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The cause of ‘SaaS’ Industry is top priority on iSPIRT’s policy radar

‘SaaS’ can drive the future of Indian IT Industry both in International trade as well as domestic front. With changing dynamics in Software sector globally, ‘SaaS’ can help India remain a Software power house. iSPIRT has been following ‘SaaS’ industry growth from this perspective. The realization that there are several policy hurdles for ‘SaaS’ industry was very early conceived at iSPIRT.

Accordingly, iSPIRT made several attempts to ease the problems of ‘SaaS’ industry. One of the belief at iSPIRT is that ‘SaaS’ is basically about ‘product’ first and then a ‘service’. With this belief iSPIRT has been continuously taking up the case of clear distinction of Software product within the larger framework of Digital economy consisting of “Digital goods” and “Digital services”.

In order to stop the exodus of Startups, which constitutes a large number of ‘SaaS’ based startups, a Stay-in-India checklist was taken up with Department of Industrial Policy and Promotion (DIPP). There have been a number of items cleared by DIPP such as Angle Tax, Fair market Value, ESOPs provisions made better, Company incorporation rules simplified, Domestic venture debt made easy, Convertible notes, FVCI norms relaxed and External Commercial borrowing (ECB) eased by RBI etc. Some of these announcements under the shadow of StartupIndia policy. However, iSPIRT has been continuously pushing policy makers to relax all these norms for all start-ups. iSPIRT covered most of these announcements in PolicyHacks blogs given here.

A major problem area for ‘SaaS’ startups is also the payment gateway systems. ‘SaaS’ industry has to resort to either relocate to a foreign geography, or open a subsidiary abroad or seek expensive international payment gateway services. On domestic front the ‘SaaS’ industry suffers from recurring billing problems. Both these issues were taken up in PolicyHacks sessions given here. iSPIRT believes Indian ‘SaaS’ companies should be able to carry of out international trade of digital goods without moving out of India seamlessly and using Indian payment Gateway systems.

The belief at iSPIRT that a futuristic industrial policy at Ministry of Electronics and IT (MeitY) is required to meet the challenge of Indian IT industry was followed up with a National Policy on Software Product (NPSP) at MeitY. Being the administrative ministry for this Industry MeitY has in past played highly catalytic role in making of IT industry that India is proud today. A similar renewed thrust is required to push the Indian Software Product Industry.

One of the main emphasis in NPSP draft being followed up at MeitY is the ‘‘SaaS’’ segment. iSPIRT team is continuously engaging with the MeitY officials to educate them and influence on the importance and the need to focus on ‘SaaS’ segment.

There is recognition in Government system for need of this strategic shift. Honourable Prime Minister’s speech at Germany (Link here see 12th Minutes segment) is the evident of this realization of need for change that can lead to companies like Google to be born out of India.

iSPIRT is striving hard in this direction to see the ‘SaaS’ as the next big leap by India.

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What to expect from National Policy on Software Products [Draft]?

Ministry of electronics and information technology (MeitY) has released the draft of National Policy of Software Product (NPSP) for public consultation.

Click here to see the announcement and how to respond to the consultation process.

Click here to see the draft pdf document.

This blog aims to explain where the draft NPSP policy statement stands at present and what to expect further.. The blog also answers many questions arising out in the minds of stakeholders in Software product industry as well as IT industry in general.

This may help Software product industry stake holders in responding to MeitY on this consultation process, which ends on 9th December 2016.

How does NPSP help India?

The first Software policy came up in 1986. It resulted into Software Technology Park (STP) scheme in 1991. Even after 25 years the old Software policy (1.0) of 1986 still prevails, with focus on IT services.

But, past few years have seen serious decline in growth, owing to rapid transformation in technology and Software industry, globally. India’s IT sector is strong enough to face changing technology challenges. India’s national competitive advantage has taken a shift towards innovative stage and ‘product’. Please see another blog on this subject here.

To address globally relevant strategic paradigm shifts, a Software 2.0 policy is needed with ‘product’ as focal to it.

This consultation process will lead this Software 2.0 policy. It will help in India in capitalizing on the existing matured IT industry and build a phase 2 of Industry in form of product based Industry. There are 3 advantages that NPSP announcement brings us.

Firstly, with NPSP announcement, India will give recognition to Software product industry.

Secondly, schemes and programs emergence from NPSP that will catalyze Software product industry eco-system.

Thirdly, Software product industry will have legitimate governance structure in Government of India that help solve problems and provide level playing field.

The draft policy does not have any actionable but only intent statements?

Yes, presently the draft is only a macro policy statement with a vision, mission to be achieved and ten strategic areas to be addressed. Let us understand different aspects of it.

There were two challenges to framing if this draft policy. One most people in Government system link the Industry policies framing directly to a package of fiscal incentives that help in direct market intervention. On the other hand, IT industry having matured, there is less appetite at ministry of finance to easily carve out a fiscal incentive program.

Two, iSPIRT believed that innovation and product based industry needs multi-layered action plan that can help promote the eco-system central to product industry. Adding any fiscal package right in beginning, to the policy statement would have put the efforts in jeopardy.

Hence, most areas that need to be acted upon are summed up in 10 Strategies in the draft. This macro policy announcement helps in getting policy rolled out in two stages.

First, set strategic intents and recognize a product industry.

Second, Action plans (schemes, programs, incentives and institutional setups) can follow on need basis and in phased manner after the policy is finally launched. Policy can be leveraged through multiple threads focused on defined actionable. It could be a) immediate action item list; b) ecosystem building programs; c) segment specific packages and lastly d) incentive schemes.  For example, SaaS based product segment needs an early support in form of a booster package that solves their multiple problems.

This is a right flexible approach adopted by MeitY. This is how it happened in Software 1.0 policy as well.

Let us achieve stage one and then proceed to stage two.

Are there stages envisaged further to announcement?

At iSPIRT, we believe, after the promulgation of NPSP the very first action that is required to be taken by MeitY is a new institutional setup (instead of relying on old or existing vehicles).

Hence, a ‘National Software Product Mission’ (NSPM) should be setup urgently, as nucleus of activity to cater to emerging Software product industry. NSPM can operate under an inter-ministry board, thus drawing legitimacy to understand and solve problems of this emerging industry, across Government departments, at a single point.

NSPM should become a forum for intellectuals and industry practitioners for issues of technology, boosting R&D, international competitive dynamics, steps and actions needed to handle challenges that industry face in a continually evolving dynamic world etc.

Let us welcome the NPSP with open mind and right expectation

Some point in NPSP may not be rightly synching with every segment of Industry. However, one must also note that, the Government’s stake in an industry policy is also multi fold which also including the generation of employment and income.

In view of above, it is in favour of Software product industry to welcome this step 1 of formulating a viable National Policy on Software products. An early approval of NPSP is in the interest of Software product industry of India as well as country to look at a bright future.

A positive welcoming feedback will help MeitY in early approval.

We sincerely hope NPSP will soon be approved and help in building a “Software product nation”.

If you still have any questions you can write to [email protected] or [email protected]