India Financial Services – Disrupt or Be Disrupted

Matrix India recently hosted two firebrands of the financial services world, Mr Sanjay Agarwal, founder AU Small Finance Bank and Mr Sharad Sharma, founder iSPIRT Foundation, Volunteer at India Stack, for a no holds barred discussion at the Matrix Rooftop in Bangalore. Here is an excerpt from the evening and some of our learnings for fin-tech entrepreneurs.

Part 1 of the two-part series features the untold story of AU Bank, in the words of Sanjay Agarwal himself, as below:

Sanjay Agarwal – on his background and early days before starting AU:

“In my early Chartered Accountancy days, I started out by doing audit work, taxation, and managing clients. I had studied hard and was naïve and enthusiastic at that time hoping, to solve the world’s problems. This pushed me to work harder and I had a desire to do something more.

I believe that we are the choices we make. While evaluating various choices, I eliminated all the options that I didn’t want to pursue e.g. to work for a fee or commission and then I started digging deeper on what really interests me – that was when the concept of AU Financiers was formed.

In 1996, as 26 years old, I began approaching HNIs to raise capital, as back then, there were no VCs. I was fortunate to raise INR 10 cr at a 12% hurdle rate and I had to secure the funding with a personal guarantee. But what is the guarantee of the guarantor? No one questioned this at that time. So, I technically became one of the first P2P lenders, and structured a product that didn’t exist– short term, secured and at a 30% rate of interest. That was the start of the AU journey.”

The Early Days of AU:

“I started off AU as a one-man army. I was everything from the treasurer to the collector. Slowly we built our team and rotated the 10 cr of capital to disburse 100 cr of loans – not a single rupee was lost. There were several challenges at that time for e.g., there was no CIBIL score, financial discipline was lacking, people were still learning how to take a loan and repay it and customer ids didn’t even have a photograph. But somehow, we managed.

The period from 1996 to 2002 taught me everything I needed to learn – how to lend, how to collect, how to manage people, read people’s body language, and most importantly how to manage yourself in different situations. I follow all of that until today, and my team also benefits or suffers from those learnings of mine even today. In those 7 years, we would have dealt with 2000 customers out of which 500 defaulted. That was the ratio of defaulters – 25%. But we managed and there were actually no NPL’s.”

Partnering with HDFC Bank

“In 2002, retail credit was beginning to take off, but our HNIs started pulling their money out, as they wanted a higher return. However, at that time, the most premium bank in the country, HDFC Bank, appointed us as their channel partner. The model we followed was very simple – AU was responsible for sourcing the customer, KYC processing and doing on the ground diligence while loans were booked on HDFC’s balance sheet. HDFC is perceived to be a conservative bank, and it is – however, they gave me Rs 400 cr, on a net worth of only Rs 5 cr! They made an exception in our case due to our strong track record, through execution, sound knowledge of the market, and most importantly our integrity.

By 2008, our net worth had increased to Rs 10 crore through internal accruals. At that time, HDFC told us that we can’t give you any more capital, as we were overleveraged, and that we now needed to bring in equity capital if we wanted to grow.”

Growing the balance sheet and partnering right

“I had two choices at that point, I could continue in Jaipur, keep my ambition under control and live comfortably or figure out what else is possible. I chose the latter and this marked the beginning of my partnership with Motilal Oswal. Its easier to raise equity now, back in the day shareholder agreements used to look like loan agreements with min IRR requirements, etc. As luck would have it, a few months after we raised equity, the Lehman Brothers crisis broke out and most banks stopped funding. We were supported once again by HDFC – they were our saviour and I will cherish my relationship with them always. Once the market settled down, having survived this negative environment, there was no looking back.

Our next major investor was IFC. For the entrepreneurs here, I want to say that you have to be selective about your investors, who will help with not just capital – there should be added value they bring to the table apart from money. IFC was giving me 20% lower valuation, but I knew that I didn’t have any lineage to fall back on. As a first-generation entrepreneur, I had to raise money on the strength of my balance sheet and not basis my family name. I knew that partnering with IFC would shift the perception of AU within the industry, especially for PSU banks. After their investment, we grew from one bank relationship with HDFC to 40 bank partnerships. One thing led to another and Warburg Pincus, ChrysCapital, and Kedaara Capital all came on board after that.”

Consistent performance

“From 2008 onwards, we started diversifying from vehicle lending and got into other forms of secured lending like a loan against property, home loans etc. We never tried unsecured lending and never ventured into microfinance or gold finance. Those were very popular products at that time but focusing on what we were good at resulted in a consistently strong performance. We never had a bad year. In the world of finance, the margin of error is very less. If you have a bad year you can almost never come back. Good companies survive regardless of the market condition, you can never blame the market for your company’s poor performance. In 2015-16, we were a successful NBFC, our RoA was close to 3% with an asset base of close to 8,000 crores, with a RoE of 27-28% and everyone was chasing us – the question at that time before us was, what next?”

How we became a bank

“As an NBFC, it is very hard to manage a book of Rs 50,000 cr with the same efficiency and effectiveness as it’s a people dependent business, there are limits to the kind of products you can do and you can’t keep raising capital. Hence, we became a bank because we wanted to be there for the next 100 years and that perpetual platform can only be created through a bank. That is the biggest platform and it is not available at a price. It’s available through your integrity, business plan and execution. Today, we receive Rs 100 cr of money every single day. This is the same person who was struggling to raise Rs 10 cr in 1996, and is now getting money at the speed of Rs 100 cr every day – it feels amazing but there is a lot of responsibility!”

Part 2 of the two-part series features insights from Sharad Sharma:

Recognizing the Athletic Gavaskar moment in Indian Financial Services

“Indian financial services industry is going through its equivalent of the Athletic Gavaskar project of Indian cricket. The motive behind this project was to instil the importance of being athletic to successfully compete in the modern game. A new team was created with the rule that if you are not athletic, you cannot be a part of the team, regardless of other skills that you bring to the table. Virat Kohli eventually became the captain of this team and the results are for everyone to see. Similar yet contrasting stories played out in hockey and wrestling. In hockey, we lost for 20 years because we refused to adapt to the introduction of astroturf. However, in wrestling, the Akhadas in Haryana embraced the move from mud to mat with rigour, and Indian wrestling is already punching above its weight class and hopefully will do even better over time. The idea of sharing this is that similar to sports, sometimes an industry goes through a radical shift. Take the telecom space, for example, if Graham Bell came alive in 1995, he would recognize the telephone system, 20 years later he wouldn’t recognize it at all. The banking industry is going to go through a hockey/wrestling or communications type disruption and a lot of us are working hard to make it happen.”

Infrastructure changes lead to New Playgrounds

“All the banks and NBFCs put together are not serving the real India today. We have 10 million+ businesses that have GST id’s, out of which 8 million+ are big enough to pay GST on a monthly basis, but only 1.2 million have access to NBFC or bank finance. This is a gap that needs to be addressed and it cannot be solved through incremental innovations.

Entrepreneurs and incumbents should learn from what happened in the TV industry when new infrastructure became available. When India went from state-run TV towers in 34 cities to cable and satellite TV in pretty much every town, there was a massive new market that was unlocked that did not want to watch the same Ramayan or Hum Log TV serials. What transpired was an explosion of entertainment products because of the high demand stemming from the new markets and the TV channel players that reinvented their content is thriving today while others that did not, are barely surviving or have shut down.

So where does this leave the bankers? I think it is the biggest opportunity for the right banker who understands this problem, wants to serve this section of the market and is willing to reinvent the way they do their business and take advantage of the new infrastructure that will be available.”

Dual-immersed entrepreneurs have the biggest advantage

“Entrepreneurs who are immersed in the messiness of both the new infrastructure and the old problem are “dual immersed entrepreneurs”. They are the ones that succeed when a market shift is underway. Today this is not happening. Some of our city-bred entrepreneurs are more comfortable with California rather than Bharat. And some of our sales-oriented entrepreneurs are intimidated by the messiness of the new technology infrastructure.”

New Playgrounds need new Gameplay

“In a world where eKYC exists, and we can transfer money through UPI from a phone, and sign documents digitally – we are ready to deliver financial products on the phone and this is the disruption that is required. Access to credit drives the economy and with this new infrastructure, it is now possible to lend to the real India. However, it’s easy to give money, but the ability to get it back and keeping defaults at a minimum is the real trick. Even there we are moving towards seeing a radical improvement. Debt providers now have powers they never had and defaulters are being brought to book. Customers are now incentivized to build their own credit history to get better and lower interest rates over time. A new Public Credit Registry is coming to enable this at scale. But the biggest innovation is related to the dramatic shortening of the tenor. One can structure a one-year loan into 12 monthly loans or 52 weekly loans. This rewards positive customer behaviour and brings about the behaviour change that is needed.

There is no secret sauce here, it requires gumption – like that shown by Reed Hastings, founder of Netflix. He disrupted the TV and home video industry by first having the wisdom to go from ground to cloud and then again when they started developing original content. In both cases, he had little support from the board or investors. If you can reinvent yourself before it becomes necessary, you’re a winner but this is harder to do for a successful company. The legacy of success provides resisters with the clout to block change. The real beneficiary of Aadhaar based eKYC in the telecom world was not the incumbents but Jio – eKYC allowed Jio to acquire customers at an unprecedented scale and they saved INR 5000 crores on KYC costs as well.”

About iSPIRT

iSPIRT is a non-profit think tank that builds public goods for Indian product startup to thrive and grow. iSPIRT aims to do for Indian startups what DARPA or Stanford did in Silicon Valley. iSPIRT builds four types of public goods – technology building blocks (aka India stack), startup-friendly policies, market access programs like M&A Connect and Playbooks that codify scarce tacit knowledge for product entrepreneurs of India.

About AU Small Finance Bank:

AU Small Finance Bank Limited (AU Bank) started in 1996 as a vehicle financing NBFC, AU Financiers and scaled to touch over a million underbanked and unbanked customers across 11 states of North, West and Central India, prior to becoming a bank in April 2017. During this time, AU attracted equity investments from marquee investors such as IFC, Warburg Pincus, Chrys Capital, Kedaara Capital and recently went public when its IPO was oversubscribed ~54 times. Over the years, AU Bank, led by its founder Sanjay Agarwal, has created significant shareholder value with its equity value growing from ~$120 million in 2012 to current market capitalization of ~$3 billion.

Please Note: The blog was first published and authored by Matrix India Team and you can read the original post here: matrixpartners.in/blog

Policy Hacks On India’s Digital Sky Initiative 1.0

On August 27, 2018, India announced its much-awaited Civil Aviation Regulations (CAR) for drones. The new CAR had many improvements on the original draft published last year, but most important was the introduction of Digital Sky, a technology platform that would handle the entire process of regulating the registration and permissions for all Remotely Piloted Aircraft Systems above the nano category, i.e. any remote controlled or automated flying object – multi-rotor or fixed-wing, electric or IC-engine. These set of regulations along with the announcement of Digital Sky drone policy represent the government’s “Drone Policy 1.0”.

What this policy isn’t?

From the outset, one of the largest criticisms of the draft was its seeming omission of beyond visual line of sight flights, as well as those of fully-autonomous operations. Combined with a ban on delivery of items, it would seem like the government is pre-emptively clamping down on some of the most promises of Unmanned Aerial Vehicles before they even begin.

But on close inspection, the Ministry of Civil Aviation has made an interesting & what looks to be a promising decision in naming this policy as “1.0”. Through the various public comments made by the Minister of State for Civil Aviation, Jayant Sinha, it can be gathered that there is a phased-approach being adopted for the planning and implementation of the government’s strategy for unmanned aerial vehicles.

The more complex commercial operations will be rolled out atop the digital platform, allowing the government to test the waters before allowing potentially risky operations.

At iSPIRT, we appreciate this data-driven, innovation-friendly yet safety-first approach that has been inherent to all of civil aviation.

What does the policy say?

The policy lays out a general procedure for registering, and taking permissions to fly for every type of remotely piloted aircraft system (RPAS). A good summary of the regulations themselves, what you need to fly, what you can and cannot do is given here. We will be focussing this blog post on mystifying Digital Sky and the surrounding technology – How it works, what it does and what should private players be doing about it.

What is Digital Sky?

Digital Sky is essentially a barebones Unmanned Aircraft Traffic Management system. An Unmanned Traffic Management is to drones what ATC is to aircraft. Most countries are looking to external UTM providers to build and run this digital enabling infrastructure. The government of India, in continuing its digital infrastructure as public goods tradition, has decided to build and run its own UTM to ensure that this critical infrastructure system remains committed to interoperability and is free from the risks of vendor capture in the long run. Digital Sky is the first version of such a UTM for managing drone flights in both controlled as well as uncontrolled airspaces.

For consumers, Digital Sky essentially constructed of three layers. The three layers are Online Registrations, Automated Permissions and Analytics, Tracking and Configurable Policies.

Online Registrations are the layers that onboard operators, pilots, RPAS and manufacturers on to the Digital Sky Platform. It will be a fully digital process, and applicants can track their applications online. All registered users will have an identity number, including the RPAS, which will get a Unique Identification Number (UIN). There is a private key attached to the UIN allowing the drone to prove it is who it claims to be through digital signatures.

Automated Permissions is the transaction layer that digitizes the process of seeking airspace clearance. Using Open APIs or a portal provided by the government, drones can directly seek permissions by specifying the geographic area, time of operations & pilot registration id, signed with the UIN of drone. In response to the API call or portal request, an XML file digitally signed by the DGCA is generated. This XML response is called the Permission Artefact.

All RPAS sold in India under the new policy must carry firmware that can authenticate such a Permission Artefact. Further, they must confirm that the flight parameters of the current mission match those given in the authenticated Permission Artefact. If these parameters do not match, the RPAS must not arm. This condition is referred to simply as No Permission, No Takeoff or NPNT. Thus, the requirement is that any RPAS (except nano) operated in India should be NPNT compliant. We will cover what it means to be NPNT compliant in part two of this series.

To deal with areas of low connectivity, this authenticated request can be carried prior to the flight itself, when connectivity is available. The Permission Artefact can be stored, carried and read offline by an NPNT-compliant RPAS with a registered UIN. Thus flight operations in remote or low-connectivity areas will not be severely impacted. While this seems tedious, it promises to be a lot easier than the draft regulations, which required the filing of flight plans 60 days in advance.

Digital Sky will classify all existing airspace into three colour-coded zones: Green Zones are where drones are pre-authorized to fly, but must still obtain a permission artefact to notify the local authorities of their intent to fly. On applying for permission, a permission artefact is returned instantly. Red Zones are where drone operations are forbidden from taking place. This includes areas such as airports, borders and other sensitive areas. Amber Zones are areas restricted by appropriate reasons as mentioned in the CAR where additional permissions are required. These requests are also initiated and managed through the Digital Sky Platform

Analytics, Tracking & Configurable (ATC) Policies is a shorthand for the regulatory functions that the DGCA will carry out to regulate the use of airspace by unmanned aircraft. It involves functions such as the classification of Red, Amber & Green zones, deconfliction of overlapping flights, incident response, etc.

The MoCA has articulated its desire for an ecosystem-driven approach to building out the drone industry. From an earlier draft of the No Permission No Takeoff technical document shared with manufacturers, it is expected that this layer of Digital Sky will be opened up to private players labelled as Digital Sky Service Providers (DSPs). We will cover more about Digital Sky Service Providers in part three of this series.

Conclusion

Digital Sky appears to be a move towards a more data-driven, phased-approach to policy and regulation for emerging technology. It is a global first and offers a truly forward-looking approach compared to most other nations.

For operators, in the long term, a formal system leads to an eco-system of authorised players, increase in trust, and rise of a legitimate industry. 

Note:  We have been actively following the Digital Sky policy development, Intend to bring in Part two of this blog after an active role out and implementation starts.

Why the SC ruling on ‘Private Players’ use of Aadhaar doesn’t say what you think it does

On behalf of iSPIRT, Sanjay Jain recently published an opinion piece regarding the recent supreme court judgement on the validity of Aadhaar. In there, we stated that section 57 had been struck down, but that should still allow some usage of Aadhaar by the private sector. iSPIRT received feedback that this reading may have been incorrect and that private sector usage would not be allowed, even on a voluntary basis. So, we dug deeper, and analyzed the judgement once again, this time trying to disprove Sanjay’s earlier statement. So, here is an update:

Section 57 of the Aadhaar act has NOT been struck down!

Given the length of the judgement, our first reading – much like everyone else’s was driven by the judge’s statement and confirmed by quickly parsing the lengthy judgement. But in this careful reanalysis, we reread the majority judgement at leisure and drilled down into the language of the operative parts around Section 57. Where ambiguities still remain, we relied on the discussions leading up to the operative conclusions. Further, to recheck our conclusions, we look at some of the other operative clauses not related to Section 57. We tested our inference against everything else that has been said and we looked for inconsistencies in our reasoning.

Having done this, we are confident in our assertion that the judges did not mean to completely blockade the use of Aadhaar by private parties, but merely enforce better guardrails for the protection of user privacy. Let’s begin!

Revisiting Section 57

Here is the original text of section 57 of the Aadhaar Act

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose a purpose backed by law, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

Now, let us simply read through the operating part of the order with reference to Section 57, ie. on page 560. This is a part of paragraph 447 (4) (h). The judges broke this into 3 sections, and mandated changes:

  1. ‘for any purpose’ to be read down to a purpose backed by law.
  2. ‘any contract’ is not permissible.
  3. ‘any body corporate or person’ – this part is struck down.

Applying these changes to the section, we get:

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose a purpose backed by law, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

Cleaning this up, we get:

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual pursuant to any law, for the time being in force:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

It is our opinion that this judgement does not completely invalidate the use of Aadhaar by private players, but rather, specifically strikes down the use for “any purpose [..] by any body corporate or person [..] (under force of) any contract”. That is, it requires the use of Aadhaar be purpose-limited, legally-backed (to give user rights & protections over their data) and privacy-protecting.

As an exercise, we took the most conservative interpretation – “all private use is struck down in any form whatsoever” – and reread the entire judgement to look for clues that support this conservative view.

Instead, we found that such an extreme view is inconsistent with multiple other statements made by the judges. As an example, earlier discussions of Section 57 in the order (paragraphs 355 to 367). The conclusion there – paragraph 367 states:

The respondents may be right in their explanation that it is only an enabling provision which entitles Aadhaar number holder to take the help of Aadhaar for the purpose of establishing his/her identity. If such a person voluntary wants to offer Aadhaar card as a proof of his/her identity, there may not be a problem.

Some pointed out that this is simply a discussion and not an operative clause of the judgement. But even in the operative clauses where the linking of Aadhaar numbers with bank accounts and telecom companies is discussed, no reference was made to Section 57 and the use of Aadhaar by private banks and telcos.

The court could have simply struck down the linking specifically because most banks and telcos are private companies. Instead, they applied their mind to the orders which directed the linking as mandatory. This further points to the idea that the court does not rule out the use of Aadhaar by private players, it simply provides stricter specifications on when and how to use it.

What private players should do today

In our previous post, we had advised private companies to relook at their use of Aadhaar, and ensure that they provide choice to all users, so that they can use an appropriate identity, and also build in better exception handling procedures for all kinds of failures (including biometric failures).

Now, in addition to our previous advice, we would like to expand the advice to ask that each company look at how their specific use case draws from the respective acts, rules, regulations and procedural guidelines to ensure that these meet the tests used by this judgement. That is, they contain adequate justification and sufficient protections for the privacy of their users.

For instance, banks have been using Aadhaar eKyc to open a bank account, Aadhaar authentication to allow operation of the bank accounts, and using the Aadhaar number as a payment address to receive DBT benefits. Each of these will have to be looked at how they derive from the RBI Act and the regulations that enable these use cases.

These reviews will benefit from the following paragraphs in the judgement.

The judgement confirmed that the data collected by Aadhaar is minimal and is required to establish one’s identity.

Paragraph 193 (and repeated in other paras):

Demographic information, both mandatory and optional, and photographs does not raise a reasonable expectation of privacy under Article 21 unless under special circumstances such as juveniles in conflict of law or a rape victim’s identity. Today, all global ID cards contain photographs for identification alongwith address, date of birth, gender etc. The demographic information is readily provided by individuals globally for disclosing identity while relating with others and while seeking benefits whether provided by government or by private entities, be it registration for citizenship, elections, passports, marriage or enrolment in educational institutions …

The judgement has a lot to say in terms of what the privacy tests should be, but we would like to highlight two of those paragraphs here.

Paragraph 260:

Before we proceed to analyse the respective submissions, it has also to be kept in mind that all matters pertaining to an individual do not qualify as being an inherent part of right to privacy. Only those matters over which there would be a reasonable expectation of privacy are protected by Article 21…

Paragraph 289:

‘Reasonable Expectation’ involves two aspects. First, the individual or individuals claiming a right to privacy must establish that their claim involves a concern about some harm likely to be inflicted upon them on account of the alleged act. This concern ‘should be real and not imaginary or speculative’. Secondly, ‘the concern should not be flimsy or trivial’. It should be a reasonable concern…

Hence, the privacy risk in these use cases must be evaluated in terms of the data in the use case itself, as well as in relation to biometrics, and the Aadhaar number in the context of the user’s expectations, and real risks. Businesses must evaluate their products, and services – particularly those which use Aadhaar for privacy risks. It is helpful that the UIDAI has provided multiple means of mitigating risks, in the form of Registered Devices, Virtual Ids, Tokenization, QR Codes on eAadhaar, etc. which must be used for this purpose.

What private players should do tomorrow

In the future, the data protection bill will require a data protection impact assessment before deploying large scale systems. It is useful for businesses to bring in privacy and data protection assessments early in their development processes since it will help them better protect their users, and reduce potential liability.

This is a useful model, and we would hope that, in light of the Supreme Court judgement, the Government will introduce a similar privacy impact review, and provide a mechanism to regulate the use of Aadhaar for those use cases, where there are adequate controls to protect the privacy of the users and to prevent privacy harms. Use cases, and an audit/enforcement mechanism matter more than whether the entity is the state, a public sector organization, or a private sector organization.

Note: This is in continuation of Sanjay Jain’s previous op-ed in the Economic Times which is available here and same version on the iSPIRT blog here.

The writer is currently Partner, Bharat Innovation Fund, and Chief Innovation Officer at the Centre for Innovation, Incubation and Entrepreneurship, IIM Ahmedabad. As a volunteer at iSPIRT, he helped define many of the APIs of the India Stack.  He was the Chief Product Manager of UIDAI till 2012

(Disclaimer: This is not legal advice)

Build On IndiaStack – Venture Pitch Competition

Announcing ‘Venture Pitch Competition: #BuildOnIndiaStack’

Dalberg and iSPIRT invite applications from early-stage ventures that are tech-
based solutions leveraging the India Stack platform at the core of their business
model to bring financial or transactional services to the underserved in India.
Pitch to some of the leading investors and thinkers in the Indian start-up ecosystem,
including the Bharat Innovations Fund, Omidyar Network and Unitus Seed Fund.
Winners will spend an hour of 'Think Time' – a mentorship session with
technology evangelist Nandan Nilekani.

Who are we looking for?

We are open to all innovations that use the India Stack to unlock new business
models or reach previously underserved new customer segments across sectors
such as financial services, education, healthcare and others. Some core focus areas
for the competition may include digital lending and supporting activities, such as
alternative credit scoring; sector specific affordable digital finance services such as
health insurance or education loans; sector specific digital services such as skilling
and certification, property registration agreements, patient-centric healthcare
management; and SaaS platforms “as a service” that support the development of
other India Stack based innovations such as Digi-locker or e-sign providers.

 

Who is eligible?
All applicants should:
1. Meet the 3-point criteria: tech enabled, leveraging India Stack Platform and
serving the underservedBe

2. Be a part of two (minimum) to four (maximum) members team including the
founder of the companyBe early stage start-ups that have received only seed (or limited angel)

3. Be early stage start-ups that have received only seed (or limited angel)
funding, if at all

 
What is in it for you?
The investor group, comprising of Bharat Innovations Fund, Omidyar Network and
Unitus Seed Fund, is a network of investors and operators, entrepreneurs and
technologists, designers and engineers, academicians and policy makers, with the
singular mission to solve some of India’s toughest problems.

Through this event you have an opportunity to receive:

-Exclusive focus on tech innovations that leverage the India Stack platform
and have the potential to address the underservedFlexible

-Flexible, insight driven, funding of up to Rs. 8 lakhs for early stage, innovative
modelsStrategic

-Strategic business support, through their specialists to support investees in
their strategy and growthA chance to be a part of the India Stack ecosystem through partnerships,

-A chance to be a part of the India Stack ecosystem through partnerships,
pilots, workshops, conferences and network building exercises

Visit www.buildonindiastack.in and send your pitch now.

Thoughts on Open Source Communities

Supporting open source users seems like a thankless job. There have been many blogs written on this topic. Developers have stopped maintain popular projects because of the burn this causes. People who use open source projects, indirectly assume that they are entitled to free support, even if they have taken no effort to understand the issue, or tried searching for a solution.

Image by Andrew Branch

At some point, it becomes unsustainable for the original developers to keep helping without a return. At this point it is important for the community to come up with a good volunteer based model of helping new users. When the project hits a very large scale, like Ubuntu for example, you find enough people with expertise to answer such questions, so this problem can be overcome by scale. This assumes that basic housekeeping like building documentation continuously is being done.

When the project is moderately successful, (it has lot more users than volunteers), the developers have to keep supporting without any benefit, if they want to project to be successful. Specially if their livelihood depends on it. Of course after a point, the developers can push for paid support, but entitled users who expect free support will still bite if they don’t get the support they expect and bad-mouth about the project. This is a tricky phase.

Users waiting for help: Image by Paul Dufour

While it feels wrong to help anonymous users, it feels good to help people who belong to the community. As humans we feel happy when we are of use to somebody, but we feel sad when we think they are being exploited. While working on open source projects, its easy to move from one extreme to another. So how do we solve this problem?

One way would be to build a community and know the people in the community. So how do you define such a community? I think, a community is formed when people help each other to achieve a common goal. This means they invest time, effort, energy, money to help everyone else achieve this goal. When everyone does this, everyone benefits from each others’ investments and the community grows powerful.

Image by Clem Onojeghuo

So why would someone invest in being a part of the community? First the person has to be convinced that being in the community, that is giving back, is more beneficial than just being a taker. The process of contribution must be easy for someone who is new. It also helps that you feel that you are not being cheated by helping other users. This can be done if the benefits reaped by the community are fairly distributed instead of being cornered by a few. Another important thing is that there must be fairness in the way the affairs of the community are conducted.

A feeling of fairness comes when there is openness and transparentcommunication in the community. This also means moderating the communication so that the conversations are open, fair, focused and based on activities rather than opinions. Users who abuse the trust of others, or only keep taking (and not giving) should be discouraged or disbarred from the community. In online communities, people sharing their real identity, profile pictures rather than being anonymous, also makes it more human and friendly.

Image by Corrine Kutz

It is important that those who contribute to open source projects also be kind on themselves and do not burn themselves out. In the long run, open source is a great asset and win for everyone, but in the short run it is hard to sustain and keep the faith. The internet not only gives us tools to collaborate, but also to share the benefits and trade, and working in an open source community also feels specially rewarding.

But it need not be a hard slog just because its open. A little bit of balance can go a long way in making things fun.

fluxday — the internal task management & productivity tracking app of Foradian is now opensource

A no-nonsense, free & opensource task & productivity management tool for growing startups

fluxday was developed by Foradian starting in 2013 and was a critical part of Foradian’s hyper growth and success as a B2B software startup in EdTech space. With a CAGR (compound annual growth rate) of 323 per cent Foradian was listed in Deloitte Tech Fast50 India consecutively for two years. We secured $2mm in funding and grew the company from a small town startup to globally recognized product company. Behind all these success and growth was a small internal app custom developed by our engineering team and adopted by all team members — fluxday

fluxday is engineered on the concepts of OKR — Objectives and Key Results, invented and made popular by John Doerr. OKRs and OKR tools are used today by many companies, including Google, LinkedIn and Twitter. If you are new to OKR read these article 1, article 2

View tasks and work logs for a selected day. You can switch between month and week views.

In fluxday, you can start by creating the departments of your organization and adding the teams in each department. Add users to each team and assign team leads. Each user in fluxday has an OKR that is created for a particular duration. Tasks are created by leads, aligned to an OKR and assigned to team members. A task could be a redesign of your product or trying out a new tool to drive more traffic to your blog. You can also add comments and subtasks on each task. Users log in work done for a task and number of hours put in each day. Team Leads can see tasks assigned to each team member and the number of hours put into it.

View details of tasks like assigned users, duration and priority. You can also add subtasks from here.

With textual and graphical reports from fluxday, get insights into the time put into each task, check the performance of your team members, calculate ROI on that new feature change, take quick decisions and grow your business. Fluxday is designed to provide a simple productivity solution for fast growing teams. Fork it, add features to it, tweak it to your liking and start using it.

Generate visual and textual reports to view performance of users. Chose between OKR, Worklogs, Tasks and Assignment based reports for an employee or employee groups.

fluxday is “your favorite task management system on steroids” with freedom of customization and private hosting

Checkout the official website and/or download and fork fluxday atgithub


Story of fluxday

We started Foradian in 2009 as first generation entrepreneurs without any experience in building and growing a company. First 3 years was about the usual startup struggles, surviving the startup-valley-of-death and establishing product market fit. By 2012 product-market fit was proven forFedena and certain predictable revenue stream was established. That is when we felt the need for a tool to coordinate the tasks of all the team members so that each and every task will be aligned to the goals of the company.

The best teamwork comes from men who are working independently toward one goal in unison. — James Cash Penney

That is when we learnt about OKRs (Objectives & Key Results) and other startups using OKRs. We started implementing the concept through spreadsheets and it picked up momentum. Next step was to choose an app for task management and productivity tracking so that we can reduce the number of daily interruptions to employees to check their work progress. We tried different apps available. There are thousands of apps for managing tasks and projects. But we needed something unique that matched with our culture and process. So we decided to develop a small custom app and fluxday was born. Sooraj T P developed the app based on the design byDeviprasad and guidance by Arvind(co-founder & CTO). I had observed this pattern in other successful companies also. Great leaders develop their custom app for their mission critical system. Read “How Elon Musk Approaches IT at Tesla

Lessons learned

Implementing a productivity tool is not an easy task. You need a lot of discipline and motivation to use even a simple personal to-do list app daily. So making sure your team members use the productivity tracking system effectively is a herculean task. We understood it, accepted it and simply executed the implementation. That made all the difference.

There will be team members who will hate the system and will not use it. Let them be. But if you can get 90% of the team members to adopt it, you got the greatest law of universe in your favor — mathematics.

Productivity tools should match with your personality type. A planner and visualizer can’t use the same productivity tool to maximum potential.

Are you a prioritizer? A planner? An arranger? Or a visualizer? Once you know, you’ll be able to more effectively manage your work and home life and achieve your goals much more efficiently. Read this HBR article and try the assessment to discover your personal productivity style. Don’t force a productivity system on your team. Develop an organization habit of using a common system with patience, compassion and respect.

Next steps

Today fluxday is not foradian’s secret tool. It is freely available to everyone. You can use it, customize it, enhance it, build a business around it, learn from it or if you don’t like it you can dump it and build another tool from scratch. Fluxday is available under Apache License 2.0 — so that you have the choice to keep the customization done by you as private or public.Download and fork fluxday

“through discipline comes freedom” — Aristotle

Team Foradian

If you liked the story of fluxday, you must checkout what we are doing with Fedena and Uzity. We are always looking for ideas and partners to help us achieve our vision.

Guest Post by Unni Krishnan, Foradian Technologies

Why govts should open source software it develops?

I am surprised not to find a single Indian govt software being open sourced. This is despite the fact that most of them have horrible user experience and highly buggy. In all probability the code behind it would be equally poor.

The govt. continues to spend crores of tax payers money to IT service providers to develop these abysmal portals instead of open sourcing it.

Examples of some portals that I used personally:

  1. Pune Municipal Corporation (PMC) complaint portal
  2. LIC portal
  3. IRCTC ticketing portal
  4. RTI portal
  5. MSEB bill payment
  6. I wont be surprised if this is true for most govt. sites/apps.

Each of them to say the least have poor user experience and worse is highly buggy. E.g., I logged a complaint in the PMC portal and got an email with ticket ID. To my surprise when I logged back in the portal after a week, there were 0 open, pending or closed tickets in my account!

Why open source?

First of all its built using tax payers’ money. Why should be is hidden property unless there is some trade secret involved in it?

Secondly, why would every state, municipal and even country“reinvent the wheel”? E.g. if Pune builds a complaint management system, why should Pimpri Chinchwad have to build another one for itself? If Maharastra builds a software for vehicle management (RTO office) why should rest of the states build another? And just a different state, even someone in Sri Lanka or Nairobi can reuse it.

Thirdly, India has the highest number of programmers in the world. Most of them are bored or frustrated in their day job, and looking for an exciting side project to work on. They would be more than willing to contribute for free to such projects. Its not only exciting but also a sense of society contribution involved. Similarly students doing college projects are another source of free hours that can be utilized. As in any open source project, you need strong gate-keeping to ensure quality of code contributed is high. Its is very easily doable as is done in 1000s of open source projects across the globe.

Fourth, if and when, for whatever reason govt has to change the vendor who is in-charge of developing the portal, it will be very easy to make the transition since the code is publicly available. Govt wont be at the mercy of a single vendor for life.

Overall, “open source” is an important aspect of “open government” after “open data”. Its a no-brainier that all government projects have to be open source unless confidential information of national or trade secret is involved. Especially in the context of smart-city and digital India, this will be critical since government spend on IT is expected to go up exponentially.

Unfortunately, no one has come forward to do it. The only reason could be vested interests of the IT services companies i.e. cartel between decision makers and software companies. Naturally open sourcing is not great for them since it will mean lesser projects and worse their “code quality” will be exposed to the whole world.

Hopefully we will see this change in the near future. Being an open source product developer myself, I will be happy to help any organization in learning more and moving towards open sourcing their projects — for free of cost.

PS: We are developers of OpenSpecimen — an free and open source software for clinical research centers.

Guest Post by Srikanth Adiga, OpenSpecimen

India is a closed source community or am I missing something here?

Open source software has been a constant buzz among few of the iSPIRT volunteers over last few months. How does India rate on OSS contribution? Does OSS seriously matter in the success of a software / software services business? Is it important enough to build an OSS ecosystem for the India based startups?

My own perception has been that the OSS engagement in India is low and as a result the contribution is low. I have often wondered why has not a single Indian OSS product featured in the top 50 global lists. Why India has not given an OSS product, foundation or a community like the LINUX, Apache, Mozilla or Hadoop. Why has no Indian voluntary OSS community ever achieved critical mass? Why even there are no OSS services companies of the likes of Cloudera or Hortonworks from the mecca of IT services companies?

There were many other questions and I am sure you the reader also have some questions, assumptions and answers to share. So I talked to few leading OSS lights around besides doing a quick research at LinkedIn. I am sharing some insights and findings in this post with more to follow in the next post soon. I might be way off the mark here, so please have patience and share your views.

Some market stats

Global OSS acceptance by end-users has grown at a healthy pace. Blackduck’s 2015 Future of Open Source survey reports 78% of the respondents’ companies ran operations partly or completely on open source. As per the report, in 2-3 years, 88% of the companies are expected to increase their OSS contribution.

RedHat (Linux) has been the lone poster boy of OSS industry for a long time. Today it has revenues touching USD 2 billion and a market valuation of USD 14.5 billion. OSS has gained VC interest as reflected in growing VC funding in OSS space and rising valuations of OSS companies. Tracing back fifteen years, gross VC funding in OSS companies works out to roughly USD 7.5 billion; averaging USD 750 million annually in recent years. Recent OSS successes include (figures are revenues / valuation / funding raised) –

Cloudera (Hadoop):  $200M / $5B / $100 M

MongoDB:                  N.A. / $1.6B / $311M

Hortonworks:             $60M / $1.1B / N.A.

Global market size of OSS based products is estimated at about USD 50 billion. Though it seems improbable OSS market will any time soon reach the size of proprietary software (USD 50 billion vs. USD 320 billion in 2015), its double-digit growth rate (compared to 3%-5% for proprietary software) presents an attractive opportunity to tap into.

What does it all means for India and Indian OSS companies?

India and OSS

Gartner estimates that by 2017, about 90 per cent of Indian IT organizations will have open source software (OSS) embedded in their mission critical platforms. The user companies hope to lower TCO and increase ROI with OSS use. The industries with significant OSS adoption include education, banking, financial services and insurance and government. Education is the leader here – majority of public and private educational institutions using OSS for library automation, and several research organizations applying it to drug discovery space. Indian small or mid-size businesses use OSS as client facing service portals. The large IT companies such as Wipro, Infosys and Tech Mahindra are already using OSS to test software for clients.

The majority of Indian government offices are directing new initiatives that involve use of open-source software and solutions. Some of the prominent government initiatives include NRCFOSS (by DEITy), FOSSEE (at IIT Mumbai), BOSS (at CDAC) and whole lot of state government initiatives.

OSS contributors – Indian companies

As anywhere in the world, OSS engagement in India happens in two ways – (Paid) Employees at software product and services companies and IT employees in plethora of other businesses contribute OSS code either as their own product or to existing OSS projects like Linux, Hadoop etc. I am not including OSS contributions from the likes of IBMs in this study.

A lot of this contribution happens on repositories and forges like GitHub and Source Forge. It is heartening to note that registered users and projects from India on these destinations are steadily growing. For example InMobi contributed OSS code to Hadoop project and Flipkart has opened source of few of its projects including a more popular project phantom. In last couple of years, largest Indian OSS contributions (though tiny by global standards) came from ShepHertz, Hasgeek, Practo and Freshdesk. Code for India is another large volunteer based tech community that develops OSS solutions for Elections, City Governance, Women Safety, Education etc.

Overall, contribution from India is tiny compared to the top contributors across the globe and does not generate healthy interest from OSS communities around the globe. For example, the most popular Indian origin repository on GitHub has 232 stars placing it at rank 5376 on a list of 219,071 JavaScript projects.

Is it a good achievement? Can it be bettered? If yes how?

OSS – individual contributors

Then, a lot of individuals contribute to OSS project outside of their day-jobs. This is unpaid voluntary contribution driven by individual passion. Some leading lights in this category include – Hackerearth developer Sayan Chowdhury who is on Mozilla’s roster for contributions to Mozilla Kuma and Rust projects, Eucalyptus Systems’ Kushal Das who was nominated to Director of Python Software Foundation, Anand Chithipotu with big contribution to web.py, and Siddhesh Payarekar (Glibe). More recently, two developers getting into limelight are – Prakhar Shrivastav (102 repositories on Github with some having 1000 – 12000 stars), Karan Goel (113 repositories on Github with several having 500 – 8000 stars).

FOSS activities in India

FOSS related activities are mushrooming in India. For example, there are more than 150 Linux User Groups. Annual FOSS events on campuses and outside like OSI Days are growing. There is greater Indian participation in global FOSS events like Google Summer of Code, Code Jam, etc.

What drives low OSS contribution from India?

I asked a few OSS contributors around, Range of answers I got fell into three buckets – individual behaviors, employer policy and process, ecosystem issues.

Individual behaviors: Maslow’s hierarchy of needs seems to at play here. The respondents were unequivocal that Indian programmers write code for a living not for passion. “We focus on daily work and do not enjoy programming as a hobby.” Other factors that came out were – fear of being judged and ridiculed, poor communication skills resulting in lack of confidence and plain ignorance of OSS – What is Open Source? Can I even contribute? What are the legal issues?

Employer policy and processes: Other set of issues related to the employers. I found that programmers were motivated to contribute but the employer either did not encourage OSS contributions or were just confused about OSS policy and process. One respondent told us – “We would like to promote OSS contribution but we are hindered by the lack of a sophisticated OSS policy (as community participation requires a set of standard guidelines throughout the company).”

Another respondent told us – “We do it more on an adhoc basis and usually during low activity periods (which are rare).” An OSS evangelist reported – “I think developers are enthusiastic about it but the companies and managers do not focus on it. If they give enough time for developers to do OSS (initially it needs extra efforts and time but slowly developing like that becomes a habit), it should improve. “

Finally, it appears that IT services companies do not encourage open source contributions and elsewhere there was focus on exploiting OSS code rather than contributing back.

Ecosystem issues

The third major bucket of issues can be aptly labelled eco-system issues. These include educational and legal.

A common feedback across respondents was – “If India, like developed economies, too has strong IP Law and enforcement, we would see many software producers and consumers shift to OSS paradigm.” A feeling prevalent was that others consume OSS without giving credit and the law either does not protect of the legal process is lengthy and expensive.

Another important feedback was – lack of awareness of OSS licenses led to indecisiveness about OSS contribution even when the intention was all there.

A comment on the Government of India’s OSS policy said – “the policy is great but implementation leaves lot to be desired.”

Folks, I ask you if these issues sync with you. Please write back to take this conversation forward.

Free Open Software and Growing Entrepreneurship Climate in India

“Imagine if Mathematics was owned by corporates and every time you wanted to use it you had to buy some from a corporate!” started Eben Moglan, Founder of Software Freedom Law Centre at the Open Innovation and our Digital Future Lecture series organised by iSPIRT. It was definitely a thought provoking preview of the work that is taking place in India in the space of Free Open Source Software with Moglan emphasising the need to create a viable environment for an alternative legal scenario for the growing start ups in India. If Make in India has to be a success it is pertinent that start ups not only have feasible options of protecting their knowledge but more importantly are not infringing the big corporates patents. For the growing entrepreneurial system the system of patents is not only dampening but also acts as a growth step towards fund raising albeit detrimentally. While corporates file patents to demonstrate hold over knowledge in the past few years this has led to patents over software suits that impacts open source creation adversely.

SFLC and OIN are working towards shifting the game and ensuring that start ups have effective legal counsel available to not only create long term strategies but also to have access to defensive patent pool. Keith Berglt, CEO, OIN made a pertinent point when he said that the advantage that a start up needs is access to global patents to work with while they hack new solutions to global problems. With the emerging world of big data and the scope of solution creation from big data analysis is going to lead how Intellectual Property Laws of India are interpreted and eventually amended to feature in the innovative approaches of start ups. While the legal system holds IP close to its chest Mishi Choudhary, Legal Director, SFLC pointed out that the government is keen on defining start up specific legal mandates and modalities.

The realm of possibilities that open up for hackers creating solutions for todays problems is boundless when the team doesn’t have to die a thousand deaths at the hand of protracted patent defence suits! Whether or not big corporations will move towards releasing their grips over knowledge and creations through softwares has to be waited out but open source innovations are going to pave the way for future solutions in India, especially with low cost solutions, and need a better support mechanism. The Digital India mission needs open source creations to fuel remote learning mechanisms which in turn requires a robust structure that allows hacks in the existing software architectures.

It was only befitting that Moglan closed the discussion on how models like facebook need to be replaced with distributed data models equalling it with the power that open sharing contains over capitalist ownership.

Post contributed by Megha Sharma Bhagat

Open Innovation, entrepreneurship, and our digital future

Open Innovation has lead to the creation of priceless resources like Wikipedia, and Free and Open Source Software (FOSS) that form the foundations of our digital society. The freedoms enjoyed by hundreds of thousands of young people around the world, hacking on laptops, hacking on servers, hacking on general purpose hardware is the primary source of the innovation which drove much of the world’s great economic expansion in the past ten years. This freedom to hack has enabled innovation and entrepreneurship, and made it possible for innovation to occur where it can occur without friction, which is at the bottom of the pyramid of capital.

As India witnesses one of the greatest entrepreneurial spurts in its history, much of it based on technologies built through collaboration and openness, it is important to understand the forces that drive the Open Innovation ecosystem. In this session, some of the brightest minds in the Open Innovation ecosystem, and the world of FOSS, will discuss:

  • 1) Why Open Innovation is important for India’s digital future
  • 2) Why Open Innovation and entrepreneurship are deeply interconnected
  • 3) How India can become one the leaders of this entrepreneurship
  • 4) What India needs to do to protect and nurture Open Innovation

The speakers are:

Prof. Eben Moglen: Prof. Eben Moglen is Professor of Law and Legal History at Columbia University Law School. Professor Moglen is the founder of the Software Freedom Law Center, which has represented many of the world’s leading free software developers. Professor Moglen earned his PhD in History and law degree at Yale University. He has taught at Columbia Law School since 1987 and has held visiting appointments at Harvard University, Tel Aviv University and the University of Virginia. In 2003 he was given the Electronic Frontier Foundation’s Pioneer Award for efforts on behalf of freedom in the electronic society.

Keith Bergelt: Keith Bergelt is the chief executive officer of Open Invention Network (OIN), a collaborative enterprise that enables innovation in open source and an increasingly vibrant ecosystem around Linux. In this capacity he is directly responsible for enabling, influencing and defending the integrity of the Linux ecosystem. Central to the achievement of his goals is the acquisition and transfer of patent rights designed to permit members of the Linux ecosystem to operate free of the threat of assertion and litigation from those whose business models are antithetical to innovation and global economic growth in information technology and computing.

Software Patents: Evil, Necessary or an Evil Necessity? iSPIRT OEQ Hangout

iSPIRT organized a OEQ(Open Ecosystem Hangout) on 20th April, 2015, to understand the role of software patents within the software ecosystem.Software patents are a much debated subject in the technology world today. In some jurisdictions like India, software is not part of patentable subject matter, while in other jurisdictions like the US, software patents are rampant. Do Indian startups need software patents? In a globalizing world, what strategies can they adapt to navigate through the software patents conundrum?

I moderated the session and asked the software entrepreneurs in the discussion to share their cost-benefit analysis of software patents.

Rushabh Mehta of ERPnext responded by saying that as a young startup, they find the cost of software patenting (estimated at around $ 15,000-$20,000 or between Rs 9.3 lakh to Rs 12.4 lakh) to be too high.

Srivibhavan Balaram of Vocera Communications, an entrepreneur, who has worked with open source and closed source software companies, said that patenting makes sense only if there is something unique that is worth patenting. However, he also added that the market for enterprise software was tilting more to open source now because companies were more inclined to go with time tested open source software, which find much faster acceptance. He added that companies are wary of proprietary software from startups.

Subramaniam Vutha, a veteran IP Lawyer and founder of the Technology Law Forum, said that India should actively encourage open source software, while accumulating as many patents as possible in jurisdictions that allowed it. He called this strategy, “Running with the hares and hunting with the hounds.”

Samuel Mani, Partner at Mani Chengappa & Mathur, said that defensibility is the only reason to file software patents. In a study that his organization did, he found that most areas that could be patented were already staked out. He pointed out that the cost of patenting is between $15,000-$20,000 which is the cost of hiring one employee for two years. He suggested that companies that aim to create a defense against software patents could join a defensive patent pool like the Open Invention Network (OIN).

Mishi Choudhary of the Software Freedom Law Center agreed with Mani on defensive patent pools like OIN. She added that most Free and Open Source Software are copyright licenses, but some also contain patent grants. She suggested that participants review the Debian Patent Policy.

This was the first such Hangout on software patents from iSPIRT, and there are plans to organize more such Hangouts to generate greater understanding of this topic.

Join us in hosting the Minister for IT – Bengaluru, 1st July

At the forefront of progress is change. iSPIRT continues to drive the process of change to Transform India as a Product Nation, using the engines of private initiative, policy and programs like Playbook Round Table and PNCamp. iSPIRT’s policy initiatives involve active dialogue with Government.

Conclave for India as the Product Nation

As part of this initiative, iSPIRT is hosting  the “Conclave for India as Product Nation #1″, an open dialogue between the Product industry and our Ministry for IT.

Welcome Sh. Ravi Shanker Prasad

iSPIRT lives and breathes (software) Products and Products only. It’s think-tank has passionately engaged with the Ministry of IT to advocate recognition of the Software Product industry in its own right. We welcome the Hon’ble Minister for IT Shri Ravi Shankar Prasad, to meet the Industry folks and experience our Industry in person, first hand.

 

You already know iSPIRT is an open-source movement. This means everyone can contribute, and each contribution is recognized. It is each such contribution that makes the open-source movement go from strength to strength. In keeping with this philosophy, you are warmly invited to participate in the Conclave with the Minister. iSPIRT Founder Circle members, Product Circle members, Fellows, Mavens and Saarthis are all welcome to attend. It’s your industry, our industry, so be there!

Prior confirmation is required… so do RSVP here to help us make adequate arrangements.

Agenda:

    • Introduction
    • Showcase of Disruptive product initiatives in India
    • Interaction session with the Product industry

Venue:

Hotel Le Meridien, 3pm – 6pm
Sankey Road, Bengaluru
Registration : 2.00pm

Do come in early. Doors close at 2.45pm.

OpenSource: The Most Underused Strategy by Indian Software Product Companies

Open Source has been quietly making its mark. Kickstarter just completed a billion dollars in crowdfunding. A lot of the work funded via Kickstarter is licensed for public use. Because the initial capital is pitched in by lots of people, the creators have a lot of incentive to give it back to the people.

The Do-It-Yourself community in both software and hardware is also on the rise. This is an early adopter and very influential community. The promise of free software promoted by Richard Stallman is no longer a promise. A lot of the backend tools you are using to build your software product are already Open Source. So why not take the next step and make your product Open Source too.

Adapt or Become Extinct

Five years from now, the product you are building will be replaced by an open source alternative.

Ok, maybe ten years from now. But it is going to happen. In the long run, as more and more libraries and mature frameworks become available, the barrier to entry to make a new open source product will reduce further. Deployment will become easier and the ecosystem will provide easy to install platforms. Right now, there is a dearth of high quality, usable open source tools, but it just takes one motivated developer to change that.

Unfortunately in India, we do not have too many examples of Open Source software products. We at ERPNext, open sourced our product a few years back and now we are seeing the benefits. We spend very little time worrying about surface level things such as Customer Acquisition Costs and A/B Testing, because our users and customers come looking for us. Sometimes, there is a cherry too. A German company just wired us $5000 because they wanted us to listen to them when we decide the product roadmap.

Getting Started

So if you are considering going the Open Source way, here are some pointers:

1. Believe in Open Source: There are no half measures here. There are tons of projects on sourceforge and GitHub that are dead because there is no documentation, or are not deployable or not updated. If you are going Open Source, go the whole way.

Another annoying strategy some projects follow is that they make a part of the product open and some parts paid. This is something like the freemium model. Avoid this, you will never win true followers this way.

2. Documentation: Prepare good documentation for users and developers. I had read an interesting comment by John Resig (the creator of JQuery) on why JQuery became the standard leaving all others aside. He had said that JQuery was simply the best documented project. As a developer just remember the time when you came across a badly document API or library. This is very hard and is a huge investment, but its a very important step for going ahead.

3. Make it Deployable: Give your users a good development environment and a production environment. Unless your users can deploy your solution in production, there is no chance of you getting feedback, or issues or contributions. And when you make it deployable also make the upgrade scripts public, so people can easily upgrade your software. Ever really noticed when Chrome or Firefox upgrades? Make it as easy as possible for your user.

When you do all of this, you will automatically start following a lot of best practices, because suddenly not only are your users your customers but also developers.

Cloud and Open Source

As virtualization and cloud gets more popular, Open Source will be the direct beneficiary. Already platforms like Bitnami specialize in creating free deployable VMs for Amazon and DigitalOcean. Soon, it will be easy for anyone to start using Open Source products on the cloud.

We at ERPNext give away VMs for free, but they can also become a source of revenue.

Business Models

The most obvious doubt you will have when you think about Open Sourcing is what will happen to your current revenue, will your customers stop paying you? Think again. Open Source is no longer a pariah to venture funding. Scalable business models can be built around Open Source. MongoDB and RethinkDB are great examples. MongoDB got funded at a valuation of a billion dollars. Here are some revenue sources:

1. Hosting: WordPress makes money off blogs hosted at WordPress.com – they own the brand.

2. Support: RedHat and all the Open Source databases make their money out of support.

3. Implementation and Deployment: SugarCRM, OpenERP and others make money via their partner network, who in turn give implementation, deployment and training services to their customers.

4. Sponsorship: As your property gets more and more visitors on the web, it will be a great opportunity to find sponsors. Examples Mozilla and others.

5. Consulting: Over high value consulting to paying customers. Enterprises are already paying huge sums to licensed vendors. With money on the table, they will be happy to buy premium consulting from your company. Example, PerconaDB

Let Us Lead

The sharing economy has already begun and is going to be the future. India is coming from behind as far as the software product revolution is concerned, but Open Source can be a great enabler in helping all of us break in.

The Buddha never patented the eight-fold path and neither did Patanjali copyright Yoga. Knowledge grows when you share it and same is true for software. The more used your software becomes, the better it will get and the faster you will reach to nirvana.