage ICT investment successfully, firms must typically make large complementary investments in intangible assets to change their business organisation and workplace practices. Training, consultancy and customization make up for most of intangible investment and local software product firms are better placed in integrating embodied capital with intangible capital.

Zinnov estimates that more than 5,000 large enterprises and over 10 million small and medium businesses in the country are ready to adopt technology. The product companies have a big role to play in pushing the expansion of the $30-billion ( 1.6-lakh-crore) technology market by some 18% this year.

Entering the Product Space – Shoaib Ahmed, Tally Solutions(Part 2 of 3)

You can read the Part 1 of the 3 series interview here.

Shoaib Ahmed, President of Tally Solutions, began his career as a retail
software developer in the early 90s. Formerly the Founder-Director of Vedha
Automations Pvt.Ltd, Mr. Ahmed was responsible for developing Shoper, a
market-leading retail business solution — and the first of its kind in India to
bring in barcoding to the retail space. The company was acquired by Tally
Solutions in 2005, where Shoper merged with the Tally platform to offer a
complete enterprise retail software suite. In the second of a three-part series,
Mr. Ahmed talks about product development in the B2B space and reaching out
to customers.

Why do you think we are seeing businesses that start off as a product
company become service entities?

This is where I see the need for educating customers: why should you buy our product,
what can you expect from our product and what shouldn’t you expect from our product?
More importantly, will the product solve your key issue and will it do it well? Unfortunately,
who is educating the customer about these aspects? It may be a service provider who is
interested in the service revenue only. So there’s a disconnect — there’s nobody who is
evangelizing the product and being a product champion in the small and medium business

What do you feel about having ‘pilot’ customers who can obtain the
product with an attractive offer like a reduced price?

I don’t think this is the right way of doing things. When you’re reaching out to customers,
it’s important to solve some of their key issues. To do this, you need information about a
particular profile of customers so very clear about who your customer is and what your
customer looks like to you. Now, if you want to get a large enough slice of the market
make sure you have experience with a complete set of customers — you cannot pilot
a semi-experience. You need to be able to engage with him and get your value from
him over the proposition you are making. This means measuring not only the product’s
effectiveness, but also measuring the quality of the sales pitch and that the service
capability and the service quality promise is being fulfilled.

You may decide in the first six months to choose a smaller customer set to target but
you’ll be measuring to see if all elements of your complete product experience are being
monitored for effectiveness or reviewed. This gives you an idea of scalability, since you
can then adopt an attractive pricing strategy with confidence. It can be an incremental
process, but unlike a pilot, you’re not only reaching out to a few customers and shaping
your product around them. With a pilot, the danger could be that the pilot customers are
early adopters who will view evangelizing you product amongst their peers as letting go of
a competitive advantage.

Do you think it’s a myth that it’s easier to develop B2C products rather
than B2B?

I think the success of Tally disproves this. Out of a potential 80 lakh businesses, nearly
40-45 lakh own computers. A large group use Tally for their business — nearly 90%
of the market. So, the constant need for us to deliver a value is critical and it’s also
important to keep communicating this value. If I as a business owner don’t see a value
in paying you for a product or service then I don’t, but increasingly in the connected
world a businessman understands that he can grow his business manifold by leveraging
technology. The information system now has to support him because he is in a connected
world so the game is changing.

In the B2C area, let’s look at the average individual : he has a higher disposal income and
is more exposed to technology. A lot of his day-to-day activities are done using technology
(like banking and filing returns). When he’s engaging with the rest of the world, he’s going
to expect a similar experience. This may act as a driving force for businesses to match
that : for example, can an individual get his doctor’s appointment online? If there is no
supporting eco-system for the the tool that the customer has, then even the greatest
online tool available to this customer can’t drive enough value. In my mind its critical that
business-to-business product development is on the system and the efficiencies have a
direct economic impact. For example, the average time for payment reconciliation in the
small business space is an average eight days. From a digital perspective, it should be
instantaneous. Just imagine the impact and velocity of commerce!

Interview Cont’d

Indian Software Startups Similar to Excitement of Late-90s Silicon Valley

Editor’s note: Sharad Sharma and M.R. Rangaswami are co-hosts of the NASSCOM Product Conclave 2011 (November 8-10, 2011), a must-attend event for software product startups. Now in its eighth year, more than 1,200 delegates from 600+ companies are expected to attend. Sharma and Rangaswami share with SandHill readers their insights on what’s happening in this dynamic market – and why U.S. buyers and software execs should keep the Indian startups on their radar screen.

One of the keynote speakers at the NASSCOM Product Conclave a couple of years back was Guy Kawasaki. In his recently published his book, “Enchantment,” he wrote that our Conclave was one of the most interesting that he had attended in the last few years because of the energy at the conference. And the energy this year is already really high. That’s because, in some respects, the Indian software products industry today is where Silicon Valley was in the 1997-98 time frame.

The Valley then was in a different era of entrepreneurship. There was enormous excitement about where the future of the world was headed and the role that the Valley could play in that. India is somewhat like that in the context of what’s happening now and the role that its software products industry can play in the economic future of India and the rest of the world. It’s a very exciting time.

Original Post at Sandhill.com