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Why Indian IT product companies grow slower than companies elsewhere?

Indians are loved world over due to their intellectuality, hardworking nature and their unparalleled ability for Jugaad (an innovative fix or a simple work-around of complex problems). Generally speaking, Indians are doing wonderful job in technology sector and why technology sector alone, it’s across the board now. Many of the world’s largest enterprises have Indians as their CEO’s who are driving high growth for such mammoth organizations e.g. Pepsico, Mastercard, Apple. Mind you, size tends to slow down the growth due to increased complexities.

Global economic expansion and rise of Indians on global map is a boon for India as a whole. It has certainly helped securing unique identity for India on the world map. Despite all this, why Indian Product companies in IT sector are not able to grow to their fullest potential? Why after a certain point these companies call it a quit or struggle to keep up pace of growth? Let’s discuss

I have been associated with Indian IT product companies from the last 8 years at least. The size of these companies has been in the range of 20 Million – 300 Million. With little experience in dealing / working with various product companies following are my general observations (not specific to any company I worked with).

  1. IP Vs Marketing – IP is heart for any product company but what are the rules of the game? Shall they continue investing heavily into developing / enriching their IP’s all the time? What is more important for them at different point in time of their lifecycle? This is a tricky question and finding a balance between business and IP creation could be a never ending debate and obviously THE most difficult question for these companies to answer themselves.

If you look at the IT products originated from western world and with specific mention to Israel, I have few observations to share:

  1. They develop the IP considering present and future (Not so Distant hypothetical future).
  2. Test it, Test it and Test it so that it does not fail (I know few of you must be smiling while reading this J. We all have restarted our computers every time it stopped responding)
  3. Sell, Sell and Sell as much as they can before finding the right balance between efforts required for IP management and marketing.

On the other side, Indian entrepreneurs (Btw most of them started by technocrats and not by sales gurus – Please note) are so passionate about IP that they tend to postpone the problem of selling the software. IP gives immense pleasure and satisfaction to an extent that all the policies, strategies, growth plans, creative energy, board room discussions and even canteen discussions revolve around IP – This is what killing them softly 🙂

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The future is here: Indian product companies are potential global giants

Every year I speak at a dozen events – both within the country and outside. These events range from ones around entrepreneurship and startups to ones purely around technology. There is, however, one common thread at all these events. At home, I meet many young product companies that now operate on a global scale and overseas I increasingly bump into entrepreneurs who have set up a product company with a global footprint.

It will not be an exaggeration if I say the era of dominance by Indian companies has started and we will see young, smart, technology enabled product companies use their imagination and information to operate on a global scale.

What has changed over the years – the biggest factor is the Indian entrepreneur’s ability to think big. About 5-10 years ago an Indian entrepreneur would want to create a niche business that would create a good amount of wealth for himself. An Indian entrepreneur now thinks differently where he wants to create a big billion dollar business that straddles continents. They want to create a dominant business and dominate globally. A startup today does not aim to be a $100 million business, but dream to reach a billion dollars.

And is it easier to do so? Theoretically the answer would be a big yes. It is easier to start a company, especially in the technology domain, and have operations across the world. Many are now starting with the world in mind and in fact during their initial days India may not be the launch market for them. There are examples of many startups that prefer to start in the US and then look to spread operations here.

The reason behind this can be attributed to a phenomenon that started about a decade or two ago. The business process outsourcing (BPO) and the services industries like Infosys and Wipro led to a lot of food for thought over the years. Enterprising individuals were not content with being mere back office providers. As global systems and processes became pervasive at work places, many stated seeing clear opportunities that could be addressed. These individuals were some of the early pioneers of Indian product companies operating and addressing global needs. Starting product companies and not services suddenly became the vogue as factors like labour arbitrage took on a new meaning. Today it is a question of skill arbitrage where product companies are developing technology that are world class and price competitive.

The second reason behind the increasing appetite to operate on a global scale is because of professionals returning home from an overseas stint. When I started Rate Gain after returning from the US, I could see some clear business opportunities. While I was unsure if it would work out, I knew serving the world from India was possible. For entrepreneurs like me and many others, the fear and apprehension of dealing overseas do not exist. There is a strut in our step and a confidence that we are second to none.

A large part of this is also due to the successes of Indians abroad. From the investing companies to top executives at some of the largest MNCs, Indians are now where it matters. A large Indian investing community abroad and forums like The Indus Entrepreneur (TiE) and Indian Angel Network (IAN) have helped tremendously by opening doors.

This is now having a cascading effect. For people with an entrepreneurial ambition, there are clear role models to follow. Companies like Druva, ours (Rate Gain), Zomato, InMobi are hugely successful and changing the status quo. The startup ecosystem in the country is maturing with a healthy mix of angel and venture investing and a good idea can now be converted into a sustainable company. The Indian market may be large and lucrative, but the opportunities multiply when operations are on a global scale.

The global outlook at an early stage works well for a startup. Not all would be successful and there is every likelihood that there will be more failures. However, the penchant to create multinationals is the first step to create billion dollar companies. In the years ahead as technology reduces the barrier to entry and democratizes opportunities, startups going global would be the new norm.