#8 Call for Volunteers: Designing Digital Infrastructure for Healthcare at National Scale

Why Healthcare?

Interacting even briefly with the healthcare system reveals the issues that plague the sector in India: a severe shortage of high-quality doctors, nurses, or medical supplies (and a lack of information on where the best are); misdiagnoses or late diagnoses; overcrowding and long waits in public hospitals; overpriced and over-prescribed procedures and in private hospitals; a complicated insurance claim system; and significant gaps in health insurance coverage. Those who have worked on trying to improve the healthcare system know the systemic challenges: misaligned incentives in care delivery, a lack of health data to coordinate care, low state capacity, and the political battles between states and the Centre. Yet not one of us is spared bouts of illness or other health incidents over our lifetime. We have no choice but to work with this system. And when it doesn’t function effectively, the largest effects are felt by the poorest: productivity losses and income shocks caused by health issues have a way of spiralling individuals on the cusp of economic well being back into poverty. 

Designing for high quality, affordable, and accessible healthcare in India is a challenging societal problem worth solving, with huge potential spillover benefits.

iSPIRT in Healthcare

At iSPIRT, we have started to develop an approach to dealing with complex societal problems at national scale. Our work on India Stack and financial inclusion taught us that public digital infrastructure can create a radical transformation in social outcomes when designed with a regulated and shared back-end that enables a number of (sometimes new!) private players to innovate on the front end to deliver better services. After all, innovative companies like Uber or Amazon are built on digital infrastructure: the TCP/IP Internet protocol and GPS systems that were both funded by public research. iSPIRT targets societal challenges by setting an ambitious target that forces us to think from first principles and innovate on the right digital public goods – which then catalyses a private ecosystem to help reach the last mile and solve the challenge at scale.

Over the last three years, members of our Health Stack team have been thinking deeply about how to design for a radical transformation in healthcare outcomes. We have developed a trusted working relationship with the National Health Authority and the Ministry of Health to better understand their operations and the issues at play. Our approach to addressing the challenge is evolving every day, but we’ve now developed a hypothesis around a set of building blocks that we believe will catalyse the health system. These blocks of digital infrastructure will, we hope, improve capacity at the edges of the system and realign institutional incentives to solve for long term holistic healthcare for all. 

Health Stack Digital Building Blocks Overview (Work in Progress!)

Some further teasers to our approach are included in the attached writeup which provides an overview of some of the more mature building blocks we hope to implement in the coming year. 

We’re striving for an end state of healthcare that looks something like this (cut by population type on the left):

These ideas were presented by the team recently to Bill Gates in a closed-door meet last month (who said he was excited to see what we could accomplish!)

We need your help!

To help shape our ideas and make them a reality, we need more volunteers — particularly those with the following expertise:

  1. Technical Experts (e.g. microeconomists or engineers): We have a few building blocks with broad design principles that need fleshing out – for instance, a Matching Engine to between individuals and doctors/hospitals. If you are a microeconomist (especially if you have thought about bidding/auction design for a matching engine, and more generally want to solve for misaligned incentives in market structure) or you’re a techie interested in contributing to solve a problem at a national scale, please reach out! Prior expertise in healthcare is not a prerequisite. Also, if you’ve looked through the document and find a block where you think your technical expertise could help us build, certainly let us know. 
  2. Current and Future HealthTech Entrepreneurs: Often, a successful health tech startup requires some public infrastructure to be successful. For instance, a powerful rating and recommendation app need a trusted electronic registry of doctors and hospitals providing core master data. Many of our Health Stack modules are designed to catalyse private sector participation and market potential for better products and services, which in turn produce better outcomes for individuals. If you are interested in helping design public infrastructure that your company could use or are a potential health tech entrepreneur interested in learning more about the ecosystem by building for it, please let us know!
  3. Healthcare Policy/Program Implementation Expertise: Field experience in healthcare delivery is invaluable – it gives us a true sense of the real challenges on the ground. If you’ve worked in delivering healthcare programs before with government, a non-profit, the private sector, an international organisation, or philanthropy and have ideas on what’s needed for an improvement in the sector at national scale, we’d love to hear from you. 
  4. Market making/ Health Stack Evangelisation: Any technology is only as good as its adoption! As some building blocks of the health stack get implemented, we are looking for volunteers who can help evangelise and drive its adoption.

India’s potential in the health sector is tremendous – partly because we have an opportunity to redesign not just the technology foundation (which is a near-greenfield) but also the market structure. With the right team, we hope to orchestrate an orbit shift in the quality and affordability of healthcare across the country.  

To volunteer, please reach out to [email protected] and [email protected] 

Announcement: iSPIRT Foundation & Japan’s IPA to work together on Digital Public Platforms

Information-technology Promotion Agency, Japan (IPA), Japan External Trade Organization (JETRO), and the Indian Software Product Industry Roundtable (iSPIRT) have shared common views that (i) our society will be transformed into a new digital society where due to the rapid and continued development of new digital technologies and digital infrastructure including digital public platforms, real-time and other data would be utilized for the benefit of people’s lives and industrial activities, (ii) there are growing necessities that digital infrastructure, together with social system and industrial platforms should be designed, developed and utilized appropriately for ensuring trust in society and industry along with a variety of engaged stakeholders and (iii) such well-designed digital infrastructure, social system and industrial platforms could have a great potential to play significant roles to improve efficiencies of societal services, facilitate businesses, realize economic development and solve social issues in many countries. 

Today, we affirm our commitment to launching our cooperation and collaboration through the bringing together of different expertise from each institution in the area of digital infrastructure, including mutual information sharing of development of digital infrastructure, in particular, periodic communication and exchange of views to enhance the capability of architecture design and establishment of digital infrastructure. We further affirm that as a first step of our cooperation, we will facilitate a joint study on digital infrastructure, such as (i) the situation of how such digital infrastructures have been established and utilized in India, Japan and/or other countries in Africa or other Asian regions (the Third Countries) as agreed among the parties, (ii) how the architecture was or can be designed for digital infrastructure as a basis for delivering societal services in the Third Countries and (iii) what kind of business collaboration could be realized, to review and analyze the possibility of developing digital infrastructure in the Third Countries through Japan-India cooperation. We may consider arranging a workshop or business matching as a part of the joint study to figure out realistic use cases.

Our cooperation is consistent with the “Japan-India Digital Partnership” launched between the Ministry of Economy Trade and Industry, Government of Japan and the Ministry of Electronics and Information Technology, Government of India in October 2018. We will work closely together and may consider working with other parties to promote and accelerate our cooperation if necessary.

For any clarification, please reach out to [email protected]

A Great Leap Forward to Transform Fintech: Data Empowerment

India is one of the first nations in the world to kick off Open APIs for consented financial data sharing. And nobody’s heard about it! 

Dear Kickass Financial Product Managers and (current & future) Fintech Entrepreneurs,

Amidst the usual flurry of sensational headlines, you may have missed a quiet announcement a few weeks ago that marked a monumental shift: RBI became the first central bank globally to publish a common technology framework – including detailed APIs – for consent driven data sharing across the entire financial sector (banking, insurance, securities, and investment).

This is a gamechanger for the industry.

Out of context, yet another circular with a good deal of jargon is an easy thing to gloss over. But it turns out this effort is actually a global first: although the UK, EU, Bank of International Settlements (BIS), Canada, and others have begun thoughtful public conversations around Open Banking (e.g. through that famous BIS report making the case, initiatives like PSD2, conferences, and various committees), India is one of the first nations in the world to actually make it a market reality by publishing detailed technical API standards — standards that are quickly being adopted by major banks and others across the financial sector in the country without a mandatory requirement from RBI. It’s not just the supposedly cutting edge banks of Switzerland, the UK, or the US driving fintech innovation: the top leadership of our very own SBI, ICICI, IDFC First, Bajaj Finserv, Kotak, Axis, and other household names have recognised that this is the way forward for the industry, and are breaking through new global frontiers by actually operationalising the powerful interoperable technology framework. Not only are they adopting the APIs, some are also starting to think through the new lending and advisory use cases and products made possible by the infrastructure. We think many new fintech startups should also be considering doing the same.

Why do the APIs Matter?

The world is focusing heavily on data protection and privacy – and rightly so. Securing data with appropriate access controls and preventing unauthorised third-party sharing is critical to protecting individual privacy. But to a typical MSME, portability and control of their data is just as critical as data security to empower them with access to a stream of new and tailored financial products and services. For instance, if an MSME owner could share trusted proof of their business’ regular historic GST payments or receivables invoices digitally with ease, a bank could now offer regular small ticket working capital loans based on demonstrated ability to repay (known as Flow-based lending) rather than just loans backed on collateral. Data sharing can become a tool for individual empowerment and prosperity by enabling many such innovative new solutions.

Operationalising a seamless and secure means to share data across different types of financial institutions – banks, NBFCs, mutual funds, insurance companies, or brokers – requires a common technology framework for data sharing. The published APIs create interoperable public infrastructure (a standard ‘rails’) to be used for consented data sharing across all types of financial institutions. This means that once a bank plugs into the network as an information provider, entities with new use cases can plug in as users of that data without individually integrating with each bank. Naturally, the system is designed such that data sharing occurs only with the data owner’s consent — to ensure that data is used primarily to empower the individual or small business. The MeiTY Consent Framework provides a machine-readable standard for obtaining consent to share data. This consent standard is based on an open standard, revocable, granular (referring to a specific set of data), auditable, and secure. Programmable consent of this form is the natural next innovation of the long terms and conditions legalese that apps typically rely on. RBI has also announced a new type of NBFC – the Account Aggregator – to serve as a consent dashboard for users, and seven new AAs already have in principle licenses. 

The Data Empowerment and Protection Architecture (DEPA) – in one image

In many other nations, market players have either not been able to come together to agree on a common technical standard for APIs, or have not been able to kick off its adoption across multiple competing banks at scale and speed. In countries like the US, data sharing was enabled only through proprietary rails – private companies took the initiative to design their own infrastructure for data sharing which end up restricting players like yourselves from innovating to design new products and services which could benefit people on top of the infra. 

What other kinds of innovative products and services could you build? 

Think of the impact that access to the Google Maps APIs allowed: without them, we would never have seen startups like Uber or Airbnb come to life. Building these consented data sharing APIs as a public good allows an explosion of fintech innovation, in areas such as:

  • New types of tailored flow-based lending products that provide regular, sachet sized loans to different target groups based on GST or other invoices (as described above). 
  • New personal financial management apps which could help consumers make decisions on different financial institutions and products (savings, credit, insurance, etc.) based on historic data and future projections. This could also branch out into improved wealth management or Robo advisory. 
  • Applications that allow individuals to share evidence of financial status (for instance, for a credit card or visa application) without sharing a complete detailed bank statement history of every transaction

…and many others, such as that germ of an idea that’s possibly started taking shape in your mind as you were reading.

In summary

This ecosystem is where UPI was in mid-2016: with firm, interdepartmental, and long term regulatory backing, and at the cusp of operationally taking off. UPI taught us that those who make a bet on the future, build and test early (PhonePe and Google were both at the first ever UPI hackathon!), and are agile enough to thrive in an evolving landscape end up reaping significant rewards. And just as with UPI, our financial sector regulators are to be lauded for thinking proactively and years ahead by building the right public infrastructure for data sharing. RBI’s planning for this began back in 2015! They have now passed the innovation baton onto you — and we, for one, have ambitious expectations.

With warmest regards,

iSPIRT Foundation

I’m Pinging A Few Whatsapp Groups Now, What Else Should I Send Them To Read? 

For any further questions or queries, please reach out to [email protected] and [email protected]

Bharat Calling In Bay Area

In the first week of October, around Dussehra, a bunch of Indians gathered in the Bay Area. The setting had nothing to do with Dussehra, it had more to do with whether they would be spending their next Dussehra while settled in India or in the Bay Area.

iSPIRT conducted two sessions around opportunities emerging in India, spurred by new digital public goods that are going to create a Cambrian explosion of new software products.

The startup activity in India over the past few years has been noted by Silicon Valley and the attendees had a keen interest to discuss what has been happening on the ground.

There were two primary tracks to the discussion:

  • how India has changed in the past decade or so and 
  • what factors have contributed to that radical change

The largely held view of the ecosystem among those gathered was of the 2008 – 2014 period, when the majority of them were last in India, studying or working.

The concerns raised about starting up were around ease of doing business and culture at the workplace but the consensus was that things are improving in these regards.

The keywords that came up to describe the factors causing the change in India were Jio, Modi and so on. However, the fascinating point to learn for all was about the rise of digital public goods and how they are fundamentally changing the market playground in India.

Many had heard of UPI (Unified Payment Interface) and rightfully so, credited Government for it but what awed everybody was how it came about with the effort of a bunch of volunteers believing in the idea of open-source public good and making India a ‘Product Nation’.

Everyone agreed that a new growth journey lies ahead for India, created by factors such as the rise of internet users, internet penetration with Jio, high data consumption and user education that comes along with it. However, it will get catalysed further when coupled with digital public goods.

UPI has been a success story and it crossed more than a billion transactions last month and had overtaken global volume of American Express months back! A number of successful companies like JusPay and PhonePe capitalised on UPI and similar opportunities now lie ahead with :

We dived into specifics of all these to discuss myriad product opportunities that will emerge, enabling new success stories.

This will further be enabled by :

  • Talent that is more agile and honed to operate in an ambiguous startup environment. This has turned around in the past few years, while a lot of talent was tuned to work in a corporate environment earlier.
  • More access to seed capital as more startup operatives have gained wealth and experience in the past few years
  • And parents are more supportive of the idea to join a startup or start one!

Capitalising on all these would need a new entrepreneur archetype that operates from first principles thinking to dig deep in the market and create viable products and business models taking advantage of unique local factors.

Volunteering with iSPIRT can act as a good channel to understand the market better, to get involved with understanding and building digital public goods that are shaping the times ahead in the country.

It’s the forum to engage with peers that help you learn more about yourself, discover your flow that brings joy and contribute towards a public good.

One attendee summed up the takeaway beautifully –

“In the US, I have created a professional career and learnt lessons by building on top of platforms in the West. Now, there are similar opportunities to build on top of platforms and participate in Indian playground. If I get to become an iSPIRT volunteer, I can not only build on top but also help build the very platforms that are driving India forward.

In my own backyard, I have the local know-how to build for India and should act on it, instead of watching Chinese and Western apps put their stake from Kashmir to Kanyakumari.”

To know more about emerging public goods, iSPIRT Foundation and know our volunteering model, check out www.ispirt.in and write to [email protected]

We would like to thank Jaspreet from Druva, Anand Subbarayan from Lyft for hosting us, Hemant Mohapatra from Lightspeed Partners for helping with the setup and our local volunteer Pranav Deshpande.

Indian Software Product Registry – All That Product Companies Need to Know

Earlier this year, National Policy on Software Products was rolled out to create a robust, participatory framework to bring together industry, government and academia on a common platform to make India as a global hub for software products development. This is a much-needed initiative to provide holistic and end-to-end support to the Indian software product ecosystem. The registry is the first step among many towards solving the real problems of the industry and nurturing the software product companies. If done right, this initiative will have immense potential and far-reaching impact to benefit the industry.

Under this policy, one of the key initiatives is the set-up of the Indian Software Product Registry (ISPR) through industry ownership. It is a collaborative platform which will act as national coordination, facilitation and inter-connected centre for all activities related to the Indian software product ecosystem.

The main purpose of this policy is to focus towards the promotion of Indian software products which are defined as under for implementation:

  • Indian Company: As per sub-section 26 of section 2 of the Income Tax Act, 1961, “Indian company” means a company formed and registered under the Companies Act, 1956 or Companies Act, 2013,  provided that the registered office or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is in India.
  • Indian Software Product Company (ISPC):  An ISPC is defined as an Indian company in which 51% or more shareholding is with Indian citizen or person of Indian origin and is engaged in the development, commercialisation, licensing and sale /service of software products and has IP rights over the software product(s).

ISPR aims to create a platform to enable discovery of Indian Software Product Companies and their products while simultaneously giving automatic access to the Government e-Marketplace (GeM) platform. This will enable the government to identify Indian companies as part of their buying process. However, more work on specific allocation of government buying and redeveloping of RFP’s in government for products will also be initiated so that the government can finally buy Indian products.

Secondly, by listing on exchange on ISPR will enable MEITY to get a better understanding of the industry so that specific product-related interventions like recurring payments for SaaS companies, credits for R&D to enable Indian companies to invest in research and development, and facilitation of Indian software product industry for providing fiscal incentives, if any, at a later stage among others will also be achieved.

Thirdly, ISPR will also enable Indian Software Product Companies to list their products here and connect to buyers across the world. Since this is a government-backed platform, it provides a high level of trust and authenticity in the global market. 

Indian Software Product Companies can register here.  For any more queries, please feel to reach out on [email protected].

The Global Stack: A Manifesto

In 1941, soon after he had secured an unprecedented third term as President of the United States, Franklin D. Roosevelt mobilised the US Congress to pass the Lend-Lease Act. Its context and history are storied. British Prime Minister Winston Churchill famously wrote to FDR requesting material assistance from the United States to fight Nazi Germany — “the moment approaches when we shall no longer be able to pay [to fight the war]”. FDR knew he would not get the American public’s approval to send troops to the War (Pearl Harbor was still a few months away). But the importance of securing the world’s shipping lanes, chokepoints, manufacturing hubs and urban megalopolises was not lost on the US President. Thus, the Lend-Lease Act took form, resulting in the supply of “every conceivable” material from the US to Britain and eventually, the Allied Powers: “military hardware, aircraft, ships, tanks, small arms, machine tools, equipment for building roads and airstrips, industrial chemicals, and communications equipment.” US Secretary of War Henry Stimson defended the Act eloquently in Congress. “We are buying…not lending. We are buying our own security while we prepare,” Stimson declared.

The analogy is not perfect, but FDR’s Lend-Lease Act offers important lessons for 21st century India’s digital economy. Our networks are open; our public, electronic platforms are free and accessible to global corporations and start-ups; our digital infrastructure is largely imported; and — pending policy shifts — we believe in the free flow of information across territorial borders. India has made no attempt, and is unlikely in the future, to wall off its internet from the rest of the world, or to develop technical protocols that splinter its cyberspace away from the Domain Names System (DNS). While we have benefited immensely from the open, global internet, what is India doing to secure and nourish far-flung networks and digital platforms? The Land-Lease Act was not just about guns and tanks; a quarter of all American aid under the programme comprised agricultural products and foodstuff, including vitamin supplements for children. The United States knew it needed to help struggling markets in order to build a global supply chain that would serve its own economic and strategic interests. Indeed, this was the very essence of the Marshall Plan that followed a few years later.

In fact, India’s digital success story itself is a creation of global demand. When the Y2K crisis hit American and European shores, Indian companies stepped up to the plate and offered COBOL-correction ‘fixes’ at competitive rates. In the process, Western businesses saved billions of dollars — and Y2K made computing ubiquitous in India, which in turn, added great value to the country’s GDP. 

Therefore, there are both security-related concerns and economic consequences that should prompt India to develop “digital public goods” for economies across Asia, Europe and Africa. Can India help develop an identity stack for Nigeria — a major source of global cyberattacks — that helps Abuja mitigate threats directed at India’s own networks? Can we develop platforms for the financial inclusion of millions of undocumented refugees across South and Southeast Asia, that in turn reduces economic and political stress on India and her neighbours when confronted with major humanitarian crises? Can we build “consent architecture” into technology platforms developed for markets abroad that currently have no data protection laws? Can we nurture the creation of an open, interoperable and multilateral banking platform that replaces the restrictive, post-9/11, capital controls system of today with a more liberal regime — thus spurring financial support for startups across India and Asia? Can India — like Estonia — offer digital citizenship at scale, luring investors and entrepreneurs who want to build for the next billion, but do not have access to Indian infrastructure, markets and data? These are the questions that should animate policy planners and digital evangelists in India. 

The Indian establishment is not unmindful of the possibilities: in 2018, Singapore and India signed a high-level agreement to “internationalise” the India Stack. The agreement has been followed up with the creation of an India-Singapore Joint Working Group on fintech, with a view towards developing API-based platforms for the ASEAN region. As is now widely known, a number of countries spanning regions and continents have also approached India with requests to help build their own digital identity architecture. 

But the time has come to elevate piecemeal or isolated efforts at digital cooperation to a more coordinated, all-of-government approach promoting India’s platform advancements abroad. The final form of such coordination may look like an inter-ministerial working group on digital public goods, or a division in the Ministry of External Affairs devoted exclusively to this mission. Whatever the agency, structure or coalition looks like within government, its working should be underpinned by a political philosophy that appreciates the strategic and economic value accrued to India from setting up a “Global Stack”. In 1951, India was able to successfully tweak the goals of the Colombo Plan — which was floated as a British idea to retain its political supremacy within the Commonwealth — to meet its economic needs. Working together with our South Asian partners and like-minded Western states like Canada, we were able to harvest technology and foreign expertise for a number of sectors including animal husbandry, transportation and health services. India was also able, on account of skilful diplomacy, to work around Cold War-era restrictions on the export of sensitive technologies to gain access to them.

That diplomacy is now the need of the hour. The world today increasingly resembles FDR’s United States, with very little appetite to forge multilateral bonds, liberal institutions, or rules to create effective instruments of global governance. It took tact and a great deal of internal politicking from Roosevelt to pry open the US’ closed fist and extend it to European allies through the Lend-Lease Act. India, similarly, will need to convince its neighbours in South Asia of the need to create platforms at scale that can address socio-economic problems common to the entire region. This cannot be done by a solitary bureaucrat working away from some corner of South Block. New Delhi needs to bring to bear the full weight of its political and diplomatic capital behind a “Global Stack”. It must endeavour to create centripetal digital highways, placing India at the centre not only of wealth creation but also global governance in the 21st century.

The blog post is authored by Arun Mohan Sukumar, PhD Candidate at The Fletcher School at Tufts University, and currently associated with Observer Research Foundation. An edited version of this post appeared as an op-ed in the Hindustan Times on October 21, 2019.

Some reflections on the fireside chat with Vinod Khosla and Nandan Nilekani

On a cloudy Bangalore evening on August 2nd, the otherwise quiet campus of a medical college in the ‘startup saturated hub of Koramangala’ was bustling with energy. That night the campus was hosting a fireside chat with Vinod Khosla (renowned Venture Capitalist and Co-Founder of Sun Microsystems) and Nandan Nilekani (Co-Founder of Infosys), with Sharad Sharma (Co-founder of iSPIRT) acting as moderator.

Sitting in the midst of many young entrepreneurs, Sharad remarked how energetic Vinod and Nandan are at their respective ages.

Vinod responded “I have this fear that you can grow old when you retire, not retire when you grow old. So, I hope I never retire. As long as you have interesting problems to work on, there’s nothing more exciting to do than work on that.”

Sharad commented that even after all of his accomplishments, it seems that Vinod sees himself as the David in a ‘David vs Goliath’-styled battle and wondered whether that was a fair assumption.

Vinod replied “You want to be the underdog. You want problems to be hard. If they were easy to solve, somebody would have solved them. The problems are very large when you look at them initially. If you apply exponential learning to that, you can catch up with any problem very quickly. If you get on the right path to exponential solutions, they’re not as hard as they seem. Just starting to solve the whole problem in one step is like trying to climb Mount Everest in one step and go straight to the top without going to base camp 1, base camp 2 along the way.”

Turning to Nandan, Sharad asked “I think India does not have a David vs Goliath mindset. Does it?”

Nandan replied “India didn’t get Independence without thinking big. India’s first elections is another example of thinking big. I think it’s all there. Now, we are applying it in new ways. We shouldn’t be daunted by the size of the problem. Whether you’re solving a small problem or a large problem, it requires the same amount of thinking. So, you might as well solve the large problem. There’s much more value for your time and money. Today, you’ve, on one side, an extraordinary array of things that need to be fixed. And, you have an extraordinary array of tools & technology that can fix those problems. You’ve access to enormous amounts of capital & great talent. There’s no better time than this”

Sharad brought the conversation back to Vinod, asking what it takes for entrepreneurs to step up to big problems, to unlearn, to position themselves to be breakthrough entrepreneurs.

Vinod expressed that, in his view, “most people, most of the time, are limited by what they think they can do, not what they can actually do. Most people limit themselves. It’s a surprising thing to say, but I almost always find it to be true.”

He elaborated that entrepreneurs must have the courage to take one little step at a time on this exponential climb. They do not have to figure out the whole journey in order to start the journey. They will determine the right paths to follow along the way. They just have to be creative in figuring them out.

He mentioned that he doesn’t mind failing and that his “willingness to fail gives [him] the ability to succeed. Most people fail to try, instead of trying and failing.”

He went on to share an observation with the audience. He said “I look back 40 years and I can’t find one major innovation that came from a large company. Not one. General Motors and Volkswagen couldn’t design an electric car. Boeing & Airbus couldn’t do space as SpaceX could. None of the media companies did media as Twitter and Facebook did. None of the Pharma companies did Biotechnology as Genentech did.”

It’s important to note that he mentions ‘large innovation’ and not ‘incremental innovation’. Also, he refers to innovations that turned out to be large in their impact on markets that they were meant for.

While there are many examples to support this claim, let’s take examples from the period of the early days of Sun Microsystems, about four decades ago.

Xerox’s PARC lab had a treasure trove of innovation that would have never seen the light of day, had it not been for Apple.

IBM at their research lab in mid-1970s, pulled together some of the smartest people in the field to create a functioning relational database system based on Ted Codd’s theory (Codd was an English computer scientist who, while working for IBM, invented the relational model for database management, which served as the theoretical basis for relational database management systems).

They succeeded and developed a functional language called SEQUEL (Structured English Query Language), later changed to SQL. In any sense imaginable, it was a breakthrough, but it wouldn’t have revolutionized the software industry had it not been for Larry Ellison’s Oracle.

Vinod mentioned that “when the path is not clear and you are inventing something new, almost certainly it would be a startup, despite how hard it may sound!”

He mentioned that when people in the energy sector looked to GE and Siemens to innovate, they didn’t.

In the current market dynamics with large tech monopolies, we see, at times, that an incumbent does well at copying what a startup does, but they rarely outdo the hunger and agility of a fast-growing startup. Google had trouble with the social network, and there are numerous examples to this effect. However, given the large distribution that few of the monopolies have with nearly zero marginal cost to acquire new customers, even if the product is not the best to be found in the market, some other inherent advantages can make a me-too product of a large incumbent thrive. For example, Microsoft, despite Slack’s rise and successful IPO, is doing well with Teams because it is leveraging its corporate-ubiquitous Office 365 suite. (Ending Q2 2019, Teams had 13 million DAUs as compared to Slack’s 10 million DAUs.)

These occurrences should in no way deter the entrepreneur, but he or she does need to immerse him or herself in systems thinking and order effects of multiple degrees when looking at how dynamics in the market that he or she is trying to disrupt, will evolve.

Following up on this point, Sharad pointed out that usually there is something working in the background enabling the entrepreneurs to carry out the change. The wind in their sails such as a technological shift, market change, and public goods.

He cited examples of GPS, India Stack and Solaris, (a UNIX operating system developed by Sun Microsystems) which came about as a result of AT&T and Bell Labs opening up UNIX standard to the world.

Nandan agreed and said “So far entrepreneurs’ successes have been built on huge investments in public infrastructure by governments like the Internet, GPS etc. We need to invest in long term digital infrastructure. Only governments can afford it or have that vision. Then open it for private innovation.”

He further mentioned that “It’s a philosophy that we have adopted in India. Just as the US invested in the internet, GPS etc, we will invest in identity, payment infra, etc. and API-fy them, thus allowing innovation to happen on top of that.”

Vinod chimed in saying that “almost all entrepreneurs build on things that are already there. In fact, how much you orient that infra towards entrepreneurial ventures makes a huge difference. There are lots of startups in the US-based on government funding in science and technology in US universities.”

Nandan added that the advantage that we have now, is that the technology has been democratized. “We have all kinds of open source stuff. We have a cloud. It’s all there and it’s all free. And it’s for entrepreneurs to take that and mix & match. That’s where we can do a lot of work.”

Sharad summarized this exchange aptly by saying that “solving hard societal problems needs ‘jugalbandi’ between public infrastructure and private innovation on top of it.”

Taking an another IBM example of how this ‘jugalbandi’ manifests, while IBM was working on SEQUEL, a group of professors at the University of California, Berkeley, were also working on a relational database as part of a project called ‘Project Ingres’, funded by the US Government. Oracle used both as a foundation to spear through the market.

It was ultimately the speed of execution that saw Oracle making headway, utilizing the nudge given to it (IBM introduced a commercial product in February 1982, despite having a relational database up and running in 1977. They also were invested in hierarchical database system called IMS and were not fast enough to cannibalize their product)

In India, if the BHIM app was a B2C reference implementation of UPI, PhonePe utilized the opportunity to build a massive business on top of the same UPI stack.

Shifting gears, Sharad recalled his interaction with Jeff Bezos where he said Jeff takes just 10 minutes to determine whether a new hire is a good fit or not and one of the key things he looks for while assessing, is resilience. Entrepreneurs need loads of it as a ‘David’

Sharad asks Vinod about what he looks for in an entrepreneur when he is deciding whether to fund a start-up.

Khosla said “There’s no one formula. As a tech investor, you’re looking for a unique solution where one can create an advantage over time. It’s as simple as that. The biggest ingredient is the quality of the team you assemble. If it’s a great team, we will fund it, whether it has an interesting business plan or not. Team matters the most. And then how clever you are, how differentiated your technology is, how far ahead are you of others in thinking through how you want to build it.

“An important characteristic when evaluating somebody who has failed is what’s their rate of learning. That’s probably the most important way you evaluate an entrepreneur. When they move from job to job, do their teams follow? What books do they read? Do they spend their time learning new things? There are half a dozen things like that, that I personally use in evaluating people. But it’s still the hardest thing you do.”

He further added that he also has a strong belief that people with expertise in the area apply old rules and old biases while noting that experience is one of the largest biases there is!

Taking his Fintech investments as examples, he explains how the founders of Square, Stripe and Affirm never had worked in Fintech. Not knowing the space proved to be a massive advantage, and the entrepreneurs tried to solve problems with great empathy towards the customer, iterating while operating with first principles thinking.

He added by giving the example of Elon Musk’s never having worked in the auto industry prior to founding Tesla. Automakers laughed at the Silicon Valley startup with no experience in auto-making. He made lots of mistakes but fixed them quickly while figuring out a better way to proceed than those decided through conventional wisdom.

For those looking to innovate in their existing field of expertise, Sharad echoed that unlearning is more important than learning.

Sharad posed a nuanced question for Vinod by asking whether a healthcare start-up hiring a VP of Sales should hire one from the healthcare sector or not. Sticking to his view, Vinod remarked that he would rather hire an athlete who would be innovative and learn quickly instead of someone with bias from experience!

Talking about the quantum of funding and the excess in Silicon Valley, Vinod said, “nobody can say what’s the right level of money. It feels like a lot of money is floating around in Silicon Valley. But that’s because there’s been a lot of really good ideas. When new platforms emerge, new applications become possible. Then great entrepreneurs build them.”

He continued, “if you look at your mobile phone, and the touch interface, there really hasn’t been a huge startup in the US in the last five years. If you look at Uber, Lyft, Airbnb, Pinterest, they are all done. We have to see where are new platforms coming along.”

When prodded on what these new platforms can be, he elaborated “I do think AI is a new platform and offers lots and lots of opportunity. Fortunately, other than ads, it offers opportunity in lots of societal impactful areas. Medicine is my favourite. 3D printing is another new platform that people aren’t using enough. One of my favourite startups right now is trying to 3D print whole houses. What’s the advantage of that? Much, much lower cost, 24 hours to print a house, but more importantly, it’s environmental footprint is much better.”

He also wanted to highlight for entrepreneurs that large problems to be solved are not confined to the domain of software, but are present in many other fields as well, such as food, construction, healthcare, transportation, etc., which are all open to radical innovation.

He said that when one merges biotechnology solutions, such as CRISPR, with AI, all kinds of disease solutions are possible. He also believes that startups will dominate drug discovery using AI, far more than the big pharmaceutical companies will.

He brought up the example of Impossible Foods and recalls everyone asking him why he was investing in a hamburger company.

Giving the rationale behind the investment, he said that “about 30% to 40% of the planet’s land surface area is used for animal husbandry of one sort or another. I think about 90% of it could be freed up if the same meat was produced using the techniques like Impossible Burger. Plant proteins are the best way to save the planet. It’s healthier than meat proteins for humans because they come with cholesterol and other negative things. So it’s a beautiful solution.”

Talking more about the funding and its quantum, he argued that “the more money you raise initially, the less likely you are to succeed. There’s some beauty & elegance in very small amounts of money because it forces you to think about your problem much harder…you’re much more creative with your solution.”

While speaking about the need for creativity, Sharad mentioned that when entrepreneurs hit an obstacle during the process, they need to re-imagine and rejig, however, there are certain components that ought not to be rejigged, such as the core set of company values.

He gave examples of Infosys and Wipro being built on that value-based culture while noting that Bangalore’s vibrant ecosystem today is definitely a beneficiary of that culture.

Nandan agreed and said “values are very important if we want to build companies to last. If we want to build companies that sustain themselves over decades and really have an impact on society and the world, they have to be anchored in a core set of values.”

Vinod concurred, reflecting that “if you don’t have values, the first time you run into a problem, people scatter. If you have values & you have a mission, people stick together & double their efforts as a team. Values play a big role during bad times”

Following this topic, the chat naturally steered towards how entrepreneurs evaluate risk and what can be the right framework for evaluation and mitigation.

Vinod said that there is no one set of rules and that everyone has their own way of looking at it.

He added, “most investors reduce risk to the point where the probability of success is high, but its consequences of success are inconsequential. It’s a good way to get a predictable rate of return. I personally find it much more exciting, where the probability of success is low, but consequences of success are consequential.”

He gives the example of Larry and Sergey, founders of Google, saying that they had no interest in making a billion dollars when Yahoo offered to acquire them. They wanted to be consequential and change the world.

While this statement is accurate, it is important for us to study the different risk scenarios that entrepreneurs face, as well as how they frame and mitigate them. The reason is that while the Google founders rejected a billion-dollar offer, they also badly wanted to sell ‘PageRank’ to AltaVista and Yahoo for 1 Million Dollars to go back and resume their studies at Stanford (from The Google Story by David A.Vise).

So then, the question that arises is that how do the founders have different outlook towards acquisition at different points in time? What changes in-between, what transitions entrepreneurs go through, and what indicators should they rely on? One can dive into ‘Prospect theory’ and other frameworks for decision analysis under risk, but we also need to consider the passion and hunger of entrepreneurs, the unquenchable fire that powers them through the risk. That will have to be another iSPIRT blog altogether!

Speaking about the risk entrepreneurs face, Nandan added “You need a social fabric which delinks failure from the person; which recognizes that failure is a tremendous experience which is likely to increase the probability of success the next time around. Here failure, person & institutions are entwined.”

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Talking about AI, Vinod said “There will be enough jobs for humans after ‘Artificial General Intelligence. We don’t have enough humans for all the elder care we need and all the childcare. We could deploy ten times as many people and raise better children and look after elders much better. Those are just two examples. I think relationships are the inherent human tendency that will not go away and meaning will come from relationships.”

Nandan added that “the assumption that AI will automate everything and there will be no jobs left and therefore we need UBI and a way to keep them occupied is wrong. The way I think about it, AI amplifies human capability. The combination of human and AI is going to be very strong.”

As the chat drew to a close, it became more apparent than ever that for the Indian ecosystem to thrive and for us to build massive companies, we need a new entrepreneur archetype – the kind that can zoom out and look at macro-trends, applies ‘systems and first principles’ thinking, platform over product thinking, have big audacious goals while being extremely empathetic to their customers.

There used to be a long gestation period from the founding of a company until it faced foreign competition on Indian soil. From early days of MakeMyTrip, Naukri to Ola, Quikr a few years back, it has reduced drastically such that companies like PhonePe have to ward off heavyweights like Facebook, Google and Amazon within a year of starting up! Indian entrepreneurs will need to buckle up as the platform wars on Indian Playground with digital public goods will only intensify, unleashing massive opportunities and growth for the country.

Please write into [email protected] for a deep dive and information on upcoming iSPIRT events where we will discuss this new entrepreneur archetype as part of what we call ‘Athletic Gavaskar Project’, and to learn more about our volunteer model.

Fireside Chat: Vinod Khosla and Nandan Nilekani in Conversation with Sharad Sharma

Join us for a conversation with Vinod Khosla and Nandan Nilekani. Together with Sharad Sharma, our fireside chat host, they will talk about what it means to be an entrepreneur in India today and how these entrepreneurs can solve the hardest problems of India.

Vinod Khosla and Nandan Nilekani are arguably two of the most influential thinkers and innovators of our time when it comes to transformation, entrepreneurship, and large scale impact. Born within 6 months of each other, both graduated for IITs, created iconic companies, become billionaires in the in aprocess and continue to innovate and transform the world.

What better opportunity than to hear these icons of industry at a fireside chat discussing the most intriguing aspects of startups, entrepreneurship, digital transformation and India’s growth towards a multi trillion dollar economy.

About Mr. Vinod Khosla

Vinod Khosla is the founder of Khosla Ventures, a premier Silicon Valley venture capital firm, and a member of the 2018 Midas List. His firm, Khosla Ventures, invests in a wide variety of startups ranging from Healthcare, Sustainable Energy, Food/Agriculture to Space, AI and Robotics. He co-founded Sun Microsystems in 1982 after which he spent 18 years at venture capital firm Kleiner Perkins Caufield & Byers before launching his own fund.

About Mr. Nandan Nilekani

Nandan Nilekani is the co-founder of tech giant Infosys and currently back as a non-executive chairman affecting a remarkable turnaround. In 2009, he was made a Cabinet Minister and Chairman of UIDAI – India’s mammoth National ID project – Aadhaar.  After Aadhaar, Nandan has actively supported India’s digital transformation through the IndiaStack initiatives in payments, digital locker, eSignature and other services. Nandan has also backed startups in the India ecosystem.

About Mr. Sharad Sharma

Sharad Sharma is the co-founder of iSPIRT and has worn many hats as CEO of Yahoo India R&D, Chair of NASSCOM Product Forum and as intrapreneur at AT&T. He is a passionate evangelist and an active investor in the software product ecosystem in India.

When?

2nd of August, 2019 from 18:00 – 19:30 hrs.
Venue to be disclosed. 

How to participate?

You can be a part of this Fireside Chat by registering here. Confirmed participants will be intimated by the 28th of July via email

Please note, due to limited seating at the venue we will not be able to accommodate everyone who applies.

Data Empowerment and Protection Architecture Explained – Video

More commonly known as the ‘Consent Layer of the India Stack’, Data Empowerment and Protection Architecture (DEPA) is a new approach, a paradigm shift in personal data management and processing that transforms the currently prevalent organization-centric system to a human-centric system. By giving people the power to decide how their data can be used, DEPA enables the collection and use of personal data in ways that empower people to access better financial, healthcare, and other socio-economically important services in a safe, secure, and privacy-preserving manner.

It gives every Indian control over their data, democratizes access and enables the portability of trusted data between service providers. This architecture will help Indians in accessing better financial services, healthcare services, and other socio-economically important services.The rollout of DEPA for financial data and telecom data is already taking place through Account Aggregators that are licensed by RBI. It covers all asset data, liabilities data, and telecom data.

We, at iSPIRT, organised a learning session on the 18th of May, to give relevant and interested stakeholders a detailed primer on DEPA. We had 60-odd very animated and engaging people in the audience. The purpose of the session was to understand the technological, institutional, market and regulatory architecture of DEPA, it impacts on existing data consuming businesses and how people could contribute to this new data sharing infrastructure that’s being built in India.

The session was anchored by Siddarth Shetty, Data Empowerment And Protection Architecture Lead & Fellow, iSPIRT Foundation (Email – sid@ispirt.in). Please feel free to reach out to him for any queries regarding DEPA.

For other queries, please write to [email protected].

#6 Healthstack session at LetsIgnite

We had the chance to conduct a discussion on the National Health Stack during the LetsIgnite event organized by the LetsVenture team on 15th June at the Leela Palace. The audience comprised of early stage healthcare startups along with angel investors and venture capitalists having keen interest in healthcare investments. Some notable attendees included Dr. Ramesh (senior cardiologist, MD Endiya Partners) and Mr. Mohan Kumar (Partners, Norwest Venture Partners).

Sharad Sharma (co-founder, iSPIRT), Dr. Santanu Chatterjee (Founder, Nationwide Primary Care), Dr. Ajay Bakshi (Founder Buddhimed Technologies, ex-India CEO Parkway Pantai) and Arun Prabhu (Partner, Cyril Amarchand Mangaldas) had been invited to lead the session, which was moderated by Anukriti Chaudhari and Priya Karnik, both core volunteers at iSPIRT championing the health stack initiative.

The context was set by an interactive talk by Sharad who began by giving a glimpse of the underlying philosophy of the iSPIRT Foundation – the idea of building public goods as digital technology stacks which can be leveraged by private players to serve Bharat. . Sharad described societal change in India being a Jugalbandi between digital public infrastructure, market participants and policy makers to achieve the same. He mentioned how the India Stack was changing the face of fintech in India and that the Health Stack could do the same for healthcare. The audience was more than startled to hear that a day prior to the session, the number of UPI transaction in India were already one-sixth of what MasterCard had done worldwide. ( UPI has only been around for 33 months! ). Sharad then went on to explain the different layers of the Health Stack comprising National Registries, standardised health information flows, an insurance claims management software built upon a standard Policy Markup Language and a gamifier policy engine. He didn’t miss reminding the audience that the Health Stack was being built to solve for the healthcare needs of ‘Bharat’and not the privileged 30 million Indian families already being well-served by the healthcare conglomerates in urban areas.

With the context in place, Anukriti took over to give a background of the healthcare landscape in India. India struggles with a 1:1600 doctor to patient ratio with more than 60% of doctors and hospitals concentrated in urban regions. To add to that, the public expenditure for healthcare is just 3.9% of our annual GDP (compared to 18% in the US) and it’s not surprising that most deaths in public healthcare facilities happen because of poor quality of care. Health insurance penetration barely touches 20% with OOP expenditure dominating the healthcare spending in India. With a huge underserved population, the need of the hour is to leap-frog to scalable solutions that can reach the masses instead of incremental linear growth solutions to address the Indian healthcare challenges. The different layers of Health Stack make it much easier for innovators (both public and private) to develop radical solutions.. While funding in healthcare startups has increased over the last 5 years, it still significantly lags behind areas like fintech, e-commerce, ed-tech, etc. Moreover, the bulk of healthtech investments have been focused on the consumer tech sector. Anukriti ended her views with a futuristic optimism regarding the innovations that Health Stack could open, to make healthcare truly affordable, accessible and high quality.

We were fortunate to have Dr. Santanu and Dr. Bakshi give insights about the Health Stack with their on-ground experiences in healthcare spanning over decades. Dr. Santanu mentioned that for primary care, the national registry of care providers was very fundamental to ascertain ‘which stakeholder provides what’ given that almost every provider is somewhere involved in primary care. On top of that, he stressed about the need for Artificial Intelligence backed clinical support systems that seamlessly integrate with the doctor’s workflow. This is of particular relevance for rural healthcare settings wherein, despite various efforts, there aren’t enough doctors to setup shops in villages . A standardized health information layer, along with data transfer mechanisms, could be the driving force for this. He was, however, wary of how well standard insurance schemes would work for primary care as the insurance business model falls apart given that almost everyone needs access to primary care at some point or the other. Priya resonated with his views and further suggested that for ‘Bharat’, micro insurance policies could be the key mechanism to drive insurance adoption at the consumer level. Such a system could potentially be facilitated by a claims engine platform build upon a standard policy markup language to ‘almost-automate’ (auto-adjudicate) the claims addressal process.

Dr. Bakshi contended that for a stable society, healthcare and education are a must, as the former secures our ‘today’ while the latter secures our ‘tomorrow’. Having worked as the CEO of three major hospital chains in India, he accepted (without an iota of political correctness) that as a nation, we have failed miserably in providing either. Healthcare is a social good and nowhere in the world has it been solved by private players alone (given the way private incentives are aligned). The public sector in India hasn’t stepped up which is the reason that private players dominate the quality healthcare delivery which could lead us (or is perhaps already leading) to following the footsteps of the US. This is an alarming trend because in the short and medium term, India cannot afford to outsource the entire healthcare delivery to private players. Dr. Bakshi remarked that to set things on the correct track, the Health Stack is a very important initiative and congratulated the iSPIRT team for working ardently to make it happen. He however suggested all stakeholders to be privy of the fact that while fintech transactions are linear (involving the payer and the recipient), a healthcare ‘transaction’ involves multiple aspects like the doctor’s opinion, investigation, drugs, nurses, ward boys and many other layers. This underlying multidimensionality would make it difficult to replicate an India Stack kind of model for the healthcare setting. At the core of the healthcare transaction lies the ‘doctor-patient’ interaction and it is imperative to come but with some common accepted standards to translate the healthcare lingo into ‘ones and zeroes’. He lauded the health information flows  of the Health Stack for being a step in the right direction and mentioned that in his individual capacity, he is also trying to solve for the same via his newly launched startup Buddhimed Technologies.

With two stalwarts of healthcare sitting beside her, Anukriti grabbed the opportunity to put forth the controversial concept of ‘doctors being averse to technology’ which could possibly be a hindrance for Health Stack to take off. Dr. Santanu and Dr. Bakshi were quick to correct her with the simple example of doctors using highly technical machines in providing treatments. They coherently stated that doctors hated Information Technology as it was forced upon them and suggested that IT professionals could do a better job by understanding the workflows and practical issues of doctors and then develop technologies accordingly. This is an important takeaway – as various technologies are conceptualized and built, doctors should be made active participants in the co-creation process.

The idea of a common public infrastructure for healthcare definitely caught the attention of both investors and startup founders. But amidst the euphoria emerged expected murmurs over privacy issues. That was when Arun Prabhu, the lawyer-in-chief for the session, took the lead. He reiterated Dr. Bakshi’s point of the doctor-patient relationship being at the core of the healthcare transactions. Such a relationship is built upon an element of trust, with personal health data being a very sensitive information for an individual. Thus, whatever framework is built for collating and sharing health information, it needs to be breach proof. Arun cited the Justice Srikrishna report to invoke the idea of consent and fiduciaries – a system wherein individuals exercise their right to autonomy with respect to their personal data not by means of ownership (which in itself is an ambiguous term), nor by regimes of negligence or liability but by the concept of a coherent consent mechanism spread across different stakeholders of the healthcare value chain. Moreover, the consent system should be straight-forward and not expressed via lengthy fifty page documents which would make it meaningless, especially for the India 2 and India 3 population. Lastly, he mentioned that just like physical and tangible assets have certain boundaries, even data privacy can have certain realistic limitations. If an information point cannot be specifically identified or associated with a particular individual but can have various societal benefits, it should be made accessible to relevant and responsible stakeholders. Thus, while it is imperative to protect individual health data privacy, there should be a mechanism to access aggregated anonymized health data. There is tremendous value in aggregating large volumes of such data which can be used for purposes like regional analysis of disease outbreaks, development of artificial intelligence based algorithms or for clinical research. Priya added that such a system was inherent in the Health Stack via the Population Health Analytics Engine and the framework for democratisation of aggregate data.

Overall, the session amalgamated various schools of thought by bringing together practitioners, CEOs, CIOs, lawyers, startups and investors on one common discussion platform. This was perhaps an example of the much-needed Jugalbandi that Sharad had mentioned about. A public good is conceptually ‘by the stakeholders, for the stakeholders and of the stakeholders’. This necessitates its active co-creation instead of isolated development. Needless to say, multi-way dialogue is the DNA of such a process. Staying true to that philosophy, we look forward to conducting many such interactive sessions in the future.

Ravish Ratnam is part of the LetsVenture Team – a platform for angel investing and startup fundraising.

He can be reached on [email protected]

Drones, Digital Sky, Roundtables & Public Goods

This is a guest post by Dewang Gala and Vishal Pardeshi (Pigeon Innovative).

Unmanned Aerial Vehicles(UAV’s)/ Drones have been making a buzz all over the world. Drones in the past have been looked at as a threat in various countries. The public perception towards drones has been very different in the past and has been changing over the past few years when people have been able to see the real benefits that this technology can offer. However, there is a need for a regulatory body to avoid the misuse of drones.

India is one of the key markets where the future growth of drone technologies is likely to emerge. India’s drone market expected to grow $885.7 mn and drones market in the world will reach $16.1 billion by 2021. Thus this market will create lots of employment opportunities and help our nation’s economy grow. Just like how the Information technology sector flourished in India increasing its contribution to the Indian GDP from 1.2% in 1998 to 7.7% in 2017, the Indian drone industry shows a similar promise.

How can drones contribute to the public good in India?

Previously, drones were an area of interest for defense sector only, but in past decade drones have been able to come into the public and commercial space where they have been able to take high definition photos, map a large area in a short time, calculate crop health, spray pesticides, inspect man-made structure which would be difficult or unsafe while doing it traditionally, play a crucial role during natural calamities to save lives, deliver goods and medicines.

Countries like Rwanda have allowed a full network of drones in their airspace which has helped save lives with the delivery of medical supplies. The company operating there initially had a huge challenge to convince people that the drones were meant for good and the company did not have the intention to spy on them. Once the people of Rwanda saw that these drones could save lives, a whole network of drones emerged across the country. Imagine the impact it would create across different industries in India if we accept and embrace this technology and have regulations in place for its safe usage. The upsurge of new drone-based innovative companies is a positive sign of India heading towards becoming a global leader in this field.

India is a high potential market, still entrepreneurs and businessman in this sector experience oblivion. This is because a few years back drones were completely banned in India as a perceived threat and now steps have been taken in Drone regulation 1.0 to get the industry moving forward. Though there are many roadblocks for the regulations to be in full force as it tries to bring together multiple agencies, the good part of it is that government understands that they lack the necessary skills set to create regulation and is willing to take help from the existing players to contribute in making the regulation more robust and user friendly.

What can be the public goods in the drone industry and why do we need them?

Paul A Samuelson is usually credited as the first economist to develop the theory of public goods. But what exactly is public goods?
A good which is:

  • Non-excludable – it is costly or impossible for one user to exclude others from using a good.
  • Non-rivalrous – when one person uses a good, it does not prevent others from using it.
  • Indivisible – one cannot divide public goods for personal use only.

Traffic lights, roads, street lights, etc. are examples of public goods. With the seamless possibilities that drones can offer, it makes sense to have public goods defined for this sector.

Imagine a future where airspace is accessible to everyone, where we have defined drone ports and air corridors which will allow smooth and safe operation of the drones. A lot of industries can benefit from it. Creating public goods will also allow more people to participate in the system thus increasing the size of the pie. If everybody in the system starts feeling comfortable with the operation of drones in the open skies then we could fundamentally transform the way we do things.

Who should be responsible for creating public goods?

Although classical economic theory suggests public goods will not be provided by a free market. But in a market like India, where the market is neither free nor regulatory, groups of individuals or organization can come together to voluntarily help government bodies to provide public goods in this market. For example, DigitalSky platform is a software initiative developed by the joint effort of iSPIRT and the government, working towards creating an online platform for registration of drones and obtaining permission for its operation, with a vision of making it paperless and presence-less.

There is tremendous scope for innovation and improvement in this sector. In the case of public goods, no firms will find it profitable to produce these goods because they can be enjoyed for free once they are provided and they cannot prevent this from happening. To provide these goods then, we either rely on governments or private organizations which volunteer to work on these issues.

The growth in India’s drone market would be primarily driven by the proactive initiative of existing players who will lay the foundation of this market in India. Thus DICE and iSPIRT have taken an initiative and are spreading awareness through round table sessions.

Round table sessions organized by DICE and iSPIRT serve as a platform where drone based entrepreneurs come together and think towards growing this industry by creating a model that benefits everyone in the system. The aim is to create a win-win situation in B2B and B2G.

The round table primarily serves two purposes:

  1. To enable strategic partnerships between companies and encouraging companies to contribute to public goods.
  2. Bridging the gap between the companies and the government.

Behavioral economics suggests that individuals can have motivations other than just money.

For example, People may volunteer to contribute to local flood defenses out of a sense of civic pride, peer pressure or genuine altruism.

Even if we have a narrow self-interest point of view we have to understand that voluntarily helping government bodies in tackling and solving the issues in drone rules and regulation will in turn help this market to flourish. And companies or individual contributors will have an underlying first mover advantage. So it’s important to act proactively to help the government to create regulation on your futuristic business model. It’s our job to demonstrate government that business can be done safely with a minimum amount of agreeable risk. Working together will not only accelerate the pace at which the regulations are implemented but also ensure that India takes away a big slice of the $100bn drone market. [5]

How does the future look like?

If you have ever seen the cartoon “The Jetsons” from the 1990’s you can already imagine what the future could look like. We are in an era where we can clearly automation and AI takes over mundane and laborious tasks at an exponential rate. The computers around us today are becoming powerful with each day. It can be witnessed that today it has become much easier to survive and it isn’t hard to survive as it used to be back in the days. We are not too far from the singularity where machine intelligence surpasses human intelligence. Thus we should have an environment where we can ensure that the technology is exploratory and exploitation is avoided.

Technology doesn’t happen on its own, people work together to make those imaginations/dreams a reality. We can already see Proof of concept (POC) of drone deliveries, drone taxis, and other futuristic applications. Who knows what else could we have with us in the next decade. Imagine a future where you would own your own personalised autonomous flying vehicle which takes you to your desired place with just the press of a button. You would have mid-air fueling stations which would enable you to drive without having ever to touch the land. Millions of smaller sized drones would be able to deliver products within minutes just like the internet today delivers information. Drones would become smaller and smaller and nanotechnology will enable us to overcome the limitations we see in drones today. Many other applications will rise up as we start working towards.

If you have any suggestions/solutions/ideas on how the system can be made better you can definitely become a part of iSPIRT / DICE India and write to us on [email protected] or [email protected] and also become a part of the round table.

 

#5 What is the Federated PHR Component of the Health Stack?

PHR – Personal Health Record – is a mechanism to access a longitudinal view of a patient’s health history and be able to use it for different purposes. It is a component of the health stack:


It relies on two building blocks – (a) registries, to know the source of the data; and (b) health identifier, to know whom the data belongs to. Separating out the building blocks with each serving singular functions helps design a more scalable and sustainable system. We follow certain principles for both of these building blocks:

1. Registries are master databases with information about different entities in the healthcare ecosystem, for example, of hospitals, doctors, care beneficiaries, etc. There should be checks and balances built to ensure correctness of data (such as digital signatures, audit trails, etc.), and this information should be made accessible for different use cases (through open APIs, and consent). Opening access to this information will have a positive effect of increased demand, thus improving quality and leading to convergence towards singular sources.

2. Health identifier is a mechanism to integrate a patient’s health records. This identifier should incorporate the following features:

  • The identifier need not be unique. This means that a patient should have the ability to create multiple health identifiers for different health records – think of different digital folders for mental health cases and cancer cases (a common practice in the physical world).
  • The power to unify health records should lie with the patient. In the physical world, this would translate to the patient having the right to either keep two folders or merge them into one. The same should be allowed digitally.
  • Patients should be allowed to use any identifier to verify themselves. However, since we are creating an electronic system of health records, it is important that these be digitally verifiable – such as mobile number, email ID or Aadhaar.

3. Electronic consent, as specified by MeitY, is a mechanism to give consent electronically in a manner that follows the ORGANS Principles – Open, Revocable, Granular, Auditable, Notifiable, Secure.

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With these building blocks in place, we come to features of the PHR architecture:

1. Federated – instead of having a centralised repository of all health records, we propose a federated framework where data resides at the source of generation. This has many benefits – (i) ease of operations, as data is not stored with a single entity (ii) lower costs, as no additional repository is being built (iii) better security, as data is stored at different nodes; and (iv) patient empowerment, as data is being shared directly with the patient.

2. Schema level standardisation – we believe that only standardising the schema without enforcing codification standards (which require a significant behavioural shift) should be sufficient for a number of use cases. Since this standardisation is at an IT systems level, it only requires a one-time mapping and does not require any change in clinical workflows.

3. Health data access fiduciaries – these would be entities that would route the consent and data requests between information users and information providers. In doing so, they would play the role of privacy protection, consent management and user education.

4. Health data vault – this is an option for the patient to store his/ her records in a personal storage space. While most hospitals that capture data continue to store it for a long period of time,  an individual might still choose to store this information separately (for long-term access, trust-deficit between patient and provider, etc.). In such a case, the patient can request a copy of the record to be pushed to his/her health data vault.

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Proposed architecture:

Workflow:

Patient goes to a healthcare provider. At the time of issuance:

Option 1: patient shares mobile number/ email id/ aadhaar no.
1. Provider authenticates user using one of the digital identifiers
2. (a) Provider sends a link to patient for downloading the report. Patient can later link these records with his/ her HDAF; or
2. (b) Patient can sign up with HDAF and search for provider to link records

Option 2: patient shares HDAF ID
1. Provider links patient records to the HDAF

Post linkage, patient can approve requests from data consumers through the HDAF for different use cases.

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We believe that building PHR as a public good will enable interesting use cases to come to life, that would together improve the healthcare ecosystem. While we will continue our quest for these, we would love to receive feedback on our thinking! If you work in this space and have comments, or would like to understand how this could help your product, please drop me a line at [email protected].

A right HS Code ‘need of hour’ for NPSP Success

National Policy on Software Product provides for creating a HS Code under Strategy item 1 for “Promoting Software Products Business Ecosystem”

The tax regime will be demarcated for ‘Software Products’ from ‘Software Services’, by providing clearly defined HS Code for the “Software products (intangible goods)” delivered through any medium; physically or online using internet (to be published within three months of notification of this policy). A model HS code will be evolved that will be further sub categorized based on the type of software products, its inter-linkages with other economic sectors, including services and hardware manufacturing. Thus, software products defined by such identifiable HS code will be treated as goods manufactured in India and will be able to avail all incentives provided under Make in India Programme.

Objective of this blog

There are number of challenges to get the HSN Code issue resolved and to get a right HSN code from the Govt. of India. This blog is an attempt to understand the regimes of HSN/SAC Code use and its application to promote a Software product industry in India to implement the above said item in the NPSP 2019.

It will be good to read the following reference documents (Click below to read)

  1. HS Code Chapter 85
  2. HS Code Chapter 49
  3. SAC Codes

Present status of HSN and SAC Code

After launch of GST, all transactions are to mention the relevant HSN code /SAC Codes are must to be mentioned in Invoices. HSN for Goods and SAC for services.

Under GST regime, all IT Software has been treated as “Service”.  Yet, there exists HSN codes and SAC codes both. HSN codes traditionally meant for physical exports through ports still exist in GST regime as there still will be Physical exports through ports.

iSPIRT has time and again represented to Government of India that the provisioning for a “Digital Goods” regime will help India embark upon a Software product wave. However, the GST regime has assumed all Software as service.

Following HS Codes or SAC codes are in use by Indian Software product companies.

For a full view of the codes relevant file links at CBIC are given above.

HS Code Item Description
4907 00 30 Documents of title conveying the right to use Information Technology software
4911 99 10 Hard copy (printed) of computer software (PUK Card)
8523 80 20 Information technology software on Media (Packaged or Canned)

 

SAC code Item Description
 

9973 31

Under 9973 – Licensing services for the right to use intellectual property and similar products.

Licensing services for the right to use computer software and databases.

 

9984 34

Under 9984 Online Content

Software downloads

 

Most prevalent uses are of

  1. 8523 80 20 – for packaged products and downloads
  2. 9973 31 – SaaS Software

Following Codes are specifically for use of Software Services companies

Under Category 9983 – Management consulting and management services; information technology services.

9983 13 Information technology (IT) consulting and support services
9983 14 Information technology (IT) design and development services
9983 15 Hosting and information technology (IT) infrastructure provisioning services
9983 16 IT infrastructure and network management services
9983 19 Other information technology services n. e. c

The coding mechanism covers both international trade Domestic Tariff Area (DTA) under new GST regime for invoicing.

Present coding is bottleneck for Software product trade

The above coding scheme has emerged from a traditional regime which

  1. Classifies only physical ‘goods’ can only qualify for cross-border trade and hence under HSN and
  2. Software sales is a ‘license to use’ in stead of a product trade.

In addition, it induces a confusion in SAC 9984, where it also lists Software downloads along with other content.

  • ‘Software’ has not been given recognition but how Software is delivered is given an importance.
  • It also does not allow us to account for Software product in a clear manner, both Domestic and International Trade Statistics.
  • It does not allow us to ‘account’ for emerging segments of Software products due to technological change.
  • It is also confusing in sense packaged software downloads can be classified under 9984 also.

 “Having right code system is Central to promotion Software Product Industry and related ecosystem.”

A proper classification and coverage will help us promote Indian Software product industry and account for Software product trade verses Software services bother internationally and domestically.

Adoption of Software product will be an important measure of maturity of digital economy.

What is needed to boost SPI under NPSP

The very basis of NPSP launch by Government of India is the recognition of our Competitive advantage in “Software” and hence capability to create world class products.

We have earlier presented papers to Govt. where “digital goods” verses “services” debate is in advanced stage.

Despite being a Software power house, Indian today has a digital deficit.

Recognizing the “Software products” as a new reality will boost India’s strength in “digital deficit”.

Recognize Software product and Distinguish Products from Services

The goods/products exhibit the following properties (as per internationally accepted definition):

  1. Durability (perpetual or time bound)
  2. Countability – traded commodity can be counted as number of pieces, number of licenses used, number of users etc.
  3. Identifiability – identified as a standardised product
  4. Movability and storage. Can be delivered and stored and accounted as an inventory
  5. Ownership of the right to use
  6. Produced/Reproduced through a process
  7. Marketable/Tradable or can be marketed and sold using standard marked price (except when volume discounts, bid pricing and market promotion offers are applicable).

as distinguished from services that are consumed either instantly or within very short period of time or continually coinciding with the activity of provision of service.

Software product exhibit all the properties of a ‘good’ except that they are intangible. Hence, Software products is an ‘intangible’ good, with discrete symptoms.

Software product brings in high value for the Software manufacturer and is normally tied to “Intellectual Property” in its development. Traditionally all software products were installed and used on end-user computers.

However, with advent of cloud it is possible to ship same product as ‘on-premises’ product (to be installed and used by end-user on their premises) or be installed on computers/cloud resources owned by original manufacturer and used by end-user through internet.

The latter is category called “SaaS” based products.

Some Software take a expanded view and present themselves as ‘platform’ with multiple products integrated together capable of being used alone or as set of products and services and ability to serve at country or global scales.

‘Platforms’ are a reality in software world and to be a power in global game, countries having large “platforms’ will be winders. India has the capacity and capability, but has systemic bottlenecks to be removed.

Technological changed will bring in newer dimensions of trade. In 2019, India should provide direction to worls by setting new trends and nudge global community in that direction.

Software products trade can’t be delimited under ‘license’ to sale regime only.

Trade is central to success of an Industry. Treating Software as mere ‘license’ is limiting the trade under Indian tax regime as of now.

The IP and ‘Software product’ is central to original Software manufacturer (Software product company). Yet, it is a ‘product’ or intangible good.

Other ‘goods’ also have IP attached as patents and copy rights, but that never is the ‘license’ a barrier to sales.

Treating Software product as a license is creating a barrier, as then each sales of Software product is subjected to “withholding tax” regulations under direct taxes.

Treating Software product as intangible goods neither infringes the ownership of IP of Software OEM nor does it cause loss to tax. But, it lubricates the trade.

Break through from tradition leads to success

The traditional understanding of trade in tax regimes does not account for technological changes. Indian took a lead in past and has a reference point of adopting such changes to successfully create an Industry.

India created a success of IT Services industry by breaking tradition. In 1992, there was a similar problem that faced country after launch of Software Technology Park (STP) Scheme. As per customs, the exports of any goods could happen only through ports or at best from foreign post office.

To enable exports through data communication links, SOFTEX form was introduced, feeling the need of hour. This was a breakthrough from existing regulations that gave us glorious 25 years in IT.

Indian can have another glorious 25 years of being a Software power, by adopting a mechanism that can distinguish the Software products from services and recognises Software product as intangible goods.

Recommendations (for creating SW product ecosystem)

A HS code classification for following categories can be issued using the last 2 digits (first 6 Digits being defined under international system).

Following category of definition will solve the issues of raised above for creating favourable environment a Software product Industry.

  • (i) 8523 80 20 – IT Software on media that is not Off-the-self i.e. not covered under Product
  • (ii) 8523 80 21 – Software Product (Pre-packaged software downloaded or Canned Software)
  • (iii) 8523 80 22 – Software Product hosted by OEMs on cloud (SaaS, PaaS Model of Software) and used by end-clients using internet.

Note: Problem with 85238020 is that it can be any Software. The only requirement is it is Information Technology Software and on media.

This will give cover for all Software products in following two categories and leave (i) above for Software other than product on media.

  1. S/W product Used – On premises (on computers/private cloud of end-user) – 8523 80 21
  2. S/w product On Cloud of OEM – 8523 80 22 (SaaS/PaaS)

The above recommendation is minimum basic and should not be a limitation to a more wide and granular classification e.g. a different code for SaaS and PaaS etc.

Can we use SAC code?

It is recommended to use HSN rather than SAC for “Software product” for following reason.

  • (i) The Software ‘product’ attribution is difficult in Services codes and will always be confused with services. SAC is not right place either for a ‘product’ image or for a trade accounting of intangible ‘goods’.
  • (ii) The SAC code classification is not targeted at distinguishing Software services and Software product. Also, the license to use a database can not be same as license to use a pre-packaged product.
  • (iii) It is better Software product are defined in HSN to capture both national and International trade Statistics. Not having them at one place will create redundancy, with chances of lot of import happening under a code under existing HSN 85238020. (The idea is to get clear distinction between Software product from services)
  • (iv) In a “Digital Economy” eventually Software products will have a international trade dimension. Hence, HSN code is a better place.
  • (v) The whole idea of NPSP is to get Software product recognition with a vision aiming India as a “Software product nation”. Hence, we need to start accounting for intangible mercantile”. To make these changes will nudge the system in that direction.
Note:  Some countries have created a HS code under 98/99 for Downloaded Software e.g. China has a code under 980300 for Computer software, not including software hardware or integrated in products. Similarly, some countries are using 9916 as a code for pre-packaged software.

Conclusions

Future of ‘digital economies’ will see trade wards on ‘digital goods’. A meaningful breakthrough from traditional trade regimes is must for a winner. India must be a winner and we should play our games in the area we have enough capability.

Software product Industry is some thing Indian needs badly both for domestic and international trade, specially when our IT Services industry growth is diminishing day by day.

Let us power up the “Software product’ with new coding and classification that recognises Software product with legitimacy to do provided by NPSP.

In 1992, MeitY (then DOE) took lead and created a breakthrough that led to 25+ years of Success of IT Industry. Once more MeitY leadership can take lead and create next 25 golden years by making Indian a Software product nation.

India’s new Software Products Policy marks a Watershed Moment in its Economic History – Can the nation make it count?

India is on the glide path of emerging as one of the economic powerhouses of the world – its economy is ranked sixth in size globally (and slated to climb to second by 2030); it has the fastest growing annual GDP growth rate amongst (major) countries; the country ranked in the world’s top 10 destinations for FDI in 2017-18. With a population of 1.3 billion and a large middle class of ~300 million+, it is one of the most attractive markets globally. Specifically in the digital economy – India has a huge $ 167 billion-sized IT industry; it boasts of a 55% market share in global IT services & outsourcing; 1140 global corporations run their tech R&D centres in India. In the tech startup space, India has attracted Private Equity (PE) & Venture Capital (VC) investments of $33 billion in 2018, and it has over a dozen unicorns (startups with over $1 billion valuations).

These data-points are truly impressive and would make any country proud, but they belie one of the glaring historical paradoxes of the Indian economic story – the sheer absence of world-beating products from India. Ask Indians to name three truly world class, globally loved Indian products or brands – chances are they’ll struggle to name even one. Check out the Global Innovation Index 2018 from the World Intellectual Property Organization (WIPO) – India doesn’t figure in the top 50 countries. Or the Interbrand 2018 Top 100 Global Brands Ranking – there’s no Indian name on that list. Leave aside brick & mortar industries, the Indian IT & Digital sector doesn’t fare any better on this count. IT services, which forms its lion’s share comprises largely of low end, commoditized services or cost arbitrage based outsourcing contracts. Most of the new age tech unicorns in India are based on ideas and business models that are copied from foreign innovators (with some local tweaks) – their outsized valuations are a result of them being the gatekeepers to the large Indian market, rather than from having created path-breaking products from first principles. So the overall trend is that India has a large domestic market, and it is a big supplier of technical brain power on the world stage, but when it comes to building innovative products, we come to a total cropper. This is best reflected in the Infosys Co-Founder, Narayan Murthy’s candid quote – “There has not been a single invention from India in the last 60 years that became a household name globally, nor any idea that led to the earth-shaking invention to delight global citizens”.



The launch of the National Software Products Policy (#NSPS):

It is in this light that the recently rolled out National Software Products Policy (#NSPS) by the Ministry of Electronics & IT (MeitY), Government of India marks a watershed moment. For the very first time, India has officially recognised the fact that software products (as a category) are distinct from software services and need separate treatment. So dominated was the Indian tech sector by outsourcing & IT services, that “products” never got the attention they deserve – as a result, that industry never blossomed and was relegated to a tertiary role. Remember that quote – “What can’t be measured, can’t be improved; And what can’t be defined, can’t be measured”. The software policy is in many ways a recognition of this gaping chasm and marks the state’s stated intent to correct the same by defining, measuring and improving the product ecosystem. Its rollout is the culmination of a long period of public discussions and deliberations where the government engaged with industry stakeholders, Indian companies, multinationals, startups, trade bodies etc to forge it out.

#NSPS will bring into focus the needs of the software product industry and become a catalyst in the formulation of projects, initiatives, policy measures etc aimed at Indian product companies. One of its starting points is the creation of a national products registry that’s based on a schematic classification system. Other early initiatives that will help in operationalizing the policy – setting up of a Software Products Mission at MeitY, dedicated incubators & accelerators for product startups, development of product-focused industrial clusters, preferential procurement by the government from product companies, programs for upskilling and talent development etc.

The Indian IT / Software Industry Landscape:

To understand the product ecosystem, one needs to explore the $ 167 billion-sized Indian IT / Software sector into its constituent buckets. The broad operative segments that emerge are –

1) IT Services & ITES: This is by far the largest bucket and dominates everything else. Think large, mid & small sized services companies throughout the country servicing both domestic & foreign markets. e.g. TCS, Infosys, Mindtree, IBM, Accenture, GE etc
2) Multinationals / Global Development Centers: These are foreign software companies serving Indian markets and/or using India as a global R&D development centre. e.g. Microsoft, Google, Netapps, McAfee, etc
3) Domestic Product Companies: This is a relatively small segment of Indian software product companies selling in domestic or overseas markets e.g. Quickheal, Tally etc.
4) Startups – E-commerce / Transactional services: This is the large, fast-growing segment of startups into direct (or aggregated) transactional businesses like e-commerce, local commerce, grocery shopping, food delivery, ride sharing, travel etc. e.g. BigBasket, Flipkart, Amazon, Grofers, Milkbasket, Swiggy, Dunzo, Uber, Ola, Yulu, Ixigo, MMT etc. You could also include the payment & fintech companies in this bucket – e.g. Paytm, Mobikwik, PhonePe, PolicyBazaar, Bankbazaar etc. This segment has absorbed the maximum PE & VC investments and is poised to become bigger with time.
5) Product Startups – Enterprise / CoreTech / Hardware: This is comprised of companies like InMobi, Zoho, Wingify, Freshdesk, Chargebee, Capillary, electric vehicle startups, drone startups etc. They could be serving Indian or foreign B2B markets.
6) Product Startups – Consumer Internet: This segment is composed of media/news companies, content companies, social & professional networking, entertainment, gaming etc. e.g. Dailyhunt, Inshorts, Sharechat, Gaana, Spotify, YouTube, video/photo sharing apps, Dream11 etc.

(N.B. Off course, this segmentation schema is not water-tight and there could be other ways to slice and/or label it)

Why India lags behind in Software Products?

The global software products industry has a size of $ 413 billion, and it is dominated by US & European companies. India’s share in that pie is minuscule – it is a net importer of $ 7 billion worth software products (India exports software products worth $ 2.3 billion, while it imports $ 10 billion)“Software is eating the world” – entire industry segments are being re-imagined and transformed using the latest developments in cloud computing, artificial intelligence, big data, machine learning etc. In this scenario, it is worth understanding why India seems to have missed the software products bus. The reasons are multifarious, cutting across cultural, economic, market, behavioural and societal factors –

a) The cultural aversion to Risk, Ambiguity & Failure: Indian society has traditionally valued conformity and prepares people not to fail. Our family and educational environments are geared for teaching us to eschew risk-taking and avoid ambiguity. But building products is all about managing risk and failure. When you take a product to market from scratch, you take on multiple types of risk – market risk, execution risk, product risk. For many people in India, this is in stark contrast to their social/attitudinal skills and expectancies they have built up over a lifetime.

b) “Arbitrage” offers the Path of Least Resistance: If you pour water down a heap of freshly dug mud, it will find the path of least resistance and flow along it. Human behaviour is similar – it is conditioned to look for the path of least resistance. And “arbitrage” offers that least resistance path in the IT industry – be it cost arbitrage, labour arbitrage, geographical arbitrage, concept arbitrage et al. The IT services industry leverages the cost arbitrage model via cheaper labour costs. Many of the transactional e-commerce startups in India have used geographical arbitrage to their advantage – once a successful product or model is created in another market, they bring it to India to capitalize on a local first mover advantage, build a large valuation and become the gatekeeper to the market before the (original) foreign innovators arrive in India many years later! But arbitrage means, that while you are taking on market & execution risk, you are not assuming the product risk. These dynamics played out at scale over the years has meant it is easier for a wannabe entrepreneur in India to go the arbitrage way and quickly build out a business using a readymade template than go down the software products path, which has a much longer gestation & higher risks associated with it.

IMHO, this “arbitrage” factor represents the single biggest reason why India has seen a virtual explosion in e-commerce startups, at the expense of product startups. Look around the startup ecosystem and you’ll see all kinds of transactional businesses involving activities like buying, selling, trading etc. Why… this almost reminds of that famous 17th-century quote by Napolean when he described Britain as a “nation of shopkeepers”🙂

c) Tech isn’t enough – you need design, marketing skills: To build great software products, you not only need strong technical abilities but also good design, marketing & branding skills to carve out a compelling product offering. Ask any startup in India – one of their most common problems is the inability to hire good designers and UX professionals. This puts Indian companies at a comparative disadvantage – even if they have the engineers to build the technology, their inability to translate that technology into an appealing user experience often means the difference between success and failure.

d) Lack of “patient” venture capital: This is a complaint you hear often from Indian product startups – the lack of venture capital that’s willing to be patient over the longer gestation cycles software products demand. While there is some truth to it, the more likely explanation is that software product companies present a “chicken & egg problem” for Indian startup investors. Investors are driven by financial returns – if they see returns from product companies, they’ll bet their monies on them. It just so happens, that Indian investors haven’t yet seen venture sized returns from software product companies. Hopefully, this dynamics will even out as the ecosystem grows.

e) Inadequate Domestic Market Potential:
 Many software products are monetized via subscription models, where the market’s ability (and propensity) to explicitly pay for the service is critical for success. Sometimes (SAAS/enterprise) companies try their model in India, only to discover there just aren’t enough paying customers. These startups may then be left with no choice but to either target foreign markets, or in extreme cases just move abroad for business continuity. Thus it has become imperative for the Indian domestic market to grow in size and scale to ensure the viability of product startups.

Platform companies from India are a non-starter: One aspect that needs calling out specifically is the sheer absence of any platform companies from India. Platforms are the next evolutionary step for scaled software product companies – if you get to the stage, where other industry stakeholders start building on top of the plumbing you’ve provided (thereby becoming totally dependent on you), that’s an immensely powerful position to be in e.g. AWS, Android, iOS etc. This factor assumes even greater importance given upcoming trends in AI, machine learning, deep learning, automation, robotics – the companies which emerge as platform providers may offer strategic advantages to the country of their origin. As depicted by the graphic below, India is as yet a non-starter on this count. This is deeply worrying – imagine a scenario 10-15 yrs out, when Indian software companies start dominating the domestic markets and also are a force to reckon with globally, but it’s all built on intellectual property (IP) & platforms created & owned by foreign companies!!

Some Suggested Action Areas for the National Software Policy:

MeitY in consultation with industry stakeholders is likely to create an implementation roadmap for #NSPS. Here are some specific action points I’d like to call out for inclusion in that roadmap:

Domestic Market Development: As explained earlier, the Indian domestic market needs curated development to reach a potential that makes product startups viable without having to depend on overseas markets. This calls for a series of steps, such as policy support from sectoral regulators, funding support via special go-to-market focused venture capital funds etc. The government could also help by announcing a preferential procurement policy from domestic software product companies. The Government e Marketplace (GeM) can help in institutionalizing these procurement norms.

Creating Early Awareness (Catch ‘em young): Fed by constant news in media about IT services, ITES, BPOs, outsourcing etc the average person in India is likely to be aware of IT services, but not necessarily software products. Many people may have friends and family members who work at TCS, Infosys, Wipro, IBM etc, but the same can’t be said about product companies. Given this scenario, it is important to create early awareness about products in schools, colleges, universities across metros, Tier 1, Tier 2 & 3 towns. Some of the world’s biggest product innovators like Bill Gates, Steve Jobs started writing software before they had reached high school – so if we can catch people young, we actually get a much longer runway to get them initiated into the product ecosystem. If they learn about products after they’ve started working in the industry, or when planning a mid-career shift from services to products, it might be quite late.

Reducing entry barriers for starting Software Product Companies: As shared earlier, one of the big problems in the Indian software product space is that there just aren’t enough entrepreneurs starting up product businesses. E-commerce & transactional services actually absorb (or suck in) a lot of entrepreneurial talent by virtue of having lower barriers to entry. To make a serious dent in products, you need a much larger number of product companies started off the ground. This can happen only by systematically bringing down the entry barriers – driving awareness, providing funding support, providing market development support etc. Advocacy and evangelism by software product industry role models also can help develop confidence and conviction in people to think products instead of services or e-commerce.

Building domestic Software Product Companies atop public goods: Silicon Valley has shown how you can build successful commercial applications on top of public goods (e.g. Uber built on top of GPS, Google maps & mobiles). In a similar way, public goods in India like IndiaStack, or HealthStack can be the base (or the plumbing) over which commercial applications get built for mass scalability. The good news is this trend has already been kickstarted, though its still early days.

This blog was first published at Webyantra.com