Government recognizes the Software Product Industry

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

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

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

Image Credit: Economist

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

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

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