product ecoystem Archives

18/11/201318/11/2013

Piracy and freemium killed the Indian software buyer

Nobody in India buys software.

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

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

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

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

Enterprise software is probably your best bet

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

Oh wow! I never knew you could do this

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

“But we can do this for free on Google”

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

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

“muHive crack codes”

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

The pricing slope

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

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

In conclusion

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

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

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

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

References:

03/03/201302/03/2013

Managing business is about having the right data at your fingertips

Hindsight, they say, is 20/20. The advantage of hindsight is that all the data that affects a decision has been revealed and is known. Unfortunately, real life never works that way. As an entrepreneur, you have to operate on a combination of one part data, one part intelligent guesses, and, if we are really frank about it, one part luck.

Managing a business, when broken down into its simplest form, is about making a series of decisions. And how those decisions are made can make all the difference. Most entrepreneurs have a lot of faith in their gut or instincts. And why not? The decision to become an entrepreneur itself is one that is based on passion, the belief that you have a winning product or service idea, and the unquenchable desire to do something on your own. Just look at the words – passion, belief, desire. Not really things you can measure and make data points about. But, combine or guide your gut feeling with the right data at the right time, and it could lead to better business decisions.

The trick, of course, is to have access to the right data at the right time.

The data that you need to make decisions while managing your business, in many cases, is about your business itself. It is about how much you spend, how much is due to you, what is your inventory situation – seemingly simple things. But if you are able to have this information at your fingertips, accessible whenever you want it, it makes your decisions not just faster, but more sound as well.

The first step to having the right data is to collect it. Do you have systems and processes that ensure that every important piece of information is captured? It could be your CRM, or your financial management software. Unless the data is captured and categorized, it cannot be utilized to distil useful information. Because raw data is just that, raw; and what you need is the analysis to make an informed decision.

When you are managing a business, you have to have your eye on the ball at all times. And that means having all your data accessible in a form that makes it easy for you to interpret and make decisions. For example, if you are able to track overdue payments as soon they become overdue, or are able to see the payment pattern of a specific customer with a bad payment record in just a few clicks, it makes it easier to track and take remedial measures. Having anywhere, anytime access to the right data empowers you with knowledge, and helps you monitor and manage your business with complete and up-to-the-minute information. The closest you can get to the 20/20 vision that hindsight promises.

Which brings me back to my starting point. I have found that the more relevant data I have, the more intelligent my guesses are. And the more confidence I have in going with my gut feeling.

03/02/201303/02/2013

ProductNation is now Proudly Powered by iSPIRT.in

I am happy to inform you that ProductNation will now be part of iSPIRT – a think-tank focussed on transforming India into a hub for new generation software products, a thought which finally is seeing action. Welcome to the new look of the website where we have made it easier for our readers to find stories that interest them and share it with friends and professional colleagues. Do drop by and share your comments if you like the design or have any suggestions for improvement.

Let me tell you how this all started. For a long time, I have had this urge to make a substantial contribution to the product eco-system in India and I shared this in my previous blog. I am proud to say that in less than five months, we have been able to do 175+ blogs, got around 20+ blog contributors, and featured 40+ #MadeInIndia Product stories. With the support of few PNEvangelists, we have been able to do few #PNMeetups in the NCR region.

But ultimately it’s not about what we want to do but about what the product ecosystem expects. I think the real value comes when ProductNation is looked upon by this emerging industry as the most favored watering hole for good ideas and thoughts that will contribute to the growth of the industry.

It’s been an exciting journey and going forward we will be able to add value in a much more structured manner to the ecosystem. As I write this blog, I’m already working on few partnerships which will be able to give more visibility to the product start-ups from India.

So what does this alignment with iSPIRT mean?

The goal of ISPIRT is to help product entrepreneurs learn from each other and from experts so that they grow their companies faster. We also seek to encourage the right policy environment and the availability of public goods so that the industry can scale more rapidly.
In the first year, we aim to achieve the following:

Explain simply, cogently and persuasively to public intellectuals why a vibrant software product industry is vital to India’s future
Establish pn.ispirt.in as the open platform for deeper conversations within the industry
Spawn new community-led initiatives like iSMB and M&A Connect to address critical gaps.,

You can find more details at www.ispirt.in.

Finally, I’d like to thank my supporting partners (Sandhill, Yorke Communications, Iridium Interactive & Boring Brands) and the contributors for ProductNation who have actively stood by me in making ProductNation a destination for software products in an extremely short time.

I continue to seek your support in the journey ahead. Let’s all contribute and make a positive impact to the eco-system. Thank you.

23/11/201223/11/2012

Building a Product Ecosystem for Startups in NCR region

Despite a lot of matter that is available and the ease with which people network, setting an Product Startup in the NCR region is fraught with challenges that few can perceive in other parts of the country. For one, it is the sheer size of the region, effectively sprawling across three states, dealing with three different governments which pose a challenge. Gurgaon houses some of the larger MNC Services companies and has a very different approach from Product companies functioning out of Noida.

For most entrepreneurs, running a product startup, challenges are aplenty. It is hard to find the right talent – just not skills but also employees, who understand product development and marketing. Once you develop a product, you will find that customers are unfamiliar with ‘Do it Yourself’ model. It’s altogether a different challenge to scale the sales and product.

If you can relate, you will be happy to know that we are launching a platform for NCR Product Startups. It will be a community driven initiative to help out fellow members in the products space. This will be by the Product guys for the Product passionates.

We have put together a short survey to understand where your main pain points are. This will help us lining up help from experts hidden in deep trenches to positively impact your business. Feel free to forward this to folks who can benefit from this initiative…also dont forget to write to us at [email protected] if you would like to volunteer. Thank you and looking forward to creating something which Product Folks will love 🙂

23/10/201222/10/2012

The Product Ecosystem in India is at the Inflection point…

We have been long hearing that the product ecosystem in India is at the inflection point and will grow significantly over the next few years (different consultants look at 2015, 2020 or 2025 to be that period :)). More than we hear this, we do hear lot of people talking about how the ecosystem is constrained, a number of challenges that exist and that India is not yet a “start-up” nation. Sure they have lot of data to support these as well. I also had more or less the same picture in my mind for a long time, but this is fast changing as I see some quality action in this space. Below are my quick observations on the “product ecosystem in India”:

1. It’s not just evolving, it’s happening: The product ecosystem has finally arrived and that too with full force. There are over 3,000 start-ups in the country today and 500 new start-ups are taking birth every year. The interesting fact is these start-ups are not a replica (or “copy”) of a globally successful company, but are truly innovative companies who are trying to address a genuine pain point (in their own way of course) in the global or domestic market. Most of the top VC firms globally have made commitments to India market, industry associations are aggressively looking at the start-up space, global incubators and accelerators are eyeing the Indian entrepreneurial landscape.

2. Modern IT is the new buzz word: Modern IT (Cloud, big data, social and mobility) is the new buzz word in the start-up space. While Indian ecosystem may have lagged behind in the traditional IT areas (don’t have enough data to prove this though) however these modern technologies are whitespaces worldwide and surely Indian start-ups do realize this. Over 70% of the new start-ups formed in India are focused on modern IT. In fact most of the 40 start-ups I met recently were based on modern IT. It is interesting to note the way these start-ups are defining use cases based on convergence of these modern technologies (cloud + Big Data OR Social + Mobile OR Social + Big Data etc.) and competing with some of the top companies worldwide

3. Indian entrepreneur is equal to a confident entrepreneur: I must say I was thoroughly impressed by the confidence that most of these start-ups had while talking about their vision, mission and the company. In my recent meetings with start-ups, it was fascinating to note how well prepared each of these entrepreneurs were, no one fumbled on the “tough questions” and everyone seems to believe thoroughly in what they were doing. While some of them went to the extent of being arrogant about this, most of them were flexible enough to take feedback and keep going

4. Indian start-ups as leader in their own niches: “No, we do not have any competition”, “We are the market leaders in this space”, “We haven’t come across a company like us worldwide” were very commonly heard statements during my recent meetings with start-ups. Of course they had a lot of data to prove this as well. Everyone was eyeing a large opportunity and a bigger market share in the times to come. I think we certainly have a few billion dollar companies in making from India

5. Who says enterprises only prefer working with big IT companies: This was a perception (at least I had one) that large Indian enterprises only prefer working with bigger IT companies. However, it was thrilling to note that many start-ups today work with some of the biggest Indian enterprises including Airtel, SBI, ICICI, Reliance, and many others. Some of the start-ups have also extended the customer list to include large global enterprises. Many of these engagements are enterprise scale and the pipeline for many of these start-ups looks very strong

I am personally thrilled by the progress seen in this landscape (and can go on writing about the same :)). While the ecosystem may have been weak for the last decade, that does not hold true for the current decade (beware consultants :)). It is time that we start recognizing this and help accelerate the ecosystem faster. Obviously, start-ups will need more support from the industry, associations, government as well as VCs/ angels/ incubators to evolve faster from the current state.

10/10/201210/10/2012

Why aren’t more developers creating serious Mobile App Products?

These are the times, when every third person that you meet in Technology world has an idea for an App. It could be every alternate person if you’re hanging out in geeky groups or among heavy Smartphone users.

The Industry trends suggest a phenomenal surge as well. According to Gartner, Mobile Apps Store downloads worldwide for the year 2012 will surpass 45.6 billion. Out of these, nearly 90% are free Apps, while out of the rest of 5 billion downloads majority (90% again) cost less than $3 per download. This trend has a strong growth curve for the next five years. (See Table 1. Mobile App Store Downloads, courtesy: Gartner)

Another report suggests that 78% of US mobile App Companies are small businesses (based on the Apple and Android App Stores based research). The typical apps that dominate this market are games, education, productivity, and business.

This comes as no surprise. There is a huge divide between the Enterprise Mobility (dominated by the Enterprise Architecture, existing platforms and mobility extensions to the platforms that ensure business continuity) and End-User (Consumer) Mobile Apps dominated by the App Stores supported Small and Mid-size App Development Companies. The barriers to entry in the Smart phone Apps Market seem pretty low with the supporting ecosystem from Apple, Amazon, Google, and Telecom carriers.

However, let’s get back to the fact that majority of these Apps “do not” generate direct revenue.

While the entry seems without barriers, there are multiple hurdles on the race track:

1. Developers need to focus on the User Experience. The smartphone apps pick-up is highly skewed toward Apps that offer a good user experience even for minimal functionality. After the initial success, the App makers end up adding functionality for sustained interest, but the User Experience tops. It’s difficult to focus on UX while still trying to do everything right at the underlying architecture level for long term.

2. Marketing is important. Getting the early eyeballs is key for the App developers. Any serious App needs an immediate initial take-off, and among the things that they need to do to make it happen is to market the App beforehand and to get the authoritative reviews in place.

3. Initial Take-off is just the first hurdle. App needs to be able to handle traffic bursts, it needs scale with increased traction, support virality & social connects inherently, and also build an effective User ecosystem. None of these may seem like the core functional features of the App, but are most critical for the broad-based success.

4. The Freemium model is very popular, but it can kill the business if the marginal costs are not sustainable. The paradox of the Free model is that unless the 10% paid users are able to pay for your 100% costs, every additional user takes you closer to the grave. With this come in two questions – how do you keep the infrastructural costs low, and how do you build additional revenue models around the app.

IaaS can solve some of the infrastructural headache, but doesn’t provide you with the other functional layers that every App needs. You need to still build them. PaaS providers provide the scalable platform for building Apps, but you still need to build some of the functional features such as Gaming Rooms support, Messaging, User Authentication & authorization models, and so on. Mobile developers are still doing a lot of repetitive work across the smartphone Apps that can be consolidated into a framework.
Supporting the additional revenue models require integration with external Ad-services, Payment systems and more importantly the bandwidth to deal with this even more fragmented set of agencies.

5. The End-point device platforms are fragmented and getting even more so. A typical model for App developers is to develop an Android App, iOS App or a Windows App and then support the other platforms as they go along. However, keeping up with these multiple platforms is only getting more and more difficult with the speed with which Apple, Microsoft, and Google keep rolling out the OS. There’s tremendous pressure to release the App within the 1-3 days window of the release of the underlying platform.

Hence, while there are millions of people developing smartphone Apps as we speak, there are only a fraction that get built at serious level, and even smaller fraction that gets built for sustainable business success.

And considering these hurdles, the arrival of the Backend-as-a-Service (BaaS) is a blessing for the App Developers. Forrster’s Michael Facemire refers to them as “The New Lightweight Middleware”. He goes ahead and lists out some of the basic tenets of what makes a Mobile Backend as a Service, but I see this list evolving as the vendors offer more and more functionality to the customers leading to en ecosystem.

And the term “ecosystem” is going to be the key. That’s because a successful mobile App doesn’t stop at the user starting the app, using the app, and leaving the app. A successful App creates an ecosystem for the viral growth, user engagement, social functionality, in-built broad-based connectivity for multi-user interactions, and more importantly the ability for cross-platform usage. In a Gaming scenario, the user interactions and the relevant immediate feedbacks are paramount. Most successful apps build an ecosystem. Instagram, 4Square, Pinterest are the common household examples today.

While Michael lists out the usual suspects in his post, most of them in the Silicon Valley, there is a very interesting player in Shephertz’s App42 platform, right here in India. The ecosystem approach that they have taken seems pretty much what may be required for serious app developers that need a robust backend provided as a service, so that they can focus on the app functionality, user experience, and more importantly the marketing aspects of the App.

Now why, still, aren’t more and more developers building even more serious mobile App products? Why shouldn’t they be? I think, they will!

27/10/201108/10/2012

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

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

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

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

Original Post at Sandhill.com