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Building products to last – Can it increase your valuation?

The inspiration for this article came up from the animated discussion that’s going on at the Product Nation discussion Forum on ‘Customized Product’ – A true Oxymoron.  We all know that customization is bad, and well architected extensions are the way to go. However, I decided to pursue on what ‘well architected’ really means, and what it means for the product business. The answer that came up is that – ‘being built to last’ should logically lead to better valuations. The question is – Does it really?

In the enterprise software world, where one is building large applications, it makes sense to build applications that last. In the consumer app world, it may be better to rewrite when changes occur, but not so in the enterprise world. Some of the best enterprise products out there in the market were built with an underlying framework, with an  aim for extensibility and for lasting for long, through decades of change. The underlying product engineering is often proprietary, but aims for certain business goals. All of these goals point to one thing – built to last. Ravages of market focus changes, technology change, functional changes, version changes, and interface changes can still note disrupt the product capability. When products are engineered for this, it allows the business leadership to change their strategies through time, making the product enduring, lasting and hence multiply. Business goals are not derailed by ‘technical surprises’ but actually allow quick leveraging of new paradigms as they keep coming.

From a valuation perspective can you convince your investor to look at a 10 year horizon of returns because you have a ‘built to last’ product, instead of a 4-5 year horizon that is considered based on current market knowledge? Ideal world? Not really. When they say a product is mature, being ‘built to last’ is what it truly means, and there are great products that do these. It takes some more time, effort, cost and vision to architect such products, but the investment is well worth it, if it’s a long term play in a market.

Is it built for functional extendibility?

Functional extendibility is when the product designers know in advance that certain parts of the product always vary by customer, while the core stays the same, and they architect for the changing areas. Here rule builders, formula builders and tax tables enable customer, industry and country specific variations to be handled through ‘meta data’. Changing leave policies, income tax rules, price rules are some good examples where variation is built into good products

Is it built for technical extendibility?

Often, it is difficult to predict the changes that customers need. With an intent to protect the core, and to easily allow consultants to extend the product, extendibility tools are built into many products. View builders, alert builders, email trigger builders, add on extension screens, add on logic builders, and text label changes are some popular extendibility tools available in good products

Built for version upgrades?

Customers and your market expects upgrades. Upgrades are minor and major. Minor upgrades enable installation without the customer knowing. Major upgrades involve data migration. In the Cloud era, one is continuously migrating customers. How can changes be applied and yet allow versions to keep moving seamlessly?

Built for geographical variation?

The initial product may be built for a country and a language, but as time zones, languages, currencies, decimal place handling and other cultural aspects change, can the product easily adapt?

Built for UI diversity?

This was has become exceptionally critical now. How does one use the same product to handle form factors that keep changing. Responsive design is the current flavor of response to changing form factors, but we can expect many more shocks as interface changes innovations in voice recognition, internet of things and 3D interaction start coming in.

Built for maintainability?

One can build great products with a spaghetti of code, or one can beautifully architect products using techniques like model based development, or well defined objects designed for reuse. The true test comes when a change is required across the board. Well designed code is easy to change and upgrade.

Is it built for technology and deployment changes?

Flavor of the year programming languages, temporarily successful platforms, and nifty user interfaces keep improving, but when it is not possible to rewrite the core system, what do architects do? They usually ‘layer’. They allow a whole layer to be replaced to do new things with new platforms. A very popular product has kept its core intact as it moved from the mainframe, mini, PC LAN, Web and now the Cloud eras. Amazing engineering!

Built for scalability?

Can it work on a laptop for a demo, on the server for a group and also scalable on the Cloud to a very large number of users on a multi-tenant environment? The scalability capability is usually related to the platform the product is built on, where the engineering allows the scalability features of the underlying platform to be leveraged easily.

Yet not over engineered

Somewhere, the engineering has to stop and the economics has to step in. Every layer of abstraction added to handle change also creates a layer of pre-configuration before a product is customer usage ready. Finally it is a question of balancing the engineering to the business goals and budget.

Having been involved in product management and functional architecture decisions in Ramco’s products in the 90’s, and the KServe range of Enterprise products (www.KServeHRMS.com, www.KServeERP.com ) as an entrepreneur during the past 10 years, I’ve seen that  the long range value of being built to last is  often not understood or appreciated fully by stakeholders. With valuations and investment return expectations being short, there is merit in not over engineering, but there definitely a merit  in the ‘right’ level of being built to last. Finally, you are accountable to satisfy and delight your customer and your market, and yet deliver returns to your stakeholders, and being built to last can be your long term ally through ups and downs of the business environment.

Guest Post by George Vettath, Kallos Solutions

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“We are getting the world to gain confidence on enterprise products developed out of India” – George Vettath, CEO of Kallos Solutions

ProductNation interviewed George Vettath, Founder and Managing Director of Kallos Solutions to learn about the journey of his company in the Enterprise software space for the past decade. In this interview, George explains how his background and experience helped in creating a superior product, and provides useful tips for entrepreneurs in this space to get more effective. Read the full story here….

What was the motivation to start your company? 

I had been working in the enterprise software space for over 16 years prior to taking the entrepreneurship leap. Around 2003, I was fascinated by the model based development – a technological innovation that started emerging in rapid software development. I immediately recognized an opportunity to leverage this new model, using which I could reduce time to value to a customer by five fold. Besides this, at that time, I had a different point of view on the direction of strategy with my employer. Both of these led me to start Kallos in India.

Why did you choose India as a location? 

First, I wanted to give back to my country that helped me get global exposure, via sponsoring of my MBA at Sydney University, Australia. Secondly, my initial working years were spent at CMC and RAMCO Systems, during which I had developed a good understanding of the needs of the Indian customer. Thirdly, my roots and extended family are here. All of these were principally responsible in my decision to start my venture in India.

Starting a new company in the enterprise space, under conditions that prevailed a decade ago should have been very challenging. What gave you the confidence to pursue this path? 

Like I mentioned earlier, during my professional career, I was already exposed to the nuances of dealing with Indian and global customers. I was part of the core team at RAMCO which was tasked to build its ERP product. Further, as global head of product management, I was given the responsibility to broaden the reach of RAMCO products to 8 different countries. The experience of selling these products in different geographies, dealing with competition – primarily SAP that came in to Indian market and virtually uprooted us, reconfiguring our strategy to survive the onslaught of global vendors, was the primary source of my confidence. I realized that I could still make my mark, despite all the heavy competition, as long as I had a sustainable competitive advantage against all these vendors.

Can you tell us on how you could translate your thoughts into a real sellable product – and one with a competitive advantage, over the past decade? 

From 2003 till about 2006, we focused on building the product suite on the principles of model driven development. I bootstrapped the company during this period, by executing US projects on the side. From 2006 onwards, we started aggressively reaching out to customers and began delivering product centric solutions, based around the PaaS infrastructure that we had developed in house. The business model was to keep the PaaS in-house, but leverage the platform to deliver rapid solutions and customizations, around our ERP/CRM and HRMS products. Thus, we differentiated ourselves with others in the marketplace as providers of product and platform centric customized solutions, delivered within relatively short timelines.

Another aspect to note is that we did not concentrate on hyper growth. We took a very long term view on the road to profitability – knowing fully well that as the product matures, growth will follow. We also did not adopt aggressive marketing tactics. All we did during the past decade was to wait for a disillusioned customer tap our door after he or she had burnt their fingers trying to adopt a MNC vendor based solution and failed. I realized that the most difficult area in the Enterprise suite implementation is in addressing the variance of requirements across customers in their respective supply chains. Here, we leveraged our development strength to rapidly customize solutions as per customer requirements. These aspects have enabled us to sustain the edge against competition over the years.

Interesting insights… Can you share to us your moments of wins during your journey thus far? 

We have provided solutions to over 170 plus customers thus far – and each one is an important milestone in itself. If I need to recollect the ones that had most impact to the organization, I would think the win we had at CSS Corp for our CRM solution, and wins at Bluedart Aviation (subsidiary of DHL), Scope International (Subsidiary of Standard Chartered Bank) and many services based BPO Organizations for our HRM solution as the key ones. Some of our international wins from the KGK group in Hong Kong and LCC in the Middle East for KServeHRMS, are also milestones since it was the early international sales of our products. The CSS Corp win validated our PaaS play, as well as demonstrated that our solution could scale to support a workforce of 400 users as early as 2007. The Blue Dart Aviation, Scope International and BPO HRMS wins gave us confidence to ramp up KServeHRMS as our current flagship product.

The KGK Group in Hong Kong initially bought the HRMS package for deployment at one of their offices – but after successful implementation there, they expanded to roll it out in many of its group companies in the Far East. An e-publishing firm in Delhi, Aptara Corp was able to effectively use the operational workflow automation solution for its 1100 employees. Power2SME, a Delhi based SME aggregator standardized on our ERP offering and went on to get funded on account of our backbone solutions. These are some experiences that I can recollect…

Over the years, you also would have your share of lost opportunities. Can you shed light on a few key ones?

As regards to lost opportunities, I think we focused initially on selling KServeCRM and KServeERP instead of KServeHRMS. We realized a bit late that the gap in the market was really in the HRMS space in India. We had the best in class HRMS solution and even those customers who had deployed MNC based solutions had not availed of the HR part for a variety of reasons.

The second one in terms of missed opportunity would be our lack of focus on going global earlier. International product sales are more profitable since they are tax free, and easier to implement due to maturity in their processes. In fact, the global customers that we have today – all of them came to us directly based on the good feedback and performance of our products in the field.

Having traveled the road thus far, what advice would you like to give to product entrepreneurs operating out of India?

Over the years, I have seen many companies start off and then shut down. While the reasons of closure could be many, I would advice all product entrepreneurs to have a proper focus on cash flow management and customer management, especially if you are addressing the domestic market. Software is not something that is understood fully by customers in India, and so, you need to work on getting them to understand the hard work that you are putting in to make them successful. Once they see the intent and integrity, customers will never hesitate to pay.

On a related note, personally, I spend about 2 to 3 hours every week for the startup and product ecosystem. I also aggregate the key challenges faced in this region to the appropriate policy makers in my capacity of being the Regional Chair for NASSCOM Emerge Forum for the past 2 years. I feel that over the past two decades a bunch of like minded folks have provided confidence to the world that we can conceptualize, build and sell enterprise products out of India. I urge all the fellow entrepreneurs in this space to reach out to us, collaborate and ensure that we take this momentum forward, and to greater heights.