The next RSPCT is scheduled for 13th June to discuss the problem of technical education…

According to the latest Mary Meeker report the number of internet users in India is second largest in the world , only behind china. Sometime this year we overtook US

We see this happening:

“India will exceed the U.S. in the number of software developers by 2017, ”

But software companies are constrained by a lack of qualified technical talent.

And the formal higher education isn’t equipped to prepare people with the skills needed by the fast changing software product industry.

“According to Aspiring Minds, an employability assessment firm, only 2.3% of engineers passing out of colleges are employable in the software product industry.”

Which means young people wanting to get into this industry need to learn the skills on their own. The internet has exploded in the last few years with free resources designed to help people learn a wide variety of technical skills. But the technology landscape is fragmented and there is no clear direction helping students know specifically what they need to learn to get jobs in this industry.

RSPCTRSPCT is an event to recognize the achievements of independent learners. The next RSPCT event June 13 evening where we will host a discussion with students and technology professionals in which we discuss the problem of technical education and explore ideas which can help students develop skills and startups find young developers.

If you are interesting in participating in this conversation please visit: http://rspct.in/rsvp

 

Tax challenges being faced by the(SPI)Software Product Industry and Budget Recommendations made by iSPIRT.

With the budget closing in on the industry there are hectic conversations to represent the Software Product Industry in the right manner in the Ministry of Finance. The tax issues both on the Indirect Tax and Direct Tax have been plaguing the Industry for a long time and this hangout addresses the things which need to be done very well. The Indepth Knowledge of  Bharat Goenka (Tally Solutions) and the  moderation done by Sumeet Kapur(Employwise) leads to an in-depth conversation on the Tax issues.

Bharat divides the two issues into, First, the Direct Tax about TDS the why and when it should be applied along with Industry perspective, the second issue was Indirect Tax – the confusion around excise and service tax relating to products and its definition and applicability of VAT .

It becomes important to introduce the Constitutional Framework under Indirect taxes which broadly talks about Manufacturing and Services being taxed by the centre and anything that is traded is taxed by state.

Confusion arises around “Service” and “Right to Service”. Whereas “service” is not tradable a “Right to Service” when sold is a tradable e.g. a Mobile phone service being provided by a Telco is a service where as when a vendor sells a recharge coupon he is selling “Right to Service” that actually will be provided by the said Telco.

Hence, under this concept of “Right to Service” tends to be tradable until the service is rendered and not after it is consumed, because the title to right to service is nor more existing after consumption. Service is therefore treated as tradable commodity thus qualifying for VAT in states and the Center charging service tax, this leads to invoicing for both VAT and Service tax on a software product.

What is needed is clarity on the issue of tradability of service as “goods” and “service delivery” as “service”.

GST will bring in changes but the taxes will be shared between states and center. GST it self may not fully solve the problem of duality of tax on software products. The problem of duality on VAT and service shall be sorted out only when there is clarity on “Right to Service” as a tradable commodity and “service” is achieved.

We as an Industry need to help Government formulate a distinction between “Service” and “Right to Service” as a tradable, so as to do away the duplicity of VAT and Service Tax so that service tax is charged only on part of service and VAT only on tradable value added portion if and when a service is traded further by channel partners of the service provider.

Direct Taxes (TDS)

Sumeet introduced an issue on TDS. Primarily a TDS made by payers to software company leaves less cash on the money collected. This is mainly for software product which sold leaves the product company with 10% less cash on the money collected.

Bharat mentioned that Software despite being a tradable product is the only product that is subject to TDS. This creates a bigger problem for the young companies and growing industry as early years do not allow you the sufficiency of profits.

We need to bring in front of Industry that no trading activity should attract TDS. Also that by doing away TDS the Government is allowing the profitability and business growth thereby allowing more business to happen and widening the tax base eventually.

Sumeet was of the view that, if software product companies are being subject to a TDS there should be Tax credits available on service tax so that the cash availability to businesses can be balanced.

Bharat added yes we can represent to the Government on this that either give me an input credit or refund TDS on day I file my return. Sumeet added that refund must be done even if there is a scrutiny.

Pramod from Nucleus Software added that in an event the question of Duplicity of VAT and service tax was raised to the Revenue Secretary, who showed his inability to do away with duplicity on tax as VAT is a state subject.

Conclusion

Many of the changes in law have come in past few decades and there was a lack in taking the cause to Government or lack of sufficient clarity in helping Government to clearly define distinction between Goods and Services and to separate out Right to Service being traded verses Services.

Bharat Concluded by saying, in the present efforts done to represent to government, we are looking at adequacy of clarity and this clarity is much needed even if the GST is coming to solve the issues and problem in this regard.

The detailed budget recommendations can be seen here.

With Inputs from Sudhir Singh, ExcelICT

From manifesto to budget to delivery

The 2014 election manifesto of the Bharatiya Janata Party (BJP) outlined how innovation, research and technology can transform India into a superpower by empowering, connecting and binding all stakeholders.

The decisive mandate given to the BJP-led National Democratic Alliance, under the leadership of Narendra Modi, in the general election marked a paradigm shift in the Indian political landscape; the people of India reposed their complete faith in Prime Minister Modi and his team.

Finance minister Arun Jaitley and his team must be complimented for taking forward the visionary BJP manifesto and turning it into actionable budget proposals, and also for setting the direction towards building a “Digital India” where innovation, research and technology will play a major role.

Rural broadband and e-highways

A pan-India programme called “Digital India” has been proposed in the 2014 budget to bridge the divide between digital “haves” and “have-nots”. This would ensure broadband connectivity at the village level, improved access to services through information technology (IT)-enabled platforms, greater transparency in government processes, consumption of local content and a host of other services. The railway budget proposed providing Wi-Fi connectivity at train stations, on premium trains and “Office on Wheels”.

An ambitious plan to integrate all government departments through an e-platform will create a business- and investor-friendly ecosystem in India, by making all business- and investment-related clearances and compliances available on a single 24×7 portal, with an integrated payment gateway.

An ecosystem for innovation: from ‘Sell in India’ to ‘Made in India’

India, since the beginning of civilization, has been a leader in science and technology. Lack of a favourable ecosystem for spurring innovation, however, has dented its position post-independence.

Today, India produces only around 2% of IT products that it consumes. This is having an adverse impact on its economy. The need of the hour is to make India an innovation-driven manufacturing hub from a consumption market, by creating an enabling ecosystem for nurturing product start-ups. Entrepreneurship needs to become part of the national culture instead of being the success story of a few.

The new government has recognized the need to create an ecosystem for fundamental research and innovation for India to become a global manufacturing giant with specific programmes for small entrepreneurs, start-up villages and incubation centres. The nationwide district-level incubation and accelerator programme can promote frugal innovation ground-up.

Special focus on software product industry

IT services will remain important for economic growth, but India needs new growth drivers as well. Global Indians educated in Indian universities, in Indian Institutes of Technology and Indian Institutes of Management have used foreign soil to make inventions and innovations that have benefited the world.

With the right impetus, it is quite possible to create the next Google, Facebook, WhatsApp out of India. The budget makes a big start by launching a fund for promoting product-led start-ups, a much desired innovation in the thinking of the government.

E-Healthcare and e-Education

Much of real India, Bharat, still lives in villages. Unfortunately, the past government’s average spending on healthcare and education was just 1% and 3%, respectively, of gross domestic product. As a result, basic health and education infrastructure is in bad shape.

The budget does a great job in recognizing the enormous opportunity that lies in improving healthcare and basic education access by using IT. Use of telemedicine, virtual classrooms, open online courses and e-education can be the kick-starter to achieve size and scale to improve the primary healthcare network and basic education standards.

Content localization and digitization

India has more Internet users than English language speakers; as a result, regional language keyboards are vital for deeper Internet penetration. Local language content needs to get digitized. China has already successfully developed and standardized local language keyboards.

Government can help by providing the standard templates for every language that can then be commercialized by using the public-private partnership model.

Now it’s time to deliver.

Technology, needless to say, will play an important role in effective delivery of services, monitoring performance, managing projects and improving governance.

An Integrated Office of Innovation and Technology to achieve the same, and for problem solving, sharing applications and knowledge management will be the key to rapid results, given that most departments work in their own silos. Tracking and managing the projects assume significance because India has been busy spending money in buying technology that it has not used effectively or in some cases not even reached implementation stage. Sharing knowledge and best practices across departments need to be driven by this Office of Technology.

India needs interventions across sectors to become a global knowledge hub by 2022. The Prime Minister is a very technology-savvy leader and the country looks forward to his leadership to drive this next phase of revolution in innovation and technology with a renewed vision and vigour.

This article first appeared in LiveMint

Government recognizes the Software Product Industry

The fact that the Finance Minister specifically underscored the Software Product Industry (SPI) in his maiden budget speech is testimony enough of the Government’s resolve to make significant and dramatic changes to achieve rapid economic development. Here are two reasons why we believe the Government is moving in the right direction.

One. Empowering the masses. There is no reason why software products cannot make an impact across various sectors in the economy including agriculture, education and healthcare among others. Software products can provide platforms for improvement in government functioning and effectiveness whether it be the issue of birth certificates or facilitating financial inclusion. They can help provide better healthcare and education. The most sophisticated defence and aerospace products have software at their heart, so software product capabilities could in the long run help our security and defence as well. 

Two. Promote Product Thinking. Success in software products could help promote product thinking in other industries as well. A healthy Software Product industry is also pivotal to developing our Defense, Aerospace and Electronics industries. It is also necessary for creation as well as maintenance of strategic technologies that are critical to national security. The advantage of focusing on software products first is that unlike many other product categories (like drugs or semiconductors), the upfront investments are much more manageable, and we already have the talent base and skills to get going. But why is product thinking crucial? Because it makes possible the capture of value within our country. According to one estimate, Apple earns $368 out of every $560 iPhone. In contrast, Foxconn’s margin on every iPhone that it manufactures for Apple is less than $15. We need to change from “India Inside” to “India: Product Nation” so that we can appropriate a significant part of the value created by our talented designers, engineers and scientists.

Image Credit: Economist

Keep in mind that India is already a global player in Software Products and has the potential to be one of the global leaders in this important industry. Companies like Tally, Zoho, InMobi and QuickHeal have created market leadership in their own segments. In recent years, hundreds of well-qualified technical people are leaving IT Services and joining the software product startup ecosystem. About 15-20% of new engineering graduates from marquee colleges are now electing to be part of Software Product companies. Software Products is the next wave. With a little effort, India can emerge as one of the dominant players in several categories of the global Software Product industry.

Fortunately, the Government recognizes this potential. In the budget speech, Mr. Jaitley clearly said: “There is an imminent need to further bridge the divide between digital “haves” and “have-nots”. For this it is proposed to launch a pan India programme “Digital India”. This would ensure Broad band connectivity at village level, improved access to services through IT enabled platforms, greater transparency in Government processes and increased indigenous production of IT hardware and software for exports and improved domestic availability. Special focus would be on supporting software product start-ups”.

The new Government has clearly taken a step in the right direction. The Software Product industry waits with bated breath.

Indian Product Industry: How Far We’ve Come And How Much More To Go

These are exciting times for us in the Indian software products industry. The air is pregnant with cautious, yet very strong optimism that some truly great product companies will emerge out of India in the coming years. There is a significant shift in the mindset of Indian entrepreneurs, with a focus now on building great products and not just good enough products. A talent pool of  highly qualified and experienced professionals who have worked with MNCs across various functions and roles is now available. The support system has also gotten stronger with more angel investors, accelerators and incubators, focused events and meetups with founders, entrepreneurs and experienced professionals coming together, sharing their knowledge and helping each other. Entrepreneurs now have more exposure to the Valley and other innovation hotbeds and international markets by virtue of their interaction and participation with accelerators, investors and entrepreneurs outside of India. More importantly, we already have examples of successful Indian product companies that have built products for the world and are now well-established names in their businesses.

I’ve stated this earlier as well, that it is my firm belief that the software product industry will lift India out of its poverty. While I strongly believe we’re firmly on track to make the prediction come true, I would also like to strike a note of caution. Having been in the industry for close to 25 years new wearing multiple hats and seen it evolve, there are some observations I would like to share with the readers.

Rome wasn’t built in a day. It’s probably the most cliched phrase, but I think it makes sense repeating the cliche once more in the current context. As entrepreneurs and investors, it is indeed important that we celebrate key wins and milestones like funding, new hires, entry into new markets etc. However, we also need look at the larger, long time picture and focus on what is needed to build a meaningfully successful company, a company that creates value for all the stakeholders – founders, employees, investors and most importantly the customers. And it is that part, of envisaging the larger picture and actually painting it, which is a true test of one’s faith in their core beliefs, their endurance and perseverance.

It is said that dramatic changes happen in a dog’s lifetime. Dogs usually live between 10-15 years on an average, and if they were to follow technology they’d be witnesses to some incredible and eventful happenings. Ten years maybe doesn’t seem like too long a time for us humans, but I were to borrow from the tagline of a very popular coffee chain, a lot can happen in ten years! Rewind ten years to this day, and this is what we would be looking at. Facebook, Groupon, Zynga did not exist. Google’s AdSense & LinkedIn were just about to be launched. On the mobile side, Nokia was the largest vendor of mobile phones and Samsung hadn’t introduced mobiles phones in India yet. Seeds of iOS and Android had probably just been sown in the minds of their creators. In the fast-paced world we live in, it’s very easy to miss how much can happen in what now seems like a short period of ten years. But if you take a step back and notice each of the happenings, you’ll realise how impactful and significant these changes are.

The observations and insights from the points mentioned above hold a lot of meaning for us in the Indian software product industry. While it’s very natural and fair to expect things to move quicker, people to be smarter, government and regulators be more friendly, investors be less risk-averse and so on, but it is also important to remember that magic doesn’t happen overnight. However, small wins and milestones added up over time will see your product and your company achieve something significant over time. Moreover, as an entrepreneur, you’ll need to believe in non-linear growth and that there’ll always be a point from where your growth will take off and go the hockey stick way. Remember, that Angry Birds was Rovio’s 52nd game and they were almost bankrupt at the time they released Angry Birds. What if they had given up after their 50th game? Of course I believe in overnight success, and the only overnight success is getting a good night’s sleep! For all other kinds of overnight success, there are miles to go before one sleeps!

I’m reminded of a tagline that Timex watches had for a long time. (A Timex watch)…takes a licking, but keeps on ticking. That’s some inspiration for us entrepreneurs there! I’ll leave you with some vintage Timex commercials. Hope you enjoy them.

http://vintagetimex.homestead.com/farmer.jpg


YouTube Video – http://www.youtube.com/watch?v=7_fKppH8B0g

Happy Building,

Transforming a nation with products

India is at a crossroads today. Gloom has replaced what seemed to be an unending boom just a few years ago. After a decade of rapid growth led by the services sector, the Indian economy has hit a plateau. While services exports continue to grow and create a surplus in services trade, they only constitute 35% of the country’s total exports and are unlikely to compensate for the deep deficit in merchandise trade that stands at 10% of gross domestic product (GDP). This deficit in goods trade is partly attributed to the services-led route of economic development taken by India in the post-liberalization era, in contrast to a manufacturing-led route to development that creates a strong base for goods trade.

From a national policy perspective, excessive dependence on services is akin to putting all one’s eggs in the same basket. For a country of India’s size, diversity, and global aspirations, a more diversified economic basket is an urgent imperative.

The current situation has created a need to nurture and bolster “products” or “goods” industries. But the challenging question is where to begin, and which industry might lead the charge. Given India’s rise to prominence in the last two decades as a software hub, could software products be the ideal place to start?
Unlike manufactured products, software does not need major logistics infrastructure, nor does it depend on inputs other than human capital. Further, software products can be delivered through the cloud.

Therefore, the software product industry holds the potential to circumvent India’s relatively weak position in manufacturing and yet capture a high enough degree of value to address at least some of our economic challenges.

In addition to the direct benefit of a healthy software product industry to the national economy, technology can bring about an order of magnitude improvement in the effectiveness and competitiveness of other sectors, be they industrial or social. Industries as diverse as healthcare and jewellery could benefit from standardized software applications that enhance their competitiveness. Therefore, a competitive software product industry will not only benefit the economy but will have a ripple effect across the society at large.

Though the aspiration for a vibrant software product industry is compelling, international comparisons show that we have much ground to cover. While the number of engineers in the Israeli software industry is only a third of those employed in the Indian product industry (including MNC captives), Israeli start-ups raise almost double the amount of venture capital that Indian start-ups do. Further, we have thrice the number of start-ups as Israel, but Israeli investors managed 40 times the number of exits compared to Indian companies in 2011. So far, India’s software product industry is punching below its weight category and needs a fillip.

In the past we have failed to realize our potential in products. Take telecom as an example. We have created mobile services giants like Airtel but have no telecom product industry to speak of. Our air force is one of the largest in the world and yet we haven’t been able to get the light combat aircraft (LCA) deployed in 30 years. We have somehow not been able to develop a product industry in India.

A challenge as big as this one is unlikely to have a one-shot solution. Yet, a vibrant product industry is unlikely to emerge by chance either. The solution needs to emerge gradually and iteratively, based on a continuous dialogue between software product companies, investors, policy makers and potential customers. Shaping policy, funnelling investments and stimulating the market can potentially steer the software product industry in the right direction.

This article first appeared in the LiveMint