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The march of the product brigade!

For the last fifteen years and more, there has rarely been a meeting of visionaries and practitioners in the IT industry where somebody does not offer the view that the days of IT services are nearing an end and the product movement will create new heroes for the industry and country.  In each of those fifteen years, the gap between the revenues of the services firms and product pioneers has only widened and a cynic might be pardoned for asking “Is it really worth our while to obsess about products when the services sector continues to do well and find newer and newer avenues and models for growth?”

The truth is that the success of  product ventures is an idea which has been slow in developing but whose time has now surely come. Many successful Product Conferences conducted by NASSCOM in Bengaluru and led by the passionate  Sharad Sharma and his band of merry evangelists, the iSPIRT and ProductNation initiatives of the product group championed by former NASSCOM stalwart Avinash Raghava, the very successful Knowledge Management and Intellectual Property movement led by the Confederation of Indian Industry and the huge deals flows seen from product wannabes for funding by the Indian Angel Network all point to a renewed surge of enthusiasm for a “Made in India” wave that will sweep the industry forward and unleash a tsunami of success for many young entrepreneurs.

However there is no case for a simplistic polarization between services and product companies and there is certainly no basis for the argument that IT services firms will decline and give way to product firms. Even five years ago, when we had postulated that the industry would grow to a three hundred billion dollar level by 2020, the canvas was painted in many colours – on-premise and cloud based services, new platforms and frameworks, accelerators and shrink wrapped and embedded products. The boundaries are blurring and most of us in services have embraced IP creation as a necessary part of all our vertical solutions. At Zensar we have built a compelling “Digital Enterprise” strategy that leads our clients from systems of record through the wonderland of Cloud, Mobility, Social Media and Analytics to true systems of engagement. This strategy is delivered through an eco-system of product partners who have focused point solutions for vertical and horizontal engagement. The day is not far when all services firms will attempt to garner over thirty percent of their revenues from systems integration and carry a cohort of product partners into new markets.

This is not to say the product companies cannot succeed on their own steam. On the contrary, there is a strong sense of self-belief in the new generation of product entrepreneurs in our country even as some of the global product majors are beginning to consider themselves as services companies. A forthcoming CII Knowledge Management conference will showcase small companies in India that can provide worthy solutions that push the frontiers of knowledge, for organisations in all user domains and as well as technology savvy services organisations. A revolution is in the making in this country and the march of the product brigade will lead this revolution !

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The push for products

By investing in the product marketplace, India will do the same leapfrog as it did with the mobile revolution. 

Recently I had the opportunity to witness the silent revolution that is taking off in India – a revolution that has been overshadowed (and somewhat suppressed) by the media-popular IT giants!

For a long time I have wondered why the IT giants with so much intellectual capital and knowledge had not invested in building products.  Most of these giants had smart folks who worked on endemic problems and were focused on solving them through service contracts. My queries to senior executives in IT giants were always met with one of the following answers:

    • not part of their niche,
    • not easily understood by analysts who closely watched their quarters,
    • they did not want their customers to feel that they were capitalizing on  knowledge gained through services to address the problems differently, and
    • did not have the rich domain experience.

 

My personal perception was that the reality was different.  They could guarantee (not just generate) a positive ROI with an incoming professional in six months. Investment in products required long term thought process and needed a completely different kind of entrepreneurial thinking.  More importantly it needed leadership that had an entrepreneurial mindset based on conviction and risk-taking.

In November of 2012 I had the opportunity to attend the Product Conclave of NASSCOM in Bangalore and it opened my eyes to a different India!  I got to see a level of passion that I had never seen before. I got to see the edge folks – folks who had worked in the domain in large companies and realized the drudgery of some of the maintenance work that they were doing.  While the vast majority were comfortable carrying on there were some folks in there who had the mind-set of “change-agents”.  They were not satisfied with simply doing the work – they wanted to get to the root issue and solve/eliminate the need for the problem.  They conceived thoughts and ideas on how they could solve the domain issue in a better way.  They aspired to replace the increasing labor costs with much better ways of doing things.  They were ready to eliminate their jobs completely but that did not fit the revenue model of large IT service companies.

These folks then did the next thing that “change-agents” do – shock everyone around them by giving up titles, safe corporate jobs and took the plunge.  They started working towards creating products that would satisfy a market need.

As per latest statistics, the total revenue of the product companies from India is currently over U.S.$2.0 Billion, from approximately 3,400 companies in the software and electronics/semiconductor industry.  When I dug into the demographics, the number of companies shocked me first, I had no idea about the same.  The revenue seemed fairly small as it works out to an average of $600K per company.   Also there seemed to be a concentration issue with 51% of the companies located in the NCR and Bangalore region.

In my personal opinion, by investing in the product marketplace, India will do the same leapfrog as it did with the mobile revolution.  It will truly democratize the software industry very quickly and let people shape their own destiny versus becoming part of the eco-system where you have to spend years to display shoulder badges of experience.  The biggest barrier is currently created by large behemoths to protect their territory.  They have service portfolios to do work, using labor at hourly charge out rates versus the paradigm shift of product folks that will either eliminate or dramatically reduce the need for the same.   Product evangelists are creating a different world that is moving away from “status quo” and coming up with new and different ways of doing things.  They are the “game-changers”.

Since the Product Conclave in November, I have seen the establishment of iSPIRT, a trade organization that is supported and focused on product portfolio companies.   It allows the product companies to build the eco-system that is required to support and enrich their environment with necessary supporting infrastructure.   Along with my colleague Greg Toebbe, I have also attended a session in February, 2013 on product start-ups wherein we were introduced to some innovative and creative technologies that had relevance to our requirements.

In this fast-paced, globally networked business environment, businesses are continuing to seek disruptive technologies that give them the competitive edge.  They are not just looking for smarter and more effective ways to do existing work but different and innovative business models that support their continued evolution in the marketplace.  They are not just looking to sell products but to engage customers in the experience – they are not looking for a sale, but a well understood and strong relationship with the customer.   Entrepreneurs need to ensure that their solutions are not constrained by the paradigm of “always have done it this way” but are “tectonic shifts” to the way of doing business.  They need to address not silo issues, but address them from a customer centric model.  They do not need to focus on big-data, mobility, social, etc., as buzz-words, but to provide solutions that provide the customer an engaging experience.   They should not get enamored by technology trends and their personal technology biases, but focus on the experience and convenience being desired by the millennial workforce participant.  By 2020, half the global workforce will be millennial and the new business models are not expected to come from the current large companies.

In the new world, businesses realize that the days of buying everything from the perceived “safe” companies is no longer the decision that will sustain them – they will buy best-of-breed from the smarter solution companies that treat the world as flat.  The power will not be in individual solutions, but the network of best-of-breed solutions.   Large companies with multi-year implementation timelines and businesses that seek to automate existing processes will not be the winners of the new world.  Solutions will have to nimble with the cycle from pilot to deployment being short followed by continued innovation.   Sales cycle will have to be supportive of the same and a long-term annuity of fixed maintenance will not be the driver; ease of use, usage metrics, continued innovation and overall satisfaction will be the new factors that will play into maintenance annuity.

So for all the product folks – my hats off to you!  My only advice would be to not be discouraged by the challenges that come along the way.  Do not care when people say “I told you so”, do not worry if you do not have all the skills to make it happen, do not worry if it takes a little longer that what you thought.  You are the “change-agent” for the revolution that needs to take place and if India has 50 percent of the world’s IT workforce, then it is time that they produce world class products!

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Just Imagine

Today is India’s 66th Independence Day and the environment around, seems, to be generally shorn of excitement, energy and optimism. However, as is customary on such occasions, a call to the people – all of us – is, well, called for: to galvanise us all to action, to put our shoulders to the wheel of policy making that will make economic activity explode.  Such calls for action and indeed, the action, itself require us all to imagine an India that is radically different from the one that we see and experience each day around us.

Nandan Nilekani wrote “Imagining India” in 2008 and one of the things he imagined has since been actualised in the form of the Aadhar / UID project that provides an Identity card and number to every resident of India. Over 600million people would be recipients of this card by next year, 2014. In and as of itself, this would have been a gargantuan exercise, amongst the very largest in the world. But that by itself wouldn’t be as interesting as what the prevalence of the Aadhar infrastructure can enable.  Identity is a fundamental pre-requisite for any kind of financial transaction and the Aadhar project enables that.  “Know your customer” ( KYC) norms can now be easily done for all kinds of activities eg. From opening a bank account to applying for a gas connection to a phone to availing a loan to purchasing insurance. Hundreds of millions of people who operated in the informal or extra-legal financial services market will now come under the more benign, formal, organised and recognised regime.

Much earlier in the 1980s, Sam Pitroda imagined an India transformed with the creation and establishment of a nationwide telecom infrastructure.  Today, we all are witness to the remarkable benefits that this imagination has brought about. Over 900 million phone subscribers in just over two decades.

Even earlier, in the 1960s Dr Verghese Kurien imagined a young country that would be self-sufficient in milk. Operation Flood made India, formerly a milk deficient country, the world’s largest producer of milk accounting for over 17% of global output with an entire infrastructure, from rural to urban, tradition and technology to markets and branding.

Each of the above examples showcases the huge long term national benefits of creating big platforms – Unique Identity, Telecom, Milk Production and Distribution – through the sheer power of imagination, entrepreneurial energy, policy making, political will and savvy marketing. Platforms are soft and hard infrastructure – policy, rules of engagement and collaboration, co-opting of existing stakeholders, creation and harnessing of technology, innovative processes and business models. Such platforms while usually created and established by the government to serve public good, interest and national security, it is the subsequent entry of private entrepreneurs that enables the proliferation and development of additional technologies and services. For example, the mother of all platforms today, the internet, had its origins in the US Department of Defence Advanced Project Network.

So as we enter our 67th year as a nation, what is it that we can imagine? Indeed, what should we imagine? Very briefly,

i)               Education: In the age of MOOCs and Wikis, why cannot India have a national programme for education using and deploying the latest technologies? Video based learning, local languages with local examples, with the best teachers, with online testing? This will require the creation of a massive technology backbone, co-opting of existing institutions, training, establishment of processes and rules, financial incentives, payment and collection mechanisms for the entry and exit of private entities.

ii)              Healthcare is another area that requires enormous intervention along the lines being discussed. Telemedicine, remote diagnostics, new innovative low cost devices for self testing and medication, education and awareness, mobile clinics, logistics for moving patients and equipment, innovative payment systems, policy, regulation and oversight are areas that have to come together.

iii)            A marketplace for logistics providers – air, land and sea – across the value chain, integrated with warehouses, C&F agents, insurance providers, payments and settlements, processes for transparent pricing. Can be very useful for agriculture and industry.

There obviously are many more possibilities (viz. defence and space) and initiatives that can be imagined that will help all of us Indians and India. Can we set the ball rolling and start the process of engagement with various stakeholders – government, industry bodies, entrepreneurs and others – to help create platforms that can create a new India? Can we create and curate ideas for platforms that have the immense potential to fundamentally transform India.  Just Imagine.

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Shaping Small Business India

Small Businesses play a significant role in a developing economy – from creating valuable business opportunities to employing a large chunk of the workforce. They are the drivers of growth contributing significantly to a range of sectors and industries.

Small Businesses produce nearly half the manufactured output and are also the largest employers of workforce in India after agriculture. Roughly, 75 million people in India are employed with small businesses. They contribute approximately 9-10% of the Indian GDP. An estimated 90% of industrial units in India come under small businesses. They contribute to 40% of value addition in the manufacturing sector and 35% to India’s merchandise exports.

With such significant contributions, it becomes imperative to encourage the growth of these businesses in India. We are now witnessing an increased focus on small businesses from several government institutions, corporate houses and financial entities. The government, by recognizing the small business opportunity, has introduced various policy measures to help them grow. It is also working towards promoting the small business segment by capacity building measures to keep them updated on emerging areas of business and familiarizing them with the changing laws and regulatory frameworks. Today, the government is developing a positive environment to encourage new businesses and entrepreneurs by providing support in several ways including financial assistance by allowing medium-term loans, reduction of interest rates by RBI etc.

India is a huge market brimming with many opportunities. This has encouraged the growth of the small business segment and brought tremendous success to entrepreneurs and business owners. So far, these businesses have limited their operations to the local Indian market. Increasingly entrepreneurs are keen on expanding to other markets and establishing a global identity. Today, the Indian small business industry is aiming for global markets, ready to compete against global giants. This is an encouraging sign and this industry needs to be provided the right support to cater to global needs.  Industry exchange programmes and access to market research data will help develop an understanding of the global market and its needs. Government support in setting up technology infrastructure will boost productivity and quality for these small businesses.

Another aspect that is essential in creating a positive environment for small businesses is to have friendly regulatory policies. Allowing Foreign Direct Investment, speeding up approvals, creating a single window system for information, simplifying operational frameworks etc. are key factors that will contribute towards the growth of small businesses in India.

Even with adequate support from the government and the private sector, small businesses in India face several challenges which need to be addressed. Prominent among them is the lack of access to technology and financial management resources. Despite various schemes from the government to enable easy access to capital, small businesses struggle to raise adequate funds. Private sector can contribute towards this issue by infusing equity funds and venture capital. In a study conducted by Intuit supported the Ministry of Micro, Small and Medium Enterprises, Government of India, pointed out that small businesses in India are yet to realize the full potential of technology as a game-changer for business. The study also highlighted the top barriers to technology adoption being cost, lack of skilled manpower, low awareness of the benefits of technology, poor infrastructure and concerns about security and privacy. A collaborative effort is needed to address these concerns of small businesses and identify and develop solutions through participation from various quarters. A collective approach with government and private sector coming together is the ideal way forward.  Intuit in association with NIESBUD has introduced a financial literacy programme aimed at helping small business owners understand financial management. Initiatives like these are a positive step in bridging the gaps.

Key hindrances to the growth of small businesses also include lack of infrastructure and limited access to institutional assistance.  Infrastructure hassles have to be addressed on priority as it forms the base of starting a business and also affects productivity. Setting up SEZs, improving transportation through better road and rail connectivity, allowing reforms in telecommunication etc. will help address few problems related to infrastructure. Another challenge for small businesses is labour and talent acquisition. Start-ups and small businesses are generally not considered attractive career options. Participation in education and career related events and academic outreach will help in reaching out to youth and spreading awareness about this sector. Growth and success of small businesses will also automatically make them lucrative for acquiring the right talent.

There are a few factors that even small businesses need to keep in mind to succeed before starting out. Understanding the market is the topmost among them. Considerable research is required to comprehend the ‘what’, ‘why’ and ‘how’ of the market.  It is necessary to understand the market preparedness for your product or service. Evaluating possibilities, pricing and competition will help build a credible product or start a service. Re-organizing and implementing necessary changes is essential to sustain in changing markets conditions.

Lastly, success in entrepreneurship and running a small business is not just dependent on the external factors as discussed above but on the internal ones such as the mindset of the entrepreneur. Challenges are abundant in starting a business but the will to find solutions and overcome these challenges is the key.

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Fellow Entrepreneur, Ask not what the Buyer can do for your company!

For about 2 hours in the RoundTable session, the intense discussion was centered around how to be ready for M&A. Buyers, who have an interest in your company will ask about your product, your markets, your customers, your revenues. As an Entrepreneur, what is your first ask in return? Usually they are any of the following. What will the buyer pay us? Is this the right time, should we wait for a better valuation? What will the buyer do with us post acquisition?

Jay Pullur, CEO, Pramati Technologies, helped us realize, that the first question should be, what will our company do for the buyer? What is the fitment of our product or solution in the buyer’s vision? You need to ask and most importantly answer this yourself. Don’t expect the buyer to answer this, if you are, then you are not ready for any deal. It was a moment of epiphany. Fellow Entrepreneur, the first step to readiness for an M&A is to ask, what your product does to the buyer’s company, not what the buyer can do for your company.

Four hours of entertaining stories by both Jay Pullur, Pramati Technologies and Sanjay Shah, Invensys Skelta, 12 companies and about 20 participants got the opportunity to interact and learn many of the wise nuggets from these industry leaders. Not all elements of the session can be reproduced here, but below are some of the key highlights and learnings.

Wise Nuggets – Its all about Knowing (see below for details)

Wise men plan ahead. The pain or the gap that your company addresses should itself be strategically planned. Positioning your entire company, like a pretty bride will ensure the suitor will come. According to Jay, technology buyers in the US do several acquisitions in a year, so for them its just another transaction, they are not emotional about it, not attached to it, its just their job. So the interests of the suitor should always take precedence, otherwise the suitor will move to the next company on the list. Sanjay added that using an iBanker to help you in the match-making process or to source the right type of buyers is also a very beneficial activity. To sum it up, like for any Sale, Seller has to make it absolutely comfortable and easy for the buyer to buy. The checklist includes, but is not limited, to the following.

    • Know or Define the right fitment (addressing the GAP in the buyer’s arsenal is most important)
    • Know your Position (be clear on the landscape and position your product very clearly)
    • Know when to exit (constantly guage the pulse or the sentiment of both the market and the buyer, macro-economic conditions can play havoc, sense the weight of an opportunity)
    • Know your Buyer’s problem – Demonstrate that you know the Customer’s Exact Problem (POC, Story boarding the Pitch and strategy all come into play)
    • Know your Product (Don’t use flowery language and adjectives- show the customer, you are only solving a pain – which is not a glamorous job to do)
    • Know your Buyer – Gauge the buyer’s impending need to buy (They will usually reciprocate with the same rigor as you)
    • Know the Competitors, their strategies, their features, their benefits and most importantly their weaknesses.
    • Know your-self (You know that you have built a rocket or a rickshaw – if you are in a rocket, you should be on-top of the short-list)
    • Know your price (indicative pricing is most important – make sure all research leads to a best possible quote)
    • Know how to close (all the criteria for success should be met, there is no alternative for preparation and effort)
    • Know your readiness (systems/processes for closure, like record-keeping, employment contracts etc)
    • Know what the deal entails (who brings the deal – may be an iBanker, upper thresholds, lower thresholds, etc)
    • Know your Organizational structure (are you are platform, are you embeddable, do you need domain expertise)
    • Know the parties and their motivations (Eng Team in California v/s CFO in London – who is the deal maker, who is the deal breaker)
    • Know the term-sheet (if not hire legal guys or ibankers who can help).

Insights and Learnings

There were many learnings, which definitely are tied to the personal experiences. Some of the key ones are

When Jay sold Qontext to Autodesk he found them to be extremely professional and did not find any price penalty, or discrimination, because of the Indian-ness of it. In fact, he was able to sell it for a very good multiple. The best valuation/revenue multiple silicon valley companies to could get. So its a myth to think that a technology product from India, might get the raw end of the deal.

When Sanjay sold Skelta to Invensys, he understood the weight of the opportunity. Even though the conversation was not intended for M&A, both parties realized that its mutually beneficial to do so within a couple of hours of conversation.

Sanjay’s additional advise, raise adequate money at a comfortable time, and continue to stay relevant via media briefings, etc all the time.

    • Other general learnings were also discussed. To note a few,
    • Learn about Earn-outs, ESOPs, Liquidation Preferences (Be real to scale)
    • Invest if you have clarity on Exit (do everything possible for the deal to come to a fruition, POC, be aggressive, call the CEO if needed)
    • Learn about Black duck tests, acqui-hires, escrows for indemnification, etc.
    • Define the outcome post M&A and get consent.

Conclusion

Overall M&A stands for all your Moves & Acts. Its all about the Story, your clarity of all the characters and props in the story, and their acts. Commercial success is most important, direct accordingly. Re-takes’s are possible, in-fact easier provided you make your first venture successful.The hilarious moment and the most catchy line came from Jay. Someone asked about honesty and truth, during the process of due-diligence, for which Jay laughingly said, “Tell the truth with such conviction, that the buyer will lie to himself”.

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Are you a #MadeInIndia Software product company with solution built on SMAC stack that sells to Enterprise segment?

If yes here is a great not-to-be-missed opportunity for you to explore partnership with Zensar Technologies….then Read on.

Zensar Technologies is a technology partner of choice for global organizations looking to strategically transform, grow, and lead in today’s challenging business environment. ProductNation is pleased to partner with Zensar to make this opportunity available for Indian Product Startups. Zensar is looking at hungry, innovative product startups that have built exciting products based on SMAC(Social, Mobile, Analytics & Cloud) technologies from India and showcase them to their Leadership Team, with a goal of offering these innovative products for their existing customers, prospects and partners

Details of Zensar TechShowcase are as follows: Date: 7th September 2013 (Tentative), Location: Pune

  • Format 40 minute slot, with 20 minutes of demo cum presentation, followed by 20 minutes Q&A session for about 12 companies. Expected to be a full day event.
  • Audience – Leadership Team of Zensar and Key Vertical heads.
    • Areas where the Zensar is looking for Products – Mobile Solutions, Mobile Analytics, Device Management, Social networking, Web 2.0, Application Integration, Intelligent Customer Interaction Solution, partner interactions, and internal business processes. If you have an area which is not listed here, please do send us an email at showcase(at)pn.ispirt.in

What you get? An opportunity to showcase your product to one of the leading technology companies which has customers across the globe. More details can be found at www.zensar.com

  • An opportunity to get feedback about your product from the team that engages with enterprise buyer community, giving you great inputs for your future engineering and design decisions
  • An opportunity to partner and take your product to international markets. And all this with no sales qualification cost!

Interested? Great. Here is how you can participate:

  1. Provide the information desired in the online form by 20th August 2013(Now extended to 23rd August 2013). Completed submissions will be sent to the Zensar for short-listing and selection by 30th August 2013
  2. A selection committee will peruse the submissions, and based on their need and interest, will shortlist a set of 10 to 12 companies, and invite them to be present at the  Zensar TechShowcase Event, on 7th September 2013
  3. All expenses for the participating in this event will be done by the participants themselves. Zensar will provide the venue, and the audience.
  4. There are no participation charges for this event.
  5. If you have already provided information about your product for the ProductNation OutSights, please do send us an email at [email protected]

If you have any questions, please write to us at us at [email protected] and we shall try to answer them.

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Economists revise GDP estimates with investment in intangibles

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development. Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output. A brief look at the emerging scenario.

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. GDP can be determined in three ways, all of which should, in principle, give the same result. They are the product (or output) approach, the income approach, and the expenditure approach. The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The production approach is also called Net Product or Value added method. This method consists of three stages:

  1. Estimating the Gross Value of domestic Output out of the many various economic activities
  2. Determining the intermediate consumption, i.e., the cost of material, supplies and services used to produce final goods or services; and finally
  3. Deducting intermediate consumption from Gross Value to obtain the Net Value of Domestic Output.

Both firm-level and national income accounting practice have historically treated expenditure on intangible inputs such as software and R&D as an intermediate expense and not as an investment that is part of GDP.  Now, this exclusion of intangibles is increasingly questioned. Economists in USA pointed that business investment in intangibles is a vital aspect of business activity, and the investments shown below represent a large and growing portion of the overall economy.

    •    Computerized information (mainly computer software)
      • Scientific R&D
      • No-Scientific R&D
        • Cost of development of new motion pictures, films and other forms of entertainment.
        • Investment in new designs
        • Estimation of product development by financial services and insurance firms.
        • Investment in Economic Competencies
          • Spending on strategic planning
          • Spending on redesigning or reconfiguring existing products in existing markets,
          • Investment to retaining market share
          • Investment in brand names
          • Employee training.

 

The rapid expansion and application of technological knowledge in its many forms (research and development, capital-embodied technical change, human competency, and the associated firm-specific co-investments) are key features of recent U.S. economic growth. Accounting practice traditionally excludes the intangibles component of this knowledge capital and, according estimates exclude approximately $1 trillion from conventionally measured non-farm business sector output by the late 1990s and understates the business capital stock by $3.6 trillion.

Can we expect our GDP estimates to be revised likewise?

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Patent Holders Listen Up; The Government Wants to Give You An Award

India’s innovation problem is not something that an award can fix. But its a step in the right direction. The department of science and technology is calling applicants for the “National Awards for Commercializable Patents,” in a bid to make more innovative products available to the society [source]. The awards were first introduced two years ago.

The program seeks to recognize the innovative potential of Indian Nationals as well as Micro, Small and Medium Enterprises (MSMEs) who have developed innovations relevant to the industrial and societal needs.

The award will carry a sum of Rs 5 lakh and a certificate. Selected innovations may be also get an additional Rs 5 lakh on commercialization of the awarded patents. The selected innovators will also get to use the the TREMAP, a government initiated innovation program.

The primary objective of the program is to help commercialization of patented technologies and will give a greater emphasis to those that have good commercial potential but could not be commercialized due to lack of resources and expertise with the inventors. The other objective is to establish an enabling ecosystem in the country to facilitate linkages of the innovative technologies with market.

Any Indian national or micro/small /medium enterprise who already has an Indian patent can apply. The year of grant of patent should not be before the year 2010 and the working prototype should be ready.

In 2012, the award was granted to 8 patent holders including the ones that held the patents to improved grinding machine for paste and powder making in wet and dry condition of soft material and device for mitigating shock waves and induced forces during explosions.

The last date for receipt of applications is August 14, 2013 and more details and the forms can be found here.

The central government has also implemented a five year scheme through which small enterprises can claim up to 50% of patenting costs from the Government.

There are various reasons why commercial innovation is really low at Indian institutions. Deepam Mishra, CEO, i2india Ventures lists out factors including wrong incentives and lack of early stage investments among others. Hopefully, these initiatives will help at the early stage.

Reblogged from NextBigWhat.com

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M & A – The most preferred option to grow in uncertain times

It is a typical Monday 9 AM! Ready to kick-start another challenging week! Fine day in Chennai !! Not so hot like a typical Chennai climate. But, for first generation entrepreneurs it is an ordeal to pass thru weekly pressures of Cash flow, Attrition, New business and opportunities etc. etc. This experience is collectively described as “Monday Morning Blues”.

The growth dilemma

There has always been a great dilemma for entrepreneurs during fund raising exercise especially when it comes to taking the company to the next level of growth. The dilemma does not stop by simply raising the money for growth, but it goes on till such time one is able to strike a balance between how much stakes to dilute and the tangible benefits that the venture will get.Then comes the business and revenue models. The previous eras have brought countless innovations in the theory and practice of running businesses. Many are now staples of contemporary management, but others were ephemeral distractions that led companies down the wrong roads. Too often, leaders have sought the appearance of success rather than its reality – size for the sake of size, book-keeping profits as opposed to intrinsic value, earnings growth manipulated to please the stock markets. This era’s changes are already redefining management theory and practice. Raising competitiveness intensity forces a return to basic again. Going down to basics today means first and foremost focusing on how you can create intrinsic or fundamental value for your business. Your ability to create fundamental value rests on how good you are at finding the right balance between your external and internal realities and your financial aspirations; in other words, how skilfully you develop and use your business model. The major reason to focus on the fundamentals is that growth won’t come easily. Organic growth will not often produce the double-digit gains that were routine and even obligatory in the last era.

Leaders who hope to grow their way to success through mergers and acquisitions in the present market scenario are left with umpteen no of options. Needless to mention that M & As promises to increase economies of scale and yield efficiencies from synergy – or at least show the kind of revenue growth that looks like progress. And some players thrive by picking up battlefield causalities on the chips and hammering them to shape. Many people viewed General Electric’s acquisitions in the late 1980s of troubled RCA as a misconceived diversifications ploy. But after selling off RCA’s consumer electronics and aerospace businesses, GE wound up with NBC for a song, turned it around and went on to build it into a network powerhouse. NBC generated significant profits year in and year out, and with the addition of Vivendi Universal’s entertainment assets which greatly helped GE’s future growth.

The courage to change

Many first generation entrepreneurs lack with the intelligence to recognize that they have reached a crossroad but don’t follow through and head down the new path. Their inner core isn’t tough enough to allow them to acknowledge and deal with an unpleasant reality, whether it is closing a loss making division or taking realistic look at the business model and tweaking to market expectations. Many would like to continue in their comfort zone of their familiar managerial routines and protecting their pay checks. They may be afraid: change means taking risks and taking risks raises the possibility of failure. The fear failure occupies most of entrepreneur’s growth dilemma of raising money, divesting their stakes and working under a different management culture.

These entrepreneurs often don’t recognize that failing to make a shift can be riskier than making none. The entrepreneurs who have the appetite for tough actions have the inner strength. They are willing to look at clearly at the business model that has been highly successful and is no longer relevant.

To raise funds for growth or get merged is a difficulty and at times too difficult to get consensus from founder/ promoters. This leaves the emerging organizations with fewer options such as the following:

  1. Tag along with a bigger player and pitch for bigger contracts – on a case-to-case basis
  2. Dilute promoters’ stake heavily and raise money from PEs or VCs at the cost of losing control of the company in your eyes and also not knowing the business outcome after fund infusion
  3. Be a captive IT Partner for a big group and get acquired by them eventually once a decent value is built. The flip-side to this approach is that one does not know the time it will take to realise decent value

The current era of business offers promising option than the usual organic growth for entrepreneurs.

M & A – The most preferred option to grow in uncertain times

While an acquisition may have higher risk of failure than any other expansion strategy, it also provides a much superior return profile in comparison to organic growth strategy. M & As is intrinsically risky and predicting the aftermath of any acquisition is almost impossible. The fact remains that predicting the aftermath of any business plan execution is also an impossible task. But there are learnings from the past that can mitigate the risk of failure. Most M& A s fail due to inadequate articulation of two key enablers of a deal: transaction management, which is all about paying the right value, conducting a thorough due diligence and appointing the right transaction adviser; and integration management, which is about devising a detailed integration strategy ahead of the buy decision to keep the rationale of the acquisition intact. The fact of the matter,however is that any corporate strategy can go bad despite putting safeguards against any possible fallout in future. And so can simple business decisions related to marketing and research and development will lead to unpredictable business outcome.

If there are precedents where shareholders’ wealth has been written off as fallout of ill-planned M & A, there are more than a handful of cases in history through well executed M & A strategy that delivered immense value to share-holders:

  1. IBM’s market value of USD 227 Billion has been created virtually through acquisitions. It has acquired 187 companies since 200 for about USD 200 billion
  2. SAP has made 5 major acquisitions since 2001 for a whopping sum of USD 20 billion to reach its current position of Euro 17 Billion
  3. Cisco built the current sales turnover of USD 47 billion from USD 4 billion in 1996. Cisco has acquired more than 450 companies since its inception. Cisco’s fundamental growth strategy has been M & A
  1. GE has acquired more than 18 companies since 1952 ranging from Aerospace, Process Industry, Financial Services , Healthcare for whopping sum of USD 14 billion to reach its current revenue of USD 150 billion
  2. Exxon Mobile, It is what today on the back of a merger between two energy giants which clearly didn’t happen without the risk of failure in 1999. Exxon Mobile has surpassed Apple’s market cap and reached the USD 385 billion in April 2013.
  3. Maersk has acquired P & O Nedlloyd in 2005 to create one of the largest shipping lines in the world.
  4. P & O and Nedlloyd were merged together in 1996 which was yet another record in the history of shipping lines.

It is all about convincing the company’s management on the risks associated with a strategy like M & A on the back of statistics of successful transactions.

The entrepreneurs who are looking at raising money must do the following reality check and decide whether M & A is an option.

  1. Research and evaluate your competition
  2. Measure share-holders value year-on-year and see whether it is increasing
  3. Your ability to raise funds and offer significant returns within a short period of time e.g. 3 years to 5 years
  4. Ability to devote time on innovation and offer more customer value

The IT/ ITeS industry are moving towards consolidation and better economies of scale and efficiencies.The market is swamped by competition and the technological advancements are determining new way of delivering customer value. Therefore, IT services companies have to seriously consider M & A as their growth strategy to protect investor’s wealth, IP, customers, business.

Guest Post Contributed by Rangarajan Sriraman. The views expressed in this article are personal. The author is a serial entrepreneur, mentor and strategic advisor to start-ups in IT and ITeS segment based in Chennai and has been involved in 2 start-ups so far from the concept to execution stage and later on successfully exiting.

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SMBs and Indian Software Product Industry: Intertwined Fortunes

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. ― Winston Churchill

Small and Medium Sized Businesses (SMBs), the growth engine of India, are on the threshold of a tremendous opportunity. Globalization of trade and the rapid proliferation of computing and communication technologies are affording them a platform to expand their reach to national and global markets and compete head-to-head with global players. But on the flip side, those SMBs that do not recognize and capitalize on this wave quickly are likely to be swept away by the stiff global competition. If SMBs are to successfully counter global competition in their own backyard and elsewhere, they need to adopt software technology on a large scale, enabling them to run their businesses efficiently and effectively. But, few SMBs have the financial muscle or the technical know-how necessary to implement customized software solutions. Therefore, the majority of 13 million SMBs would count on standard business application software that requires minimum upfront investment and ongoing maintenance, to fuel their growth. Such software is distinct from the software deployed in large corporations and I refer to this as ‘Small Business Application Software (SBAS)’ to distinguish it from large enterprise application software.

Business application software (SBAS) such as accounting software, ERP, CRM etc., offers multiple benefits to SMBs –

  • As shown by research, SBAS significantly enhances the internal productivity of SMBs as well as their ability to manage relationships with vendors and customers, leading to superior firm performance.
  • It forces SMBs to adopt standard processes and best practices, moving them rapidly up the quality and value curve.
  • Most important of all, by streamlining day-to-day operations, it not only frees up the entrepreneur’s time for strategic planning but also assists her with the tools needed to make informed strategic decisions.

 

The question now arises – How can Indian SMBs get the right fuel for their growth? This is where a vibrant Indian software product industry plays a critical role. Indian SMBs cannot realize productivity and performance gains from software that is designed for developed markets. This is because the business environment in India (and other emerging markets) is substantially different from that of developed markets. It is volatile, with frequent regulatory changes, and rife with institutional and infrastructural challenges. For instance, there were 340 updates to Indian tax laws last year. That’s more than one tax law update every business day! Therefore, SMBs need software products that can buffer them from such volatility and help overcome the challenges associated with operating in this unique and dynamic environment. This is possible only when products are designed specifically for the Indian SMBs – and this is best done by a strong indigenous software product industry.

Indian software product companies are better positioned than foreign firms to support the Indian SMB market. This is because,

  • They have lower cost structures which allow them to meet the stringent price-performance expectation of Indian SMBs.
  • Further, because of their familiarity with the operating environment, they can build effective channels to drive software awareness and adoption among Indian SMBs- remember that Indian SMBs are more like enterprise customers than individual buyers in that they expect suppliers to sell to them.

 

In summary, there is a symbiotic relationship between SMB growth and a robust software product industry in India. SMBs need the software product industry to power the next phase of their growth and make them globally competitive. At the same time, the Indian software product industry, having missed out on the individual productivity and communication software wave, can leverage the large SMB market in India to establish itself as a global leader in the SBAS space. In other words, software product industry is the fuel for the SMB engine and the SMB engine can drive the Indian software product industry towards SBAS leadership. By moving in lockstep and moving quickly, India can create a competitive SMB sector and a vibrant software product industry.

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Stop Imitating! Finding India’s True Self

A man with a severe tooth ache goes to the dentist, who upon examining the tooth, assures the man that the problem wasn’t anything serious and that a simple procedure performed under a local anesthesia would help repair the damage. Upon hearing this, the man gets very upset and  tells the dentist, “What? Local anesthesia? You think I cannot afford a foreign one?! I demand an  imported one!”

I heard this tale first some decades ago and it served to highlight, in a tongue in cheek manner, the Indian’s obsession with all things foreign while also showcasing the lack of awareness of what a local anesthesia was.

This obsession with the imported and  the foreign should have lessened, one would have imagined, after over 20 years of economic liberalization. Yet, Chidanand Rajghattta writing about Ang Lee winning the Best Director Oscar for “Life of Pi” in the Times of India – Feb 16th 2013 – had this to say “It was a big moment for Lee, but a bigger moment for his Indian fans when he ended his acceptance speech with a “Namaste”” Really? Indians felt pride, according to the writer because Ang Lee said “Namaste”?!

There’s a big lesson for Indian entrepreneurs. A lesson involving self-esteem, capability, the confidence and courage of one’s own convictions.  An entrepreneur cannot solve problems by just seeking inspiration, affirmation and trivial acknowledgement from elsewhere without the passionate driving  self-belief, a deep understanding of the problems to be solved and a gathering of insight.  Therefore, blindly copying models from elsewhere, by only reading about startups and startup ecosystems  in  advanced economies and  thereafter slavishly attempting to adopt those offerings and even behavior  without adding any real original material of one’s own is a recipe for tragic disaster. Imitation is the best form of flattery, and indeed homage, to the original; the imitator is, at best, tolerated but never respected for there’s no original contribution on offer that’s worth recognizing, just a momentary quick-fix solution. Many companies and entrepreneurs – even countries (think Taiwan and China) – start off imitating but then, the successful ones, move rapidly to invest in creating the infrastructure to develop the insights and then execute relentlessly to offer unique solutions to their problems.

Shekhar Gupta, Editor in Chief at The Indian Express, talking to Steven Spielberg is quoted thus “Walking down Champs-Elysees, I was very happy to see a hoarding for an Indian film which described the director as India’s Tarantino”.  So, what about an American director being described as America’s Anurag Kashyap? When will that happen? Should that happen and is that a desirable goal? What will it take to make that happen? So, rather than have debates and discussions around these questions, we bask in the pitiable glory of being second hand?

Shekhar Gupta goes on to say, “I would like to express a wish to you. …… So why don’t you come to India and do an epic on anybody—Buddha, Ashoka, Chandragupta, Akbar, Gandhi, Nehru—we have many themes and stories for you. But it needs a Spielberg to come and do justice to it.”

And how does Spielberg respond?  “I think it needs an Indian director to tell those stories and maybe I could help in the background” How big a tragedy is it when we are so eager to outsource the telling of our own stories and history? What does it say about us? What does it reveal about our lack of self-belief, the infrastructure, the competence, the capacity?

Since we learn and react only to what outsiders have to say, perhaps the following will be instructive.

Eric Schmidt, Executive Chairman of Google, on a recent visit to India said “The most striking Indian internet ……….. will come from Indians solving local problems. We know that India’s internet infrastructure allows Indian engineers to solve the problems of small businesses in other countries. If India plays its cards right, we’ll soon see Indian engineers and Indian small businesses tackling Indian problems first, then exporting the solutions that work best.” For India to play its cards right, it must first recognize that it has the cards and can learn to play its own game!

Drew Olanoff writing in Techcrunch on recent visit had this to say “If a country like India can stop worrying about being like Silicon Valley and find its true self, there could be a new RedBus every other week. It’s moonshot thinking, of course, but that’s what it takes”.

Finding its true self  – that’s a challenge for Indian entrepreneurs and for those involved in the growth of the Indian entrepreneurial ecosystem. Shall we all rise to the occasion now that there’s endorsement from outside?

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Why #Hashtags are the future of monetizing social media

You can’t invite people to a party and try to sell them stuff. Pretty much every starry-eyed startup that went after eyeballs gets it by now. Over the last seven years the web has moved away from a consumption medium (think NY times) to a creation-consumption medium (think Twitter, Facebook). But we’ve been very tardy in reshaping business models for this new model of the web. Interestingly, the solution to this monetization problem may lie with a small insignificant key on your keyboard. Read on.

Why are we failing at monetization today?

Traditional online media worked on a Pipe model, targeted only consumers and got away with monetizing eyeballs. Social media works on the Platform model, supports both creators and consumers, and has tellingly failed with trying the same old monetization strategies. 

Media Monetization 101

The monetization of any form of media is driven by mining of context and using that (or some other consumer action) as a proxy for intent. Advertisers then pay to have their ads matched with the right intent. Here are a few examples:

Keywords on a page: Context E.g. AdSense

Search query: Intent E.g. AdWords

Location: Context E.g. FourSquare

Monetization works by harvesting user intent and serving messages/information relevant to that intent. The better you are at harvesting intent, the more effective your monetization is going to be. 

Why is this model breaking down?

Mining context and intent goes for a toss in the world of social platforms. Users are the new content creators and content isn’t necessarily structured. With the older media model, the content creators (typically the media houses) were creating content to cater to search engines. The content was designed for text mining algorithms right at the point of production. With social media, the creators of content (all of us) don’t care about structure. In fact, online conversations are getting more unstructured by the day. Consequently, mining these conversations for context and intent is a crazy task, riddled with false positives. And false positives always lead to spam.

This is why the Hashtag is so important to the future of the web. 

Enter the Hashtag

Engineers would like to be known for the tech innovations that they engineered but Chris Messina will probably go down in history as the guy whose random blog post helped structure a new era of media. In a 2007 post, Messina suggested the use of Hashtags for the first time for Twitter.

This week, Facebook rolled out Hashtags.

It’s interesting to revisit that original blog post and figure out how Platform Thinking is so rare (and important) and how most of us just prefer to think in Pipes. 

Hashtags and Platform Thinking

If you think of media as a Pipe where content creators create stuff and push it out for us to consume, the content creator takes great pains to structure the content. Every piece of content will be carefully drafted in a category, will be peppered with keywords for search engines to gobble and will be structured so that the context can be easily mined.

If you look at the proposals from Stephanie and Brian, they advocate the use of pre-defined groups to regulate conversations around certain contexts. This is a typical Pipe Thinking model. Provide the constraints and force the creators to work within those constraints. It works very well when media is created within the boundaries of a firm.

When media is created by users, as it is today, one cannot afford to think in terms of constraints anymore. This is where Messina’s advocacy of the Hashtag is so brilliant. If you’re thinking in terms of Platforms, you’d want to make the creation process as easy as possible for users, yet ensure that they leave you with enough hints around intent and context. This is what Flickr did when it allowed users to tag pictures instead of forcing them to fit pictures into pre-defined categories. This is what Messina advocates in this post when he argues against users having to operate within groups and allows users to define context and intent on the fly.

Through Hashtags!

Top-down classification and forcing creators to fit within categories or groups is a hangover from Pipe Thinking; an editorial view of the web. A social view of the web requires a more bottom-up approach.

If you think of the social web as a flow of information, pre-defined categories and groups limit the channels in which information can flow. Hashtags, instead, allow creation of channels on the fly to suit the needs of the information creator. 

If you’re still thinking Semantic search alone, you’re in the wrong game

When the world first saw an explosion of user-generated content, people realized that Google’s keyword and link-driven approach to ranking information wasn’t going to work forever. Semantic search was hailed as the next savior.

I have nothing against semantic search. I just believe algorithms are still fairly limited in mining human intent from unstructured conversations. And the web is gradually, but definitively, moving towards unstructured conversations.

The solution to mining unstructured information doesn’t lie in creation of more sophisticated algorithms alone. It lies in, first, solving the problem at the point of production and allowing the new creators to easily append some structure to the information.

That is exactly what the Hashtag does!

If you’re building a platform that enables and promotes unstructured conversations, and you want to go beyond just being a communication tool, to creating a corpus of sticky content, hashtags can help transform unstructured conversations to structure, right at the source.

Tweetable Takeaways

Hashtags are the new keywords, and the key to monetizing social media.

Tags are the new categories, hashtags are the new keywords!

This article was first featured on Sangeet’s blog, Platform Thinking (http://platformed.info). Platform Thinking has been ranked among the top blogs for startups, globally, by the Harvard Business School Centre for Entrepreneurship

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8 Truths why IT Services Organizations cannot do Software Products

The bread and butter of the Indian IT Industry has been IT Services.  IT Services, as the terminology implies, is servicing a customer.  A customer states his needs, the IT Services organization makes a proposal to develop / maintain / re-engineer / etc., and the deal is done.  As offshoring and outsourcing has matured, customers have become savvy and are putting pressure on IT Services Organizations to compete more aggressively, provide more value and make cheaper proposals with no hidden costs to customers.

IT Services Organizations are in turn looking for ways to improve their margins by creating their own Intellectual Property (IP) and some of them have turned to building or investing in software products.

This articles core purpose is to warn leaders in IT Services Organizations – “DON’T BUILD SOFTWARE PRODUCTS”.  But success makes one arrogant, so I suspect some leaders will still build their own products, in which case hire somebody who has made these mistakes before and is familiar with the 8 Truths.

TRUTH 1: Trusting your best IT SERVICES Manager to build your Product

When an IT Services Organization decides to do Products, it is one of their significant investments and guess who they put in charge of it – one of their better managers.  A manager in an IT Services Organization is an expert at – scope management, cost management, SDLC, resource management, status reporting, financial management, etc.. And of course he is very good at managing other managers.

Building successful products has little to do with the above skills.  Building successful software products requires the ability to provide vision for the Product, ability to work with changing customer and market needs, the ability to build and trash architectures, deal with failures, inspire creativity, identify opportunities you had not seen before.

Most importantly, if you decide to build software Products please find a Software Product Head who has a couple of failures under his belt.  And if you find one that hasn’t yet failed, guess what – he will fail on your Software Product !!!

TRUTH 2 : IT SERVICES ORGANIZATIONS serve Customers and their Projects

The real expertise of a successful IT Services Organization is Scope Management – negotiating successfully with the customer on agreed scope and what is not in scope.  If you are the Program Manager and your team is on the wrong track or if you have made a mistake, you are taught to revisit the scope.  Examine the scope document with a fine toothcomb to compare what the customer asked for with what you have delivered.

If the customer says “The system is not easy to use” then examine the scope to say “Yes, but we did not agree on usability guidelines”, so if you now need “Usability”, it’s a change request and please Mr. Customer, do pay for it.

If the customer says “The system is too slow and it takes 45 seconds for my Employee Screen to come up” then examine the scope document for “Performance Requirements” and tell the customer “Oops !! Mr. Customer you seem to have missed defining Performance Requirements” and what you are asking for is a major redesign.  Guess who’s gonna shell out big bucks for it?!

Customer: “The database design is bad”.  IT Service: “That is not a deliverable as per scope”.

Customer: “The coding guidelines are poor”.  IT Services: “We follow our organization standard guidelines, if you need anything different it’s not in scope”.

… and so on.

Importantly, the cost of changes and mistakes is either borne by customers or at least shared by them.

In the Software Product world there is limited Customer defined scope and there is no fallback position to ask a customer to pay for mistakes.  If you have got it wrong, bad luck. Do it again and by the way do it better.  And please meet “implicit needs of the product” – customers implicitly expect a Software Product to load within 5 seconds and the usability to be impeccable and intuitive.

This is a culture shift for an IT Services Organization.

TRUTH 3: IT SERVICES ORGANIZATIONS don’t know when to say STOP

IT Services thinking:  If we got it wrong, lets change the manager, lets change the technical architect, lets change the Business Analyst.  Or better still … lets throw more people at it, lets change the location of development, lets get more funding.

How about just stopping and starting again.

IT Services Organizations just don’t know how to stop or setup metrics to stop.  IT Software Products have high failure rates – over 80%.  The IT Services Organization is used to 80% success rate.  It’s a another  culture shift.

This is also related to how Software Services Projects and Software Products are funded.  A Customer Services Project even if gone bad often continues to be a revenue earner, till the customer decides to stop development.  An investor in a Software Product organization often invests in multiple Product companies and has clear criteria to continue or stop.

In Software Products there is little room for carrying baggage and making incremental changes.  If you have got your product wrong, throw it away and restart or just stop.  Any kind of incremental changes cost a lot and makes the whole team slower.  Your technical team also knows they are building an elephant which will not be nimble, flexible, easy to change or responsive.  There is no greater demotivator than a technical team that doesn’t believe in the Product.

A Software Product is developing IP for the future – there will be peaks and troughs of investments and returns and these will typically be in separate time-cycles.  This is another reason, why an IT Services organization just doesn’t know when to say STOP.  They may well invest much more than a pure-play Software Product Organization would and that too for poorer returns.

TRUTH 4: IT SERVICES ORGANIZATIONS have Forgotten how to BUILD SOFTWARE

IT Services Senior leadership is chosen for Customer Engagement skills, for P&L responsibility, and not for Product vision.

If you are in IT Services, when you resource for a Customer Services Project, you pull out your Gross Margin sheet and see what level of senior / junior people you are allowed.  You then go to your Resource Management team to help you fill those resources.  You could need a team of 20 or a team of 200, depending on the size and complexity.  And that is your focus.

When you develop a Software Product, you first review the market of the Product, then you review its features, then you validate it with some customers, then you do prototypes and proof of concepts, then you validate it again with customers.  You convince an anchor customer.  Your entire focus is on – are the features right, is my customer happy, is my software maintainable, will I get references to other customers?  Resources and budgets are just as important but features and benefits to customers come first.

When a Software Product organization scales the problems grow differently – what is the scope of my product, what are the analysts saying about it, how will my licensing model work for small and large customers, how will I support customers, what is their upgrade path,  are there core architectural bottlenecks that will prevent the software from scaling?

The priority for an IT Services Organization remains quality of service, size of business, revenue and margins as it should.  IT Services Organizations do not know how to build software any more.  They knew it once – now they have forgotten.

TRUTH 5: IT SERVICES ORGANIZATIONS’ HR works on scale and size.  They cannot focus on the problem of 1 Employee

The HR team of an IT Services organization has a very clear idea of where and how to recruit, what compensation to give, how to give raises, how to be fair across thousands of people.    There are employee benefits, training programs, career growth plans, dual shore movement, etc.

Product teams start by being small teams.  They often need expertise in small bursts – speed is everything.  An IT Services Organization just doesn’t have the flexibility and nimbleness to take care of the needs of a Product team.  Can I out price my 1 core architect and 2 functional experts?  Can I provide them with ESOP that is way beyond others on the services side?  Can a developer in the product space get paid more than a manager?

Can HR deal with the above?  More importantly does HR have the mandate to make such exceptions?  What happens when a Product person moves to a Services Project – how do the incentives work?

For a services organization with thousands of people – it is not significantly important to solve the problem of at most a few hundred people working on products.  For the Product Organization every decision MUST be driven towards getting a great piece of software to the end-customer.

IT SERVICES ORGANIZATIONS don’t know their TOP DEVELOPERS

A developer in a software Product organization is the go to person to solve any problem.  It is extremely unlikely that a Services Organization even knows their top developers.  Developers of Software Products may often get paid more, and maybe more relevant to a customer implementation than any manager.  I have seen situations where One Top Developer has by himself been able to solve a problem that 15 managers, technical leads and developers could not.

The best Product Organizations will identify and nurture these developers.  IT Services organization will struggle with salary bands, designations, bonuses, and the best ones will find workarounds to reward these developers.  But that’s just what it will be – a workaround at best.

TRUTH 6: IT SERVICES ORGANIZATIONS don’t know IP management

Providing an IT Software Service to a customer and actually being the owner of the Software Product are very different perspectives.  When you own the Intellectual Property – here this refers to the Software Product; it comes with a different set of liabilities as well.

The questions an IT Services company may not ask – Did I leave a security hole in my software through negligence? My design is faulty and my code is badly written – did I disclose this to my customers?  If one customer is going to sue me for damages, does that mean all my customers will have to be informed? What if one of your developers has copied code that is Open Source – what are the implications? Etc. etc. etc.

Also, to develop IP, requires a certain amount of R&D (loosely used term here to indicate trial and error, waste and true R&D) – which algorithms will be most optimal? Which UI will be a hit with the customer?  Which features will be used the most?  And anyone who has been in R&D, knows that investment in R&D does not guarantee results and is often considered waste.  R&D needs an open mind and the results are often serendipitous.

Services organizations are experts at managing waste and reducing fat.  The Product organization actively produces waste and a CFO or an Accountant is often looking at the Product team (within the IT Services Organization) with itchy fingers to take that number off his xls sheet.  The Product team needs to experiment, to create and to throw away;  to improve things and hone it and make it better.  It is an idea generating machine that needs focus to create more value.  It is just such a throwaway piece that a product may need to make it standout, to break through the clutter and the noise in its space.

Related to IP is also a host of copyright, trademark and patents related issues.  The IT Services Organization needs to come up to speed with all of this if it is to create software products.  The last thing you need is for your Product to be successful and then to discover that someone else is using the same name or you have been slapped with a copyright infringement.

IP is the differentiator that can make your Software Product successful.

TRUTH 7: IT SERVICES ORGANIZATIONS grow through SIZE and PERSEVERANCE

IT SERVICES ORGANIZATIONS are all about growth through replication of success.  The growth mantra for this replication of success is to scale through resources, infrastructure, deployment on projects, managing bench, engaging with customers, building competencies, delivering software projects successfully time after time after time.  There is also a huge push on sales and winning large deals.

An IT Services business is also conservative by nature.  Due to its maturity, it is also a predictable business model.  Investments are made in people after knowing the size of Customer Projects that will be won. You assign resources on a won Project and then remove them when the Project is over.  When you don’t win the projected business and have a large number of unutilized resources (bench) you either cut salary or you ask people to leave after a certain amount of idle time.

In a Software Product Organization, at the first level, the Product should be able to talk for itself.  The word of mouth is critical.  For Example, for an internet product to grow, the problem is eyeballs and retention of the end customer on your internet site.  The primary focus is not on growing the number of people you have to hire and train.  In Services deals you may lose out if you are unable to show the customer your ability to scale up and get office space, people, training, rebadging, infrastructure, etc. on time.  In Product you will need to do a flawless job of your product implementation and ensuring your product Roadmap is road worthy.   You grow through better products, with backward compatibility, with presence on mobile, with analytics – and many other features around the product along with a science to replicate deployment methodologies and customer trainings.

Both IT Services Organization and Product Organizations scale and grow in very different ways.  An IT Services Organization doesn’t have the DNA for software products.  So, if a Services Organization chooses to go for Software Products be prepared for some gene level surgery.

TRUTH 8: IT SERVICES ORGANIZATIONS are not experts in their Customers’ Business

IT Services have today moved away from being just technology companies.  A website of an IT Services organization shows you industry verticals and domain solutions.  Full credit to IT Services companies for providing such exemplary service to its customers.  However, the customer still doesn’t expect the IT Services organization to know its business better than itself.

IT Services Organizations have honed Customer Service to a fine art.  There are processes and sub-processes to be followed.  You have frameworks like ITIL that continually reduce cost of maintenance and support.  The focus is on reducing cost of Business As Usual (BAU) activities.

With a Software Product it is different.  In the domain of a particular Software Product, customers expect you to know everything.  You are expected to know the domain, the technology, competing products, integration with other systems, mapping to business processes, etc.  You are expected to know how the beginner users and how the expert users will use and misuse your product.

All Customer Service comes from the knowledge of the customers’ business scenarios and not from a support management framework.  The ability to anticipate a customers’ problems and to be able to demonstrate thought leadership are critical to the success of a Product Organization.

Conclusion

If you are an IT Services Organization the biggest mistake you can make is to think that a Software Product is just another piece of software, which it is.  But that is not ALL what it is.  It is a completely new business.  So be prepared to reinvent that part of your team or else …

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Crowdfunding In50hrs: India’s Idea-to-prototype Event Platform

I am in the middle of building two platforms. One being The Startup Centre, the older one, and its younger sibling In50hrs. In50hrs does get a bit of my attention, partly because I find my soul being there with entrepreneurs, teams,  and ideas when they get that Aha! moment of breakthrough and build something. Its priceless being part of those moments.

Most of you might think that In50hrs is extremely well funded, or for that matter, The Startup Centre. I am not at liberty to talk about how much funding went into setting up The Startup Centre (yet), but I can tell you that In50hrs runs on extremely thin budgets.

We knew that overcharging participants is not a way out. People can only pay what they have, and anything more than INR 1500 for an event will become hard to sell – partly because of affordability. Students will need a discount.  Which doesn’t leave much room to wiggle around.

If not for the generous support of organizations such as Thoughtworks, One97, Verisign etc who support us, In50hrs would be an impossible dream.

Yet, last year 1600 participants were part of it, 400 ideas were pitched, 283 prototypes were built, and 185 products launched. 28 startups came out of In50hrs and some have even gone on to raise institutional capital. All that, starts very small.

I love the energy when being in the middle of In50hrs. I love the community that Kerala, Pune and these smaller, endearing cities bring about. I love the moments when i have my jaw on the floor when people build amazing things, and talk about ideas bigger than this country, but are nowhere close to the metros. In50hrs is about that first step.

If you are imagining me high flying to most of these places, infact Redbus has been my best friend. We take the cheapest flights out (in cases like cities far to the north) and we exclusively travel by bus for all the neighbouring cities. By We, we mean me. Because, thats all the time that In50hrs can afford (barely).

An Event Platform like In50hrs costs anywhere between 20 – 25L per year to keep it running. While we have had some generous and far thinkers in the corporate world, raising all that money from corporates is turning out to be tough. Partly because I am stubborn not to want to turn In50hrs into a recruitment event. I cannot nudge someone with an amazing idea, and ask them to dare, and on the other hand also pitch a company that might be interested in hiring them and shelf their idea for a few more years. I’m gonna see the end of me, thanks to wanting to be black and white about it.

So in a moment of madness, thats original to entrepreneurs, I am thinking, if this is about the community, why not ask the community to own this as well. So we are going to start small, and raise 10% of the costs from the community (or atleast aim to). I can’t by any measure do this on your own, but if you’ve been a part of In50hrs and would love to help – in anyway – this is that moment to truly own this wonderful platform. Here’s the question then: Knowing all the pains and troubles we have as an ecosystem and country, would you like to be part of the solution, laying one crucial brick in India’s product ecosystem?

Im hoping your answer would be a Yes.

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Cybersecurity: Israel’s Innovation as India’s Opportunity

India is one of the leading victims of cyber-crime and the cybersecurity market is estimated at around US$218 million. Indian cybersecurity companies have developed indigenous products to address rising cyber-threats, but, with limited success. By contrast, Israel is famed for its prowess in developing innovative solutions for fields that encompass agriculture, medicine, clean-tech, hi-tech etc., and this also extends to the emerging field of cybersecurity. Israel’s cybersecurity industry possesses the potential to be a willing partner in defying India’s cyber-world problems.

The essence of India’s ongoing cybersecurity partnership with Israel has primarily been characterized by Israeli cybersecurity companies serving requests of the Indian governmental sector. However, the flow of the collaborative needs to take another direction, and more partnerships need to be formulated in the corporate world. India’s reliance on data systems continues to increase rapidly and corporate entities including start-ups will undoubtedly play a pivotal role in shaping the cyber-domain.

Joint-product development is possibly the most vital area of cybersecurity-cooperation for the Indian and Israeli private sectors. Indian cybersecurity corporations and start-ups are certainly gifted with an enormous market, great ideas, and skilled manpower; but have had limited success in creating innovative products. However, a great idea will not suffice to build a successful product; something ‘extra’ must be added to the existing idea! Israel’s expertise in innovation promises to grant the much-needed edge for the Indian cybersecurity industry to develop world-class products.

A true goldmine for innovative partnerships in Israel is embedded in the globally renowned “Start-Up Culture”. It is very common to see Israeli cybersecurity start-ups being founded by fearless-entrepreneurs with considerable military experience, as they understand the nature of cyber-threats, and the intuitive methodology to pioneer relevant solutions. The start-up community is a significant segment of Israel’s cybersecurity ecosystem that provides valuable partnership and investment openings for Indian corporations/start-ups.

Cybersecurity remains a field where the numbers of threats are growing rapidly; but so are opportunities for collaboration. Securely connecting India’s existing and ever-expanding infrastructure to data systems is an enormous task which continues to open avenues for constructing strategic alliances with Israel. Indian cybersecurity entities must recognize, and capitalize, on opportunities to partner with Israeli counterparts to address India’s cybersecurity challenges.

Guest Post Contributed by Vishal Dharmadhikari, the concept initiator of a business-event – India-Israel Cybersecurity Connect (IICC), which featured as a sub-event in Israel’s largest cybersecurity event i.e. the 3rd Annual International Cybersecurity Conference.