Posted on

Drones, Digital Sky, Roundtables & Public Goods

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

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

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

How can drones contribute to the public good in India?

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

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

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

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

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

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

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

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

Who should be responsible for creating public goods?

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

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

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

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

The round table primarily serves two purposes:

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

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

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

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

How does the future look like?

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

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

If you have any suggestions/solutions/ideas on how the system can be made better you can definitely become a part of iSPIRT / DICE India and write to us on info@diceindia.org.in or playbooks@ispirt.in and also become a part of the round table.

 

Posted on

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

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


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

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

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

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

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

_____________________________________________________________________

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

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

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

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

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

_____________________________________________________________________

Proposed architecture:

Workflow:

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

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

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

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

_____________________________________________________________________

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

Posted on

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

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

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

Objective of this blog

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

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

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

Present status of HSN and SAC Code

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

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

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

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

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

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

 

SAC code Item Description
 

9973 31

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

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

9984 34

 Under 9984 Online Content

Software downloads

 

Most prevalent uses are of

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

Following Codes are specifically for use of Software Services companies

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

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

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

Present coding is bottleneck for Software product trade

The above coding scheme has emerged from a traditional regime which

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

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

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

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

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

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

What is needed to boost SPI under NPSP

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

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

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

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

Recognize Software product and Distinguish Products from Services

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

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

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

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

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

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

The latter is category called “SaaS” based products.

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

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

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

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

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

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

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

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

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

Break through from tradition leads to success

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

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

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

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

Recommendations (for creating SW product ecosystem)

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

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

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

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

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

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

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

Can we use SAC code?

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

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

Conclusions

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

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

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

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

Posted on

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

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

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



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

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

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

The Indian IT / Software Industry Landscape:

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

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

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

Why India lags behind in Software Products?

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

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

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

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

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

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

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

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

Some Suggested Action Areas for the National Software Policy:

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

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

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

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

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

This blog was first published at Webyantra.com

Posted on

SaaS founders discuss NPSP 2019 with MietY Officials in Chennai

Shri Rajiv Kumar Joint Secretary in-charge of National Policy on Software Products (NPSP 2019) and Senior Director Dr. A K Garg met 20 SaaS companies founders and leader in Chennai on 13th March 2019. At meeting it was discussed that NPSP announced by Government of India on 28th February will soon create a National Software Product Registry, where SaaS companies can register and have access to GEM portal. Also, the procurement process will be suitably amended to allow Govt. departments to procure and use SaaS products.  ‘National Software Product Mission (NSPM)’ envisaged in the policy will be setup at Ministry of Electronics and IT (MeitY).

 

  

Government has launched NPSP 2019 to focus on Software product ecosystem. iSPIRT has been advocating the cause of SaaS segment in Software products and its importance for India to remain a force to reckon with in Software in next 25 years.

The event was a golden opportunity for SaaS companies Founders and leaders, to provide feedback to and understand from the senior officials in Delhi, about the vision they have to make India a Software product power. Twenty SaaS companies represented in the event.

Speaking on behalf of SaaS founders, Suresh Sambandam, Founder and CEO of OrangeScape said,” Global landscape has changed very fast driven by new technology. We have a 2 trillion Dollar opportunity for SaaS industry. If we get our act right, India can aspire to remain in global game in Software Industry”.

The roundtable was organised by iSPIRT Foundation to facilitate officials to have direct interaction with SaaS industry and understand issues, problems and opportunities in SaaS industry, to enable Government to further carve out schemes/ programs under NPSP 2019 going further.

Posted on

Decoding the Aadhaar (Amendment) Bill – PMLA Amendment

The amendment made by way of the Aadhaar and Other Laws (Amendment) Bill, 2018 to the Prevention of Money Laundering Act,2002 gives true effect to the intention of the Hon’ble Supreme Court as set out in their judgment of September 2018.

It is clear from the judgment that the objective was to empower the individual and allow for the resident to be able to uniquely identify herself to avail of every service of her choice while ensuring that there are adequate protections for such use under the force of law.

Aadhaar Act Amendment

This is clearly set out in the now amended Section 4(3) of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (the “Aadhaar Act”) as follows:

Section 4(3) – Every Aadhaar number holder to establish his identity, may voluntarily use his Aadhaar number in physical or electronic form by way of authentication or offline verification, or in such other form as may be notified, in such manner as may be specified by regulations.

Explanation-For the purposes of this Section, voluntary use of the Aadhaar number by way of authentication means the use of such Aadhaar number only with the informed consent of the Aadhaar number holder.

And further in Section 4(4)-

An entity may be allowed to perform authentication if the Authority is satisfied that the requesting entity is-

  1. Compliant with such standards of privacy and security as may be specified by regulations; and
  2. (i) permitted to offer authentication services under the provisions of any other law made by Parliament; or

(ii) seeking authentication for such purpose, as the Central Government in consultation with the Authority and in the interest of the State may prescribe.

With the above amended provisions, it is clarified that (a) the objective is to ensure that the Aadhaar number holder is empowered to establish her identity voluntarily with informed consent (b) Entities that may be permitted to offer authentication services will do so pursuant to a law made by Parliament or by way of Central Government direction in consultation with the UIDAI and in the interest of the State.

PMLA Amendment

The amendment to the Prevention of Money Laundering Act,2002 (the “PMLA”) seeks to give clear direction to the above-enunciated ideas.

The newly inserted Section 11A of the PMLA provides for the manner in which a Reporting Entity may verify the identity of its clients and beneficial owner (conduct KYC). This is by way of offline verification of Aadhaar or where the Reporting Entity is a banking company- online verification of Aadhaar.

However, it is further clarified (in tandem with the aforesaid amendments to the Aadhaar Act) that upon satisfaction of standards of privacy and security, the Central Government may, in consultation with the UIDAI and appropriate regulator provide for online authentication for Reporting Entities other than banking companies.

And it is further explicitly clarified that in the scenarios as contemplated in this provision, nobody will be denied services for not having an Aadhaar number, i.e: ensuring that the presence of Aadhaar number is not mandatory but purely enables and eases the availing of services.

As next steps on this front, distinct Reporting Entities, including NBFCs, Mutual Fund Houses and other financial institutions need to approach the Central Government with requests for access to online Aadhaar authentication services.

Organisations such as DICE would be useful in mobilising groups of different financial institutions in approaching the relevant regulators and Central Government authorities for Aadhaar authentication access.

Saranya Gopinath is the co-founder of DICE (Digital India Collective for Empowerment)- an industry body representation across emerging technology sectors.

She can be reached on saranya@diceindia.org.in

Posted on

Policy Hacks – National Policy on Software Products (NPSP) 2019

It is a moment of delight at iSPIRT to see Govt. of India setting its focus on “Software Product”, with the announcement of National Policy on Software Products by government of India on 28th February 2019. The policy framed by Ministry of Electronics and Information Technology (MeitY) is aimed to sustain India as a global power in Software industry in emerging technological changes impacting the industry. iSPIRT had earlier covered this announcement in a blog titled “India powers up its ‘Software Product’ potential, Introduces National Policy on Software Products (NPSP)” A link to PDF document of the NPSP 2019 is given here on MeitY website. https://meity.gov.in/writereaddata/files/national_policy_on_software_products-2019.pdf Ispirt held a Discussion on NPSP 2019 on 2nd March 2019 with Dr. A. K. Garg, Director MeitY and iSPIRT volunteers Shoaib Ahmed, Amit Ranjan, Nakul Saxena and Sudhir Singh. A vedio of the discussion is placed below.   Given below is the transcript of the main part of the discussion. (We have tried our best to put this but It is not a ditto verbatim transcript but what each participant spoke in essence).  It is advised to watch and listen to the video. Sudhir Singh started the discussion and invited Dr. A.K. Garg to give an overview on the policy. Dr. A.K. Garg – The policy gives wholistic looks and a single window opportunity. issues involved with HS Code. Three tire effort of building a talent pool. First, Appraising Students at school level that there is a difference between product and services. Second, Dedicated pool of developers dedicated to products. Third, Developing a pool of people who can be mentors The other aspects we have looked at is, how do we provide dedicated market access to the product space. Unless and until there is a dedicated and early market access, we cannot create opportunities. We have not looked at graduating this from services industry to product industry, but we are looking at a completely new set of eco-system that will created around the product space, that is one thing which is very important and hallmark of this policy. Sudhir – in the Strategy section 1 that deals with ‘Promoting Software Products Business Ecosystem’ creating ‘Product registry was an important aspect that can be further utilised to create incentives, schemes and programs. Amit Ranjan – what can not be measured can not be improved, going further on the line, what can not be defined can not be measured. The government is taking a proactive view od first defining what is a Product and then a logical breakdown of that is building the registry, building the classification and codification system. So at least the system recognizes the different dimension and different players in the industry and then once you have a clear understanding of it than you know you can tailor policy and you can do specific thing for specific part and creating this registry will lead to mapping the industry and there after many things could emerge out of the system Nakul Saxena –  One of the main objectives of iSPIRT was to create a special focus on Software products and thanks to people like Mr Garg and Secty MeitY and the Minister that we finally got this out. The HS code creation can help product companies to get preferential inclusion in Government procurements and Software products being included in many of the international agreements, especially where Govt of India gives grant to developing countries. Shoaib Ahmed – Is the definition of Software product clear (referring to the early phase of development of policy when there was lot of debate on this part). Nakul – the definition on Software product company is that that the company need to be owned 51% by Indian origin person and IP should reside in India.” Dr. Garg – lot of thinking has gone in to Software product and Software product company. The first and foremost thing is that, it is a very dynamic world and what we have taken is an approach where Software product definition can adjust to changing dynamics. Initially we thought we will not keep any definition, but ultimately, we had to with pressure of various stake holders. Sudhir – requested Nakul to take up the second Strategy section on Promoting Entrepreneurship & Innovation. Nakul – One of the important features of the Policy is that Govt. and MeitY will be putting together 20 Grant Challenges to solve for specific eco-system problems in education, agriculture and healthcare. He mentioned that Secretary has asked to quickly start working on the Grant Challenges. Dr. Garg – Can we crowed source ideas using iSPIRT and Policy Hacks platform. Nakul – Yes, we can. This is a welcome idea and suggested we can have Policy Hacks session to structure discussions and then invite ideas. Dr. Garg – (further spoke on skilling)  for skill development to suit product space, one has to think product and live with it. We have to think through a program that can create a pool of 10 to 15 thousand product professionals who understand product eco-system can help innovation and creation of new ideas and or mentor product companies. And that will be the most important dimension for creating a product eco-system. Shoaib – I think that is a wonderful point and a very important point, beyond the technology and is a combination of skills with one being important is understanding of product market and development of these skills is important. Amit – The way to think about it is that we have to catch people when they are young and I actually see this playout when lot of times when student are in their secondary education, when they are doing their class 10th or 12th, if you are able to educate them at this stage then it takes very early root in their mind. Product system is all about being experimental and all about being failing then retrying and then improving via every attempt. We should educate them about what is a Product how is it different from Services. We do not have lot of Product success stories from India. But educate them and then skill building comes at secondary stage. Dr. Garg – We do not have to replicate the Silicon valley model and that will never work. We have to think and India specific solution that will work. Shoaib – We need to create an India eco-system, there are a few success stories which we have in India, we need not copy but which need to be understood. Sudhir – There are two more points covered in this section of Strategy. One is on common upgradable infrastructure to be created to support startups and software product designers to identify and plug cyber vulnerability. The second being creation of a Centre of Excellence will be set up to promote design and development of software products. Dr. Garg – the first market in Cyber Security is Govt. So creating a single repository of various Indian Cyber products will help. The other thing could be understanding Indian cyber problems and through Challenge grant on some of these problems. Sudhir – let us take up the Strategy section on improving access to market. Requested Nakul to start. Nakul – for Indian Companies to start growing and start scaling it is important getting some anchor customer. The policy has taken care of this aspect for Product companies to get access to anchor customers and then compete within domestic and international market. But the product entrepreneurs have also to be aware how to deal with Govt. RFP. Dr. Garg – So first two anchor customer are important. In Govt. space we are working on Gem to provide interface to Indian Software product. But we need to think how these product companies tie up with System Integration Companies and their interest are not compromised by Sis. Second thing is awareness building in various Govt. agencies. A young entrepreneur may not be able to get to the right stake holder, how does he get this access is what we need to think through. We will be very happy to get your views on creating access to first market. Amit – this is a very important point, especially in the context of SaaS companies, there is an unwritten rule that Indian Domestic market is not big enough or pay enough to sustain many of the SaaS startups. And that is why many VCs are suggesting that you can build a SaaS Company of out of India but that is essentially for engineering, product design but the market it self you will have to go overseas. Development of the Indian domestic market is extremely important. One of the factors which will play a role there is kind of graduating these startups up the Quality ladder as well. The buyer will look for best product in market at best price. By focusing on Quality, they can compete with foreign companies. It is very important to break this negative feeling in the Eco-system that if you are SaaS you can not sell in India, you have to go out. Shoaib – my point is that Quality software and creating a eco-system.  Selling Software, servicing Software and manage Software is a complete different eco-system. Making sure that policy supports that and recognizes it, is the first step. I think we have started with that and I am happy to spend more time to contribute on what does it take to do this. Dr.Garg – if you have a Quality and you do not have a brand it a challenge. Sudhir – this section again mentioned in Policy creating a Software product registry and connecting this with Gem for government product. Sudhir – Let us move on to the last strategy section on implementation. I remember that the ‘National Software Product mission’ (NSPM) was proposed by iSPIRT in to the policy. NSPM can play a vital role as it can become an umbrella cover. Using this it may be possible to create many schemes and program. For example, we have a formidable SaaS industry and it may be possible to quickly create a SaaS product registry and use Gem to get access to Government. Once the registry is created may be Govt. can also issue and advisory to state Government to adopt products from this registry. Dr. Garg – One of the important things is we have to educate the people, and secondly, we have to educate the people on procurement model. Most of the time procurement models are one-time purchase, whereas in a SaaS you have to budget every quarter or every month or it will be pay per use also. Which is a very difficult proposition in Govt. to be approved. One of this thing that come in to my mind is the entry barrier have to be made easier, e.g. there is lot of activity around e-commerce. Now Govt. is actively going to promote product. The e-commerce system is far more developed, it has lower gestation. You can find few companies having valuation of Billion dollars, but that is not true of Product startups. So, we need to see how do we make entry barrier lower for entrepreneur of product companies, other wise human nature is to go by the path of least resistance. Product takes much longer to build, the gestations are much longer, risk are much higher. Shoaib – the challenge are to get role models going, to showcase this. Education is some thing we have been talking about from two dimensions, one is the entrepreneur, second is the Indian SME customer or the Indian customer. The Participants did deliberate further on important of early implementation of NSPM and working on various section of Policy and providing active support from iSPIRT.  The discussion was closed with final remarks from the participants. (please listen/watch the Video for further details on final deliberations). The main Salient features of this policy for benefit of users are as follows:
  1. The visision is to make India a Software product leader in world
  2. In it’s mission – It aims at a ten-fold increase in India’s share of the Global Software product market by 2025, by nurture 10,000 technology startups, upskill 1,000,000 IT professionals and setting-up 20 sectorl technology cluster.
  3. The policy has 5 Strategie to implement the policy.
  4. Strategy are 1 – Intendents to create a congenniel environment for Sofware product business.
  5. An important feature of the policy is creation of a Software product registry of India that can facilitate implementation of schems and programs in future, creation of a HS Code category for Software products.
  6. To boost enterprenure ship, it itends to create a Software Product Development Fund (SPDF) with 1000 Croroe contributed by ministry in a fund of funds format. Remaining coming from private sources.
  7. 20 dedicated challenge grants to solve societal challenges.
  8. Readying a talent pool of 10,000 committed software product leaders
  9. Improving access to domestic market for Software product companies and boost international trade for Indian Software products.
  10. Lastly setting up of a “National Software Product Mission (NSPM)” to be housed in MeitY, under a Joint Secretary, with participation from Government, Academia and Industry. NPSM will further drive implementation of the policy and be able to craft schemes and programs for the said purpose.
An important part of announcing the scheme has been done. This has now to be leveraged to create a momementum in Software product. iSPIRT is committed to see the further development of India as a Product Nation.
Posted on

Scaling Good Advice In India’s Startup Ecosystem – A Research Paper On PNGrowth Model

In January 2016 iSPIRT ran the largest software entrepreneur school in India, called PNgrowth (short for Product Nation Growth).  The central vision of PNgrowth was to create a model of peer learning where over 100 founders could give each other one-on-one advice about how to grow their startups. With peer learning as PNgrowth’s core model, this enterprise was supported by a volunteer team of venture capitalists, founders, academics, and engineers.  See iSPIRT’s volunteer handbook (https://pn.ispirt.in/presenting-the-ispirt-volunteer-handbook/)

However, unlike a regular “bootcamp” or “executive education” session, the volunteers were committed to rigorously measuring the value of the peer advice given at PNgrowth. We are excited to announce that the findings from this analysis have recently been published in the Strategic Management Journal, the top journal in the field of Strategy, as “When does advice impact startup performance?” by Aaron Chatterji, Solène Delecourt, Sharique Hasan, Rembrand Koning (https://onlinelibrary.wiley.com/doi/10.1002/smj.2987).

TLDR: Here’s a summary of the findings:

1. There is a surprising amount of variability in how founders manage their startups.  To figure out how founders prioritized management, we asked them four questions:

“…develop shared goals in your team?”
“…measure employee performance using 360 reviews, interviews, or one-on-ones?”
“…provide your employees with direct feedback about their performance?”
“…set clear expectation around project outcomes and project scope?”

Founders could respond “never,” “yearly,” “monthly,” “weekly,” or “daily.”

Some founders never (that’s right, never!) set shared goals with their teams, only did yearly reviews, never provided targets, and infrequently gave feedback. Other, super-managers were more formal in their management practices and performed these activities on a weekly, sometimes daily, basis. Not surprisingly, the supermanagers led the faster-growing startups.  Most founders, however, were in the middle: doing most of these activities at a monthly frequency.

2. Since PNGrowth was a peer learning based program, we paired each founder (and to be fair, randomly) with another participant. For three intense days, the pairs worked through a rigorous process of evaluating their startup and that of their peer. Areas such as a startup’s strategy, leadership, vision, and management (especially of people) were interrogated. Peers were instructed to provide advice to help their partners.

3. We followed up on participating startups twice after the PNgrowth program. First ten months after the retreat, and then we rechecked progress two years afterwards.

We found something quite surprising: the “supermanager” founders not only managed their firms better but the advice they gave helped their partner too.  Founders who received advice from a peer who was a “formal”  manager grew their firms to be 28% larger over the next two years and increased their likelihood of survival by ten percentage points. What about the founders who received advice from a laissez-faire manager? Their startup saw no similar lift. Whether they succeeded or failed depended only on their own capabilities and resources.

4. Not all founders benefited from being paired up with an effective manager though. Surprisingly, founders with prior management training, whether from an MBA or accelerator program, did not seem to benefit from this advice.

5. The results were strongest among pairs whose startups were based in the same city and who followed up after the retreat. For many of the founders, the relationships formed at PNgrowth helped them well beyond those three days in Mysore.

So what’s the big take away: While India’s startup ecosystem is new and doesn’t yet have the deep bench of successful mentors, the results from this study are promising. Good advice can go a long way in helping startups scale.   iSPIRT has pioneered a peer-learning model in India through PlaybookRTs, Bootcamps, and PNgrowth (see: https://pn.ispirt.in/understanding-ispirts-entrepreneur-connect/).

This research shows that this model can be instrumental in improving the outcomes of India’s startups if done right. If peer-learning can be scaled up, it can have a significant impact on the Indian ecosystem.

Posted on

India powers up its ‘Software Product’ potential, Introduces National Policy on Software Products (NPSP)

This is an exciting occasion for our indigenous software industry as India’s National Policy on Software Products gets rolled out. This policy offers the perfect framework to bring together the industry, academia and the government to help realise the vision of India as a dominant player in the global software product market.

For ease of reference, let us summarise some of the major things that the policy focuses on

  • Single Window Platform to facilitate issues of the software companies
  • specific tax regime for software products by distinguishing  them from software services via HS code
  • enabling Indian software product companies to set off tax against R&D  credits on the accrual basis
  • creation of a Software Product Development fund of INR 5000 crores to invest in Indian software product companies
  • grant in aid of  INR 500 Crores to support research and innovation on software products
  • encouragement to innovation via 20 Grant Challenges focusing on Education, Healthcare & Agriculture thus further enabling software products to solve societal challenges
  • enabling participation of Indian software companies in the govt. e-marketplace to improve access to opportunities in the domestic market
  • developing a framework for Indian software product companies in government procurement.
  • special focus  on Indian software product companies in international trade development programmes
  • encouraging software product development across a wide set of industries by developing software product clusters around existing industry concentrations such as in automobile, manufacturing, textiles etc.
  • nurturing the software product start-up ecosystem
  • building a sustainable talent pipeline through skilling and training programmes
  • encouraging entrepreneurship and employment generation in tier II cities
  • creating governing bodies and raising funds to enable scaling of native software product companies.

There is good cause for cheer here. The policy offers to address many of the needs of the Software Product Ecosystem. For the first time, HS codes or Harmonised Codes will be assigned to Indian software product companies that will facilitate a clear distinction from ‘Software Services’ facilitating availing of any benefits accruing under the ‘Make in India’ programme. In addition, this will enable Indian software product companies to participate in govt contracts through registration on GeM (Govt. eMarketplace).

Considering that we remain a net importer of software products at present, steps such as the inclusion of Indian software products in foreign aid programmes, setting up of specialised software product incubators in other geographies and promoting our software product capabilities through international exhibitions definitely show intent in the right direction. With a commitment to develop 10000 software product start-ups, with 1000 of them in tier II cities, technology entrepreneurs building IP driven product companies can now look forward to infrastructural and funding support. The policy also aims to go beyond metro-centric development with a commitment to develop tech clusters around existing industry concentrations, enable skilling and drive employment in non-metros and tier II cities while actively encouraging Indian software companies to solve native problems.  

This policy could not have been possible without the vision of the Honourable Minister Shri Ravi Shankar Prasad, and continuous engagement and discussions with Shri Ajay Prakash Sawhney, Rajeev Kumar and Ajai Kumar Garg from MEITY and their team.

We have seen software companies solving native problems do exceptionally well, just look at what Paytm has been able to achieve while driving digital payments in India. There is now an understanding ‘Make in India’ can help us bridge the digital divide given that Indian entrepreneurs have a greater understanding of local issues and the challenges that are unique to us.

Setting up bodies such as the National Software Products Mission in a tripartite arrangement with the industry, academia and govt. to enable creation and monitoring of schemes beneficial to native software product companies is another much-needed step that will create a forum distinct to our software product companies and help give them a strong voice.

We would like to thank Lalitesh Katragadda, Vishnu Dusad, Sharad Sharma, Rishikesha T Krishnan, Bharat Goenka, T.V. Mohandas Pai, Arvind Gupta for their diligent efforts on the continuous dialogue and inputs for the policy.

While launching the policy is a great start, its implementation is what we all will have our eyes on. Now is the moment of action. We all look forward to fast-tracking of the various proposed measures under this policy for the benefits to start showing!

Website link to the official policy –  (https://meity.gov.in/writereaddata/files/national_policy_on_software_products-2019.pdf)

References

J​ANUARY​​ 15, 2019​ – ​https://tech.economictimes.indiatimes.com/news/internet/india-needs-to-win-the-software-products-race/67533374

DECEMBER 8, 2016​ – ​https://pn.ispirt.in/what-to-expect-from-draft-national-policy-on-software-products/

NOVEMBER 13, 2016​ – ​https://pn.ispirt.in/national-software-policy-2-0-needed/

MAY 10, 2016​ – ​https://pn.ispirt.in/taxation-and-digital-economy/

APRIL 29, 2016​ – ​https://pn.ispirt.in/saas-the-product-advantage-and-need/

JULY 16, 2014​ – ​https://pn.ispirt.in/government-recognizes-the-software-product-industry/

DECEMBER 11, 2013​ – ​https://pn.ispirt.in/three-waves-of-indian-software/

JULY 16, 2013​ – ​https://pn.ispirt.in/smbs-and-indian-software-product-industry-intertwined-fortunes/

JULY 4, 2013​ – ​https://pn.ispirt.in/8-truths-why-it-services-organizations-cannot-do-software-products/

Posted on

A Platform is in the Eye of the Beholder

The distinction between whether you are building a platform or a product should be made primarily to align your internal stakeholders to a particular strategic direction, as we learned in the recent iSPIRT round table.

[This is a guest post By Ben Merton]

“So are we a platform, or are we a product?” I said last month to my co-founder, Lakshman, as we put the finishing touches to our new website.

We’d been discussing the same question for about a year. The subject now bore all the characteristics of something unpleasant that refuses to flush.

However, the pressure had mounted. We now had to commit something to the menu bar.

“I think we’re a product.”

“But we want to be a platform.”

“Okay, let’s put platform then…But isn’t it a little pretentious to claim you’re a platform when you’re not?”

Eventually, we agreed to a feeble compromise: we were building a platform, made up of products.

Job done.

At least, that is, until #SaaSBoomi in Chennai last month.

Manav Garg, who has considerably more experience than both me and Lakshman at building platforms, put up the following slide:

Product = Solving a specific problem or use case

Platform = Solving multiple problems on a common infrastructure

“Here we go again”, I could hear Lakshman say to himself after I Whatsapped him the image.

“That’s his definition. It doesn’t have to be ours,” he replied tersely, “What does he mean by ‘use case’, anyway?”

“I don’t know.”

I’m in awe of the entrepreneurs who seem to bypass these semantic quandaries.

You know, the ones who say stuff like “Stop thinking so much. Just sell stuff. Make customers happy.”

For me, these are the type of questions I need to chew over for hours in bed at night.

I was therefore excited to be invited to the iSPIRT round table at EGL last week, where the topic of discussion was “Transform B2B SaaS with #PlatformThinking”. The roundtable was facilitated by iSPIRT mavens Avlesh Singh, Shivku Ganesan & Sampad Swain.

It takes a lot to get 20 tech founders & their leaders to travel after work from all over the city to sit in a room for three hours with no alcohol.  Fortunately, the organisers had promised a lot.  The topic description was:  

“Enable a suite of products, high interoperability, and seamless data flow for customers. This peer-learning playbookRT will help product to platform thinkers develop an effective journey through this transformation” was the topic description.”

The meeting was governed by Chatham House rules, meaning we can’t discuss the name or affiliation of those involved.

However, along with our founder mavens of large, well-known Indian technology businesses, there were 15 or so less illustrious but equally enthusiastic founders (& their +1s), including myself.

The discussions started with an overview of the experiences and lessons that had been learned by some of those who had successfully built a platform.

“We define a use case as a configuration of APIs…” the founder of a cloud communication platform started. This was going to be interesting.

“Why did you define it that way?” I asked.

“Based on observations of our business.”

I began to understand that the term ‘use case’ was being used differently by platform and product companies.  

“A use case of a platform is usually tangential but complementary to the core business. A use case for a product is something that just solves a problem,” someone clarified, guaranteeing me a slightly more restful night.

As the discussions continued, it also became clear that there were a large number of possible markers that distinguish a platform from a product, but there was no agreement on the exact composition.

To resolve the impasse, we listed out the names of well-known technology companies to build a consensus on whether they were a platform or a product.

Suffice to say, we failed to reach any consensus.  The conversation went something like this:

“Stripe?”

“Platform.”

“Product.”

“A suite of products.”

“AirBNB?”

“A marketplace.”

“A marketplace built on a platform.”

Etc etc

Even companies that initially appeared to be dyed-in-the-wool platforms like Segment and Zapier eventually had someone or the other questioning the underlying assumptions.

“Why can’t they be products?” murmured voices of dissent at the back of the room.

This was going nowhere. A few people sought solace from the cashew nuts that had been placed on conference table in front of us.

“Does the customer care whether you’re a product or a platform?” someone said.

Finally, something everyone could agree on. The customer doesn’t care.  Your product or platform just needs to solve a problem for them.

“Then why does any of this matter at all?” became the obvious next question.

“I found it mattered hugely in setting the direction of the company, especially for the engineering and design teams,” the Co-Founder of a large payment gateway said.

“And investors?”

“Yes, of course. And investors. However, I think the biggest impact that our decision to build a platform had on my business was in the design more than anything else,” he explained, “For the engineering team, it was just a question of ‘we need this to integrate with this’. But the UX/UI and the…language… needed to be thought about very carefully because of this decision.”

“So, in effect, the platform/product debate is primarily a proxy for the cultural direction of the company?”

“Exactly.”

Logically, therefore, the only way you can really understand whether a company is a platform or a product is to have an insight into the direction its management wishes to take it.

A company might appear to be a product from the outside but, since it intends to evolve into a platform, it needs to start aligning its internal stakeholders to this evolution much earlier.

“So, a startup like mine should call itself a platform even if we are years away from actually being one?” I asked cautiously after I had enough time to process these insights.

“Yes,” was the resounding, satisfying response that virtually guaranteed me a full night’s sleep.

“And when should the actual transition from product to platform happen?”

“Well, Jason Lemkin says it should happen only when your ARR reaches USD 15m-20m, but that’s just another of those rules that doesn’t apply in India,” the co-founder of a marketing automation software said.

“The important thing is that this transition – when it does happen – is very hard for businesses,” he continued, “There is a lot of risk, but it opens up new revenue streams, helps you scale and build a moat.  We hugely benefited from our decision to become a platform, but it was tough.”

It’s unlikely that we completely resolved the product vs platform debate for all founders. However, I feel that all of us came away from that meeting with a deeper insight into the subject.

Ultimately, whether you’re building a product or a platform will depend on your perspective. Most companies lie somewhere in between.

Where does your company lie on this sliding scale? And if that makes you a platform vs. a product, does it make any difference to the way you think?

We want to thank Techstars India for hosting the first of the roundtables on this critical topic.

Ben Merton

Ben is a Co-Founder of Unifize, a B2B SaaS company that builds a communication platform for manufacturing and engineering teams. He is also a contributor for various publications on business, technology and entrepreneurship, including the Wall Street Journal, the Financial Times and Business Standard. You can follow him on LinkedIn here, and Twitter here.

© Ben Merton 2018

Featured Image: Source: https://filosofiadavidadiaria.blogspot.com/2018/01/o-principio-mistico-da-verdadeira-causa.html

Posted on

#2 Federated Personal Health Records – The Quest For Use Cases

Last week we wrote about India’s Health Leapfrog and the role of Health Stack in enabling that (you can read it here). Today, we talk about one component of the National Health Stack – Federated Personal Health Records: its design, the role of policy and potential use cases.

Overview

A federated personal health record refers to an individual’s ability to access and share her longitudinal health history without centralised storage of data. This means that if she has visited different healthcare providers in the past (which is often the case in a real life scenario), she should be able to fetch her records from all these sources, view them and present them when and where needed. Today, this objective is achieved by a paper-based ‘patient file’ which is used when seeking healthcare. However, with increasing adoption of digital infrastructure in the healthcare ecosystem, it should now be possible to do the same electronically. This has many benefits – patients need not remember to carry their files, hospitals can better manage patient data using IT systems, patients can seek remote consultations with complete information, insurance claims can be settled faster, and so on. This post is an attempt to look at the factors that would help make this a reality.

What does it take?

There are fundamentally three steps involved in making a PHR happen:

  1. Capture of information – Even though a large part of health data remains in paper format, records such as diagnostic reports are often generated digitally. Moreover, hospitals have started adopting EMR systems to generate and store clinical records such as discharge summaries electronically. These can act as starting points to build a PHR.
  2. Flow of information- In order to make information flow between different entities, it is important to have the right technical and regulatory framework. On the regulatory front, the Personal Data Protection Bill which was published by MeitY in August last year clearly classifies health records as sensitive personal data, allows individuals to have control over their data, and establishes the right to data portability. On the technical front, the Data Empowerment and Protection Architecture allows individuals to access and share their data using electronic consent and data access fiduciaries. (We are working closely with the National Cancer Grid to pilot this effort in the healthcare domain. A detailed approach along with the technical standards can be found here.)
  3. Use of information – With the technical and regulatory frameworks in place, we are now looking to understand use cases of a PHR. Indeed, a technology becomes meaningless without a true application of it! Especially in the case of PHR, the “build it and they will come” approach has not worked in the past. The world is replete with technology pilots that don’t translate into good health outcomes. We, in iSPIRT,  don’t want to go down this path. Our view is that only pilots that emerge from a clear focus on human-centred design thinking have a chance of success.

Use cases of Personal Health Records

Clinical Decision Making

Description: Patient health records are primarily used by doctors to improve quality of care. Information about past history, prior conditions, diagnoses and medications can significantly alter the treatment prescribed by a medical professional. Today, this information is captured from any paper records that a patient might carry (which are often not complete), with an over-reliance on oral histories – electronic health records can ensure decisions about a patient’s health are made based on complete information. This can prove to be especially beneficial in emergency cases and systemic illnesses.

Problem: The current fee-for-service model of healthcare delivery does not tie patient outcomes to care delivery. Therefore, in the absence of healthcare professionals being penalised for incorrect treatment, it is unclear who would pay for such a service; since patients often do not possess the know-how to realise the importance of health history.

Chronic Disease Management

Description: Chronic conditions such as diabetes, hypertension, cardiovascular diseases, etc. require regular monitoring, strict treatment adherence, lifestyle management and routine follow-ups. Some complex conditions even require second opinions and joint decision-making by a team of doctors. By having access to a patient’s entire health history, services that facilitate remote consultations, follow-ups and improve adherence can be enabled in a more precise manner.

Problem: Services such as treatment adherence or lifestyle management require self-input data by the patient, which might not work with the majority. Other services such as remote consultations can still be achieved through emails or scanned copies of reports. The true value of a PHR is in providing complete information (which might be missed in cases of manual emails/ uploads, especially in chronic cases where the volume and variety of reports are huge) – this too requires the patient to understand its importance.

Insurance

Description: One problem that can be resolved through patient records is incorrect declaration of pre-existing conditions, which causes post-purchase dissonance. Another area of benefit is claims settlement, where instant access to patient records can enable faster and seamless settlement of claims. Both of these can be use cases of a patient’s health records.

Problem: Claim settlement in most cases is based on pre-authorisation and does not depend solely on health records. Information about pre-existing conditions can be obtained from diagnostic tests conducted at the time of purchase. Since alternatives for both exist, it is unclear if these use cases are strong enough to push for a PHR.

Research

Description: Clinical trials often require identifying the right pool of participants for a study and tracking their progress over time. Today, this process is conducted in a closed-door setting, with select healthcare providers taking on the onus of identifying the right set of patients. With electronic health records, identification, as well as monitoring, become frictionless.

Problem: Participants in clinical trials represent a very niche segment of the population. It is unclear how this would expand into a mainstream use of PHR.

Next steps

We are looking for partners to brainstorm for more use cases, build prototypes, test and implement them. If you work or wish to volunteer in the Healthtech domain and are passionate about improving healthcare delivery in India, please reach out to me at anukriti@ispirt.in.

Posted on

iSPIRT’s Response to Union Interim Budget 2019

Our policy team tracks the interest of Software product industry

INDIA, Bangalore, Feb 1st, 2019 – Proposals for Union budget of 2019 have been announced today by Finance Minister.

Being an interim budget not many announcements were expected. Some of the important announcements that may affect the expansion of the economy, in general, owing to increased income and ease of living in the middle class are as follows:

  1. Within two years tax assessment will be all electronic.
  2. IT return processing just in 24 hours
  3. Rebate on taxes paid for those with an income below 5 lakhs
  4. TDS threshold on interest income by woman on bank/post office deposits raised from Rs. 10,000 to 40,000
  5. Increase in standard deduction from Rs. 40,000 to 50,000
  6. Rollover of Capital gains tax benefit u/s 54 from investment in one house to two houses, for a taxpayer having capital gains up to Rs. 2 crore
  7. Recommendation to GST Council for reducing GST for home buyers
  8. Exemption from levy of tax on notional rent, on unsold inventories, from one year to two years
  9. Many benefits announced for Agriculture and Rural sector

The coining of the phrase “Digital Village” and placing it second on the list of ten-dimension vision statement in budget speech is a welcome step. The statement nudges the next Government to improve access to technology in rural India, a welcome step. We expect “Digital India” and easy and quality access to the internet for every citizen will remain a focus area, irrespective of which government comes to power.

The government has announced a direct cash transfer scheme for farmers. We are happy to see that technologies like the India Stack are being used by policymakers for effective policy-making irrespective of political ideology. Cash transfers promise to be more efficient initiatives that directly benefit our poor without needing them to run from pillar to post trying to prove their identity and eligibility. “Similarly, startups and SMEs remains a focus area in the vision statement. These are very important for a healthy ecosystem built up.

Similarly, focused phrases such as “Healthy India”, “Electric Vehicle” and “Rural Industrialisation using modern digital technologies” are welcome ideas in ten-dimension vision for Indian Software product industry and startup ecosystem.

However, among key issues for Startups and Investments which need to be addressed but have been missed out are Angel tax and Tax parity between listed and unlisted securities. Angel Tax is a very important issue which needs to be addressed conclusively at the earliest. We need to ensure gaps between policy declaration and implementation do not cause entrepreneurs and investors to relocate themselves aboard.

About iSPIRT Foundation

We are 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. visit www.ispirt.in

For further queries, reach out to Nakul Saxena (nakul@ispirt.in) or Sudhir Singh (sudhir@ispirt.in)

Posted on

#1 India’s Health Leapfrog – Towards A Holistic Healthcare Ecosystem

In July 2018, NITI Aayog published a Strategy and Approach document on the National Health Stack. The document underscored the need for Universal Health Coverage (UHC) and laid down the technology framework for implementing the Ayushman Bharat programme which is meant to provide UHC to the bottom 500 million of the country. While the Health Stack provides a technological backbone for delivering affordable healthcare to all Indians, we, at iSPIRT, believe that it has the potential to go beyond that and to completely transform the healthcare ecosystem in the country. We are indeed headed for a health leapfrog in India! Over the last few months, we have worked extensively to understand the current challenges in the industry as well as the role and design of individual components of the Health Stack. In this post, we elaborate on the leapfrog that will be enabled by blending this technology with care delivery.

What is the health leapfrog?

Healthcare delivery in India faces multiple challenges today. The doctor-patient ratio in the country is extremely poor, a problem that is further exacerbated by their skewed distribution. Insurance penetration remains low leading to out-of-pocket expenses of over 80% (something that is being addressed by the Ayushman Bharat program). Additionally, the current view on healthcare amongst citizens as well as policymakers is largely around curative care. Preventive care, which is equally important for the health of individuals, is generally overlooked.  

The leapfrog we envision is that of public, precision healthcare. This means that not only would every citizen have access to affordable healthcare, but the care delivered would be holistic (as opposed to symptomatic) and preventive (and not just curative) in nature. This will require a complete redesign of operations, regulations and incentives – a transformation that, we believe, can be enabled by the Health Stack.

How will this leapfrog be enabled by the Health Stack?

At the first level, the Health Stack will enable a seamless flow of information across all stakeholders in the ecosystem, which will help in enhancing trust and decision-making. For example, access to an individual’s claims history helps in better claims management, a patient’s longitudinal health record aids clinical decision-making while information about disease incidence enables better policymaking. This is the role of some of the fundamental Health Stack components, namely, the health registries, personal health records (PHR) and the analytics framework. Of course, it is essential to maintain strict data security and privacy boundaries, which is already considered in the design of the stack, through features like non-repudiable audit logs and electronic consent.

At the second level, the Health Stack will improve cost efficiency of healthcare. For out-of-pocket expenditures to come down, we have to enable healthcare financing (via insurance or assurance schemes) to become more efficient and in particular, the costs of health claims management to reduce. The main costs around claims management relate to eligibility determination, claims processing and fraud detection. An open source coverage and claims platform, a key component of the Health Stack, is meant to deal with these inefficiencies. This component will not only bring down the cost of processing a claim but along with increased access to information about an individual’s health and claims history (level 1), will also enable the creation of personalised, sachet-sized insurance policies.

At the final level, the Health Stack will leverage information and cost efficiencies to make care delivery more holistic in nature. For this, we need a policy engine that creates care policies that are not only personalized in nature but that also incentivize good healthcare practices amongst consumers and providers. We have coined a new term for such policies – “gamifier” policies – since they will be used to gamify health decision-making amongst different stakeholders.

Gamifier policies, if implemented well, can have a transformative impact on the healthcare landscape of the country. We present our first proposal on the design of gamifier policies, We suggest the use of techniques from microeconomics to manage incentives for care providers, and those from behavioural economics to incentivise consumers. We also give examples of policies created by combining different techniques.

What’s next?

The success of the policy engine rests on real-world experiments around policies and in the document we lay down the contours of an experimentation framework for driving these experiments. The role of the regulator will be key in implementing this experimentation framework: in standardizing the policy language, in auditing policies and in ensuring the privacy-preserving exchange of data derived from different policy experiments. Creating the framework is an extensive exercise and requires engagement with economists as well as computer scientists. We invite people with expertise in either of these areas to join us on this journey and help us sharpen our thinking around it.

Do you wish to volunteer?

Please read our volunteer handbook and fill out this Google form if you’re interested in joining us in our effort to develop the design of Health Stack further and to take us closer to the goal of achieving universal and holistic healthcare in India!

Update: Our volunteer, Saurabh Panjawani, author of gamifier policies, recently gave a talk at ACM (Association for Computing Machinery)/MSR (Microsoft Research) India’s AI Summit in IIT Madras! Please view the talk here: https://www.microsoft.com/en-us/research/video/gamifier-policies-a-tool-for-creating-a-holistic-healthcare-ecosystem/

Posted on

Discussion on “The Information Technology [Intermediaries Guidelines (Amendment) Rules] 2018”

Ministry of Electronics and Information Technology (Meity) has put up a new set of draft rules for the IT Act, and is inviting feedback.

The draft rules mostly relates to governing violations on social media.

The Draft is given at:

http://meity.gov.in/content/comments-suggestions-invited-draft-%E2%80%9C-information-technology-intermediary-guidelines

It contains a link to the new rules:

http://meity.gov.in/writereaddata/files/Draft_Intermediary_Amendment_24122018.pdf

This PolicyHacks recording was done on 2nd January 2018 at 5.30 pm covering a discussion on the proposed rules ( amendment ).

iSPIRT Volunteers, Sanjay Jain, Saranya Gopinath, Venkatesh Hariharan (Venky), Tanuj Bhojwani iSPIRT volunteers and Bhusan, a lawyer from IDFC participated in the discussions with Sudhir Singh.

The main aspects of the draft amendment and its impact on the Software product and Start-ups in tech world in India are covered in the discussions. A transcript of the discussion is given below for read. Or you could choose to listen to the recorded audio/video on you tube embedded below.

 

The draft rules mainly cover information published by users on intermediaries also referred to as platforms in this discussion. The three broad aspects that draft rules cover are :

 

  1. Putting higher onus on Intermediaries on objectionable content
  2. High level of compliance and penalties
  3. Enforcing traceability of objectionable content

With above introduction to topic floor was opened for discussions by host Sudhir Singh. Below is the transcript of contribution made by participants ( the transcript may not be complete word by word but follows the semantics of contribution made).

On Question on how the draft rules will impact industry

Sanjay Jain – “Two three element that you have highlighted in there.

First is the definition of the platform player. Intermediaries are broadly defined. They include everybody from  telecom players, ISPs, a Social network and even a site like apartment Adda, Baba-jobs, because all of these will have some kind of user generated content, which is being published and shared with others. While the law drafting may have had one type of intermediary in mind, but it actually applies to all of them and as such that is where some of the issue starts.

Second part is that by moving some of the Onus to the platform, and I actually think they have not fully moved the onus to the platform, which is very dicey situation because, they have moved and not moved at the same time. And because, the onus is primarily still on the Govt. to notify to the intermediary, that there is something objectionable and they have to remove it. But, at the same time they have said that intermediary shall develop technological means for identifying  all of this, as well. Sometimes there is an assumption that technology can do a lot, and in reality while you can have 99.9% accuracy, you still have those 0.1% and that becomes an issue.

Third part, I wanted to say is cost of compliance goes up considerably. They have put a limit 50 Lakh users in India, though we believe 50 lakh may either be little low. They should go little higher and depending upon type of user generated content they should allow for little graded form of compliance.”

Bhusan, from IDFC Institute –  “As a context, these rules have come about are drafted based on earlier rules of 2011 and have some new features like graded approach such as significant intermediary to non-significant intermediary. They have put time lines in terms of response from intermediary and so these rules are being built upon existing set of rules.

There is some short of tightening of the compliance on intermediary e.g. 72 hours of time line for response. If you are a significant intermediary, than you have to be incorporated in India and has to appoint a person who is available 24X7, and you also have to have proactive measure to screen content on your side. Some of this is coming from frustration of getting information from intermediaries.”

On issue of how much these numbers are practical for small players? How to save start-ups?

Sanjay Jain – “Differed assumption is that if you publish any content which is against the law, you are liable. Being an intermediary protects you. If you remember the case of Baje.com, the only protection they got was proving to be an intermediary. Hence, you want to call them (Start-ups) intermediaries but get a better procedural control to stop harassment at hand of low level law enforcement.”

Tanuj came in and quoted the the line after 72 hours, in section 5 it says”as asked for by any government agency or assistance concerning security of the State or cyber security; or investigation or detection or prosecution or prevention of offence(s); protective or cyber security and matters connected with or incidental thereto.”

According to Tarun, this statement is so broad that any junior level officer can say I got information that someone from Hissar in Haryana is harassing a person and give information of all users in Haryana.

Venky – “I agree with Tarun, we have the laws or the rule meant to be more sharply defined and have sharp implementation guidelines. In this case seems to be pretty loosely framed.”

Sudhir Singh – “There is another issue in draft rules on once in a month information to user, and taking their consent. Any hard compliance of rules is normally easier for large players, they may easily invest and handle with technology but small players and start-ups it is difficult situation to comply.”

Sanjay – “From technology experience we learn that if you make something automated, user ignore it. So, what will happen is this will be implemented by sending one email to every user, once in a month, stating if you don’t comply, we will delete your account from platform.

That’s an email that is going to get ignored. So, it is a very ineffective suggestion. Also, there is an implicit assumption that all users are identifiable, which is not the case always. So, just to implement it you will have to identify users. That may not be a valid requirement.”

Bhusan –  “On the point that you need to have more than 5 million users. My question is procedurally how do you even establish that?

Will platform will have to do GPS type of tracking to ensure that and does this not create a privacy risk in itself e.g. I do not know does platforms like Quora know that they have more than 5 million users in India or not. It seems, there is this focus on regulating Big Techs and this 5 Million number really come from that.”

Sanjay – “Basically, anybody can be hosting user generated content. So, lets us say we are on a common platform, and there is a message flowing from me to you. If I violate the law, and let’s say the message is liable of incitement or any other law, then I should be held liable and not the platform.

For that platform needs to be qualified as intermediary, put under safe harbour and intermediary takes on the responsibility of helping the law enforcement. So, we should not take up start-ups out of its ambit. What we have to do is make sure that, the conditions required is that conformance to the standard should not be so terrible that start-up should be excluded.

So, we need to sharpen the requirement they they should be conforming with and make it easy enough for somebody to confirm.”

It is being discussed that Govt. is aiming for higher level of Penalty. What should be our recommendation?

Tanuj – “If you take very young company any short of hit is bad, but if you can put proportion of revenue basis, it will be at least more forward thinking, even if it is not absolutely fair, in some sense more fair of not having that rule or having flat rule. The amendments of changes we should think about of moving the penalty would be not being in favour of arbitrary penalty.”

Tarun added – “Our recommendations should be around sharpening rules, like who can use it who cannot use, what are the accountability measures on them, more than magnitude of these numbers.”

Saranya – “Just to address the Data protection law vis-à-vis intermediary act. The subject matter of Data Protection law is ‘personally identifiable information’, whereas Intermediary act tries to cover ‘all communication in some sense’ and hence, Intermediary act has a longer leash with regard to the person who can take the intermediaries to task.

The criteria of what would be offensive under Intermediary act is very different e.g. encouraging consumption of narcotics. Hence, the criteria that a person can take intermediary to task is extremely wide and needs to be curtailed.”

Bhusan – “There is an inherent subjectivity in these rules and there is need to some short of standard procedures on how these rules are applied by law enforcement agencies across. All that these rules say is  – any request has to come in writing and intermediaries have to comply with.”

Venky –  “From an implementation perspective we need implementation guideline. Section 5 is so wide that anybody can drive a truck through it.”

How the numbers (e.g. 72 hours period to respond and 50 lakh users) should be defined in a manner that is suits Start-ups who are in the early phase.

Sanjay – “Broadly, we need to identify the places and various numbers to apply proportionally depending upon the size of entity and size of violation, in our feed back to the Government.”

Sanjay also brought in attention to the “Appropriate Govt”, needs to be defined well. He said,  “What we want is the Govt. agencies to be defined.”

Bhusan –  “This is very standard way of defining. I have not seen any precise definition on specifying agencies in general regulation and I do not see they will start with IT act on this.

Bhusan mentioned another important issue of end-to-end encryption is a more political point rather than national security issue. (refer section 5 last lines).

Sanjay –  “This is about tracking and tracing may not be about encryption. The fact, that I sent information to some body is about meta data, it’s not about information itself. This may be clarified better, but is not about end-to-end encryption but about meta data.”

Sanjay further added, “perhaps one clause you could add is to say that the ‘intermediary should be able to do this based on the information it has, if it does not have information, there should be not requirement to maintain information’ e.g. if you take business of mailinator, they don’t keep record of mails sent in and out.”

Bhusan, added “it should not lead to intermediaries having a requirement to do KYC on users.”

Is 50 lakh only to target large platform players?

Sanjay, “my read is they may have thought that way. But in reality a regional ISP or even a small newspaper will fall in to that category.”

“Bhusan, I don’t think it is a number generate by some study, but it seems like they just picked it.”

The discussion was rapped with thanks to all players.

Author note and Disclaimer:

  1. PolicyHacks, and publications thereunder, are intended to provide a very basic understanding of legal/policy issues that impact Software Product Industry and the startups in the eco-system. PolicyHacks, therefore, do not necessarily set out views of subject matter experts, and should under no circumstances be substituted for legal advice, which, of course, requires a detailed analysis of the relevant fact situation and applicable laws by experts in the subject matter on case to case basis.
  2. PolicyHacks discussions and recordings are intended at issues concerning the industry practitioners. Hence, views expressed here are not the final formal official statement of either iSPIRT Foundation or any other organisations where the participants in these discussions are involved. Media professionals are advised to please seek organization views through a formal communication to authorised persons.