India powers up its ‘Software Product’ potential, Introduces National Policy on Software Products (NPSP)

This is an exciting occasion for our indigenous software industry as India’s National Policy on Software Product gets rolled out. This policy offers the perfect framework to bring together the industry, academia and the government to help realise the vision of India as a dominant player in the global software product market.

For ease of reference, let us summarise some of the major things that the policy focuses on

  • Single Window Platform to facilitate issues of the software companies
  • specific tax regime for software products by distinguishing  them from software services via HS code
  • enabling Indian software product companies to set off tax against R&D  credits on the accrual basis
  • creation of a Software Product Development fund of INR 5000 crores to invest in Indian software product companies
  • grant in aid of  INR 500 Crores to support research and innovation on software products
  • encouragement to innovation via 20 Grant Challenges focusing on Education, Healthcare & Agriculture thus further enabling software products to solve societal challenges
  • enabling participation of Indian software companies in the govt. e-marketplace to improve access to opportunities in the domestic market
  • developing a framework for Indian software product companies in government procurement.
  • special focus  on Indian software product companies in international trade development programmes
  • encouraging software product development across a wide set of industries by developing software product clusters around existing industry concentrations such as in automobile, manufacturing, textiles etc.
  • nurturing the software product start-up ecosystem
  • building a sustainable talent pipeline through skilling and training programmes
  • encouraging entrepreneurship and employment generation in tier II cities
  • creating governing bodies and raising funds to enable scaling of native software product companies.

There is good cause for cheer here. The policy offers to address many of the needs of the Software Product Ecosystem. For the first time, HS codes or Harmonised Codes will be assigned to Indian software product companies that will facilitate a clear distinction from ‘Software Services’ facilitating availing of any benefits accruing under the ‘Make in India’ programme. In addition, this will enable Indian software product companies to participate in govt contracts through registration on GeM (Govt. eMarketplace).

Considering that we remain a net importer of software products at present, steps such as the inclusion of Indian software products in foreign aid programmes, setting up of specialised software product incubators in other geographies and promoting our software product capabilities through international exhibitions definitely show intent in the right direction. With a commitment to develop 10000 software product start-ups, with 1000 of them in tier II cities, technology entrepreneurs building IP driven product companies can now look forward to infrastructural and funding support. The policy also aims to go beyond metro-centric development with a commitment to develop tech clusters around existing industry concentrations, enable skilling and drive employment in non-metros and tier II cities while actively encouraging Indian software companies to solve native problems.  

This policy could not have been possible without the vision of the Honourable Minister Shri Ravi Shankar Prasad, and continuous engagement and discussions with Shri Ajay Prakash Sawhney, Rajeev Kumar and Ajai Kumar Garg from MEITY and their team.

We have seen software companies solving native problems do exceptionally well, just look at what Paytm has been able to achieve while driving digital payments in India. There is now an understanding ‘Make in India’ can help us bridge the digital divide given that Indian entrepreneurs have a greater understanding of local issues and the challenges that are unique to us.

Setting up bodies such as the National Software Products Mission in a tripartite arrangement with the industry, academia and govt. to enable creation and monitoring of schemes beneficial to native software product companies is another much-needed step that will create a forum distinct to our software product companies and help give them a strong voice.

We would like to thank Lalitesh Katragadda, Vishnu Dusad, Sharad Sharma, Rishikesha T Krishnan, Bharat Goenka, T.V. Mohandas Pai, Arvind Gupta for their diligent efforts on the continuous dialogue and inputs for the policy.

While launching the policy is a great start, its implementation is what we all will have our eyes on. Now is the moment of action. We all look forward to fast-tracking of the various proposed measures under this policy for the benefits to start showing!

References

J​ANUARY​ 15, 2019​ – ​https://tech.economictimes.indiatimes.com/news/internet/india-needs-to-win-the-software-products-race/67533374

DECEMBER 8, 2016​ – ​https://pn.ispirt.in/what-to-expect-from-draft-national-policy-on-software-products/

NOVEMBER 13, 2016​ – ​https://pn.ispirt.in/national-software-policy-2-0-needed/

MAY 10, 2016​ – ​https://pn.ispirt.in/taxation-and-digital-economy/

APRIL 29, 2016​ – ​https://pn.ispirt.in/saas-the-product-advantage-and-need/

JULY 16, 2014​ – ​https://pn.ispirt.in/government-recognizes-the-software-product-industry/

DECEMBER 11, 2013​ – ​https://pn.ispirt.in/three-waves-of-indian-software/

JULY 16, 2013​ – ​https://pn.ispirt.in/smbs-and-indian-software-product-industry-intertwined-fortunes/

JULY 4, 2013​ – ​https://pn.ispirt.in/8-truths-why-it-services-organizations-cannot-do-software-products/

“Potential of Software Products from India” – Insights from an interview with Prof. Rishikesha T Krishnan, IIM Bangalore

In an interview with Govindraj Ethiraj on the changing paradigm of the Indian software industry, Professor Rishikesha T Krishnan, IIM, Bangalore, talks about how the software industry is getting transformed from a services oriented model to creating successful products. He cites FusionCharts as a great example of finding a niche market and moving to the cloud as an efficient mechanism to deliver and service customers.

 

Building profitable and sustainable software product company

What common principles underlie success of software product companies such as Newgen, Nucleus, Tally, Polaris, Srishti, Mindmill, Quest informatics, Druvaa, Infrasoft, Zoho etc?. Kim and Maubrogne (1997) in their analysis of high growth companies found that these companies focus on bettering themselves, continuously let unprofitable customers go, and shed commodity resources/skills. Collins (2001) in his widely acclaimed book “good to great” identifies, the value of executive leadership, getting the right people, focus on what a company is good at and creating a culture of discipline, as the core principles of great companies. On the product development side, Reis (2011), Brown and Eisenhardt (1998) have brought out the value of building core (Minimum viable product or MVP) to reduce time to market and patching modules against market opportunity.  In this article, Browne & Mohan consultants synthesize their learning of working with software product companies.

Market selection
While many product companies start off as services companies and later productize-their services, successful ones are those that operate in markets with periodic changes in regulatory requirements, witnessing newer investments to scaling and growth of enterprises in the industry and operational friction exists due to proprietary approaches or tools. Long term sustaining software product companies also look at markets where large MNC products exist, product acquisitions are on raise and MNC’s are unable to address non-behemoth companies in that sector.

Strategic Imitation, not Innovation
While it is fashionable for academics to talk about first-to-market, most successful product companies are strategic imitators. They allow the first-mover to discover the key features, educate early customers, but ride on a me-too quickly to capitalize on the market growth. This helps in lower S&M costs and improved ROCE.

Seek ideas fly from all; focus on what not to do.
Successful product companies seek ideas from multiple sources, beta clients, product demo teams, end users, etc. But build the product looking at where the friction is highest, pain is unbearable and intension to pay is highest.

Design a product for reuse and as platform
Design the product for big picture, but strip down to basic version to design first and market test. Later modules must be used for versioning and bundling. Build modular products and products that could be used in cloud or on-premise environment. Focus should be on minimizing customization, and reduce variety at early stage to benefit from low code, feature and support variety.

Invest in multiplicative Ecosystem.
Successful product companies must learn to exploit the product ecosystem. Whether it is the technology OEM you have an ISV relationship with, analyst relationship, or a sales partner, they are good levers to reduce investments in your set-up (people and other paraphernalia). Align your sales resources to maximize the self-interest of partners. Align with OEM account manager to acquire new customers and “sales focused” no product companies in international markets to expand. Partners and resellers help in market coverage, delivery and post-deployment support. Invest in marketing and vendor management resources, processes including training and certification realised better results. Use every platform provided by technology OEM to brand and reach out to market.  Academic institutes and interns are a good platform to explore open innovations. Ideas for new products, GUI modifications, market research, pricing and competitive intelligence and in fact product development can all be areas where qualified resources can be employed to your company’s gain.

 

Keep sales structure lean and mean
Successful product companies need sales teams where the client opening meetings may happen through marketing events or resources on street, closures can only happen if they have sales team that can inform and influence at senior levels of organizations.  Named account strategy will work if the client organizations can be identified a priori, they are far and few and the sales team has the ability to penetrate those accounts at all levels.

Invest in sales operations
Successful product companies invest in sales operations units, often led by a visibility into last mile was high and the sales teams were mean and lean.

Credible and Consultative Pre-sales
To be a successful product company, invest in pre-sales who enjoy problem solving and consulting. Use various platforms to positions them as solution providers, thinkers, etc. Arm them with couple of certifications, it helps to open many a closed minds in many parts of world. 

Profitable license sales
Many companies do not have the mix of license, support and deployment worked out in detail and with sales pressures may accept clients where the license fee has been abnormally discounted. While winning reference customers is a must, not all clients must be treated as referential. 

Right pricing, adopt versioning
Use versioning or hosted vs. on-premise or CPU vs. instance prices appropriate to the product environment. Create sufficient variants to allow customers to do self-selection and a feeling of control.

Limited budget, Impactful Marketing
You do not have to splurge a lot to be noticed. In fact, many a business papers have paucity of good stories to tell on innovation, India based product or E-governance product. Invest in couple of resources to engage actively with media and also create appropriate noise on social media.

Many successful product companies have HR talking about the culture, what is unique and so on. Brand all aspects of the company. See in what way your unique induction program can become a business case study or women employees returning from maternity or other long breaks can immerse into the organization becomes an impactful article.

Hire for attitude, perseverance and initiative
Successful software product companies do not need hire noble prize winners, but committed people who would embrace common ambition of the firm. They come with openness and curiosity to learn, improvise activities within their control and innovate over time.

While academic degrees and honours may matter initially, what matters is positivism and attitude. Choose employees who are keen to dirty their hands, shoulder a bit of other roles and open to unlearn.  Incentivize employees to attempt, appreciate failures and set them for win.

Rein in service cannibalizing product
Service revenues that come with product installations can be very tempting and wean away the focus away from the product if strongly not reined. Many successful companies find themselves in service cannibalization over time and lose their long term sustainability. Limit your services play and consciously promote partners to support roll out and de-risk yourself.

Risk Management
Product companies that grew and sustained momentum measured the risk and impact of their actions, though mostly subjective.  Senior management insisted on developing an approach to estimate risks, their impact, however rudimentary across organizations. Explicit identification and evaluation of risks helped the companies question their assumptions and prepare for back up plans.

De-risk, invest in R&D
Product companies must de-risk from technologies, products, markets and customer segments. Look out for related product usage areas where the product could fit, refurbish the features appropriate to a specific industry and monetize extension of the product knowledge across different customer segments. 

With inputs from Pratibha Sharma

Bibliography Brown, S.L. and Eisenhardt, K.M. Competing on Edge: Strategy as Structured Chaos, HBS Press, Boston, 1998. Collins, J. Good to Great: why some companies make the Leap… and others Don’t, Harper Business Press, New York, 2001. Garud,R. Kumaraswamy, A and R.N. Langlois, Managing in the Modern Age, Blackwell, Oxford, 2003. Hagel, J and Brown, J.S. The only sustainable Edge: why business strategy depends on productive friction and dynamic specialization, HBS Press, Boston, 2005. Johnson, R. and Soenen, L. Indicators of Successful Companies, European Management Journal, 2003, 21(3), 364-369. Kim, W.C and Mauborgne, R. Value innovation: the strategic logic of high growth, Harvard Business Review, 1997, Jan-Feb, 75(1), 1012-112 Kopitov, R and Faingloz, L. Ways of transforming aims into results at Successful companies, Technological and Economic Development of Economy, 2008, 14(3), 312-327. Kotter, J.P, Leading Change, HBS Press, Boston, 2008. Leonard, D. Wellsprings of Knowledge: Building and Sustaining the Sources of Innovation, HBS Press, Boston, 1995. Morgan, M. Levitt, R.E and W. Malek, Executing Strategy: How to break it down and get it done, HBS Press, Boston, 2007. Schnaars, S.P. Managing Imitation Strategies, Free Press, New York, 1994.

Build it Right, then Sell it to Many (and Keep Repeating)

Building a software product is more difficult than doing projects or providing services. With projects, software is developed to meet the exact specifications of the client. Work begins only when the contract is signed.

The project scope can be defined accurately in consultation with the customer, and deployment happens in a controlled environment at client site, with known hardware and software. Support requirements are minimal.

Changes to specifications, or defects during development or after deployment, usually have limited financial impact. In T&M contracts, the vendor is paid regularly, based on efforts put in. Hence, changes and delays may in fact, bring in more revenue. Fixed price bids usually account for contingencies like delays. If specifications are changed, the vendor can ask to re-negotiate the price. Quality issues may cause loss of credibility, or at worse, project termination and denial of future contracts. 

A product, in contrast, will be shipped to thousands, or even millions of users. Specifications are based on the seller’s understanding of customer needs. Therefore, a deep knowledge of market and domain is required. Clients are not guaranteed, and marketing and sales functions are critical. Selling cycles are longer and more cumbersome.

Quality has to be outstanding, since the product will be used by a variety of users, and on a plethora of platforms and configurations, and not all of it can be anticipated in advance. As the diagram below shows, the cost of fixing a defect increases exponentially depending on when it is detected.

A post-release defect creates negative publicity and costs lot of money. A patch to fix the problem has to be developed and distributed quickly to the users. Even Microsoft has faced this problem repeatedly when hackers have exploited vulnerabilities in its operating systems. In another instance, a US-based personal finance company inadvertently exposed the private account details of several hundred individuals to other users. Such snafus can expose a product company
to expensive lawsuits.

A product business requires highly structured engineering and organizational discipline. Formal reviews are necessary at every stage (architecture, design, coding) to catch deviations from the requirements. Rigorous testing and quality assurance (test/QA) processes should be followed to detect defects before product  release. Test labs must replicate the myriad deployment environments that users  may have. This can become complicated for multi-platform products that support a variety of operating systems (Windows, Unix, Linux) and databases.

The installation procedure must be highly automated and work fl awlessly in all possible system configurations. New versions, patches, and future upgrades must install without any disruption to existing software and data at user sites. A strong support organization (on phone, email or onsite) has to be built.


Unlike projects, there is no end date for product engineering. They must  continue innovating and releasing new versions with more functionality and advanced features, to stay ahead of competition. Product organizations often have a signifi cant revenue component derived from services such as consulting, customization, integration and solutions. Unlike a pure services business, these are used to underpin and drive their product sales.

The ecosystem for products is more complex, consisting of engineering teams, product management, marketing, sales, consulting, professional services, distributors, system integrators, resellers and investors.

Reprinted from From Entrepreneurs to Leaders by permission of Tata McGraw-Hill Education Private Limited.

Best products are built, keeping its user experience in mind says Shalin Jain from Tenmiles…

Hypothetically speaking, if one was offered a job and the decision to accept or reject was based on how far one had to travel, would “Tenmiles” be a round enough estimate, to base a rejection on? The answer is locked away somewhere in this piece. Read on to find out…

Education, bunking and creation

Shalin Jain’s enchantment towards Internet started way back, when he was in high school and the thought dawned on him how powerful a tool it was for connecting people. Blog, as a platform for communicating ideas caught on early and he used WordPress as effortlessly and seamlessly as one uses notebooks to make personal notes. Doing B.Sc in Statistics from Loyola college, proved beneficial in many ways. It helped develop an analytical mind and the flexibility to work during those years. At the company that he worked for, Indchem Software Technology, Shalin learnt the ropes in design through ASP & JSP Applications. Submerged in work, college attendance  was to take a nosedive. At the behest of the Principal and some paternal advice, Shalin almost took the brow-beaten path of doing an MBA. While still mulling over his future, one day he got a job offer from his old organisation. Though a seasoned hand by now, yet some parts of the student in him remained alive. The distance to workplace and back was approximately 10 Miles. He decided to chuck it. Tenmiles Tenmiles Tenmiles, the words reverberated – what could have been and what he chose.

The Brand Tenmiles

Instantaneously, his creative mind went on an overdrive. What if he started a company with a name like “Tenmiles” and live his dreams.  A “no” to something is really about saying “yes” to something else. Thus was born the idea. Initially it was a garage-level operation and the focus of business was on Web Design & Flash programming. Functioning out of the domestic market is very challenging for a startup. The constant “back and forth” approach can be unnerving and puts additional pressure on time and deadline. It also did not help that there were many companies claiming to develop products.

Screenswift, creates installable Flash screensavers from any Flash movie, took only 16 days to develop. There were two versions: Personal edition & the Premium edition later in 2001. This product would gain huge popularity amongst design agencies. The desktop screensaver market was big towards the end of 90’s and early 00’s. Not off late.  In 2005, Helpdesk Pilot, another very successful product was launched. In the first month itself, the product got in 11 customers and umpteen sales enquiries. It’s a platform built to help you provide excellent customer support effortlessly. HappyFox was another cloud based customer support software which got launched soon and now happens to be the flagship product. In the words of Shalin, the design element in this product was very good. In 2010, launch of DoAttend  established the company’s reputation on strong customer driven focus.

SWOT Analysis              

Self admittedly, the company did not have a structured approach to Marketing and only started investing in it, after the launch of DoAttend. Shalin gave the example of a painter, who paints not with “awards” in mind but what the painting is going to look like. Best products are built, keeping its user experience in mind.  DoAttend was a very successful product and word-of-mouth marketing, worked to its advantage. The focus was the “customer” and never the media. This approach worked well and brought customers in droves.

The organisation also believes in lean staffing which in a way has resulted in optimising productivity. Shalin is of the firm belief that in case of a multi-product approach, each product must be self sustainable. A half-baked approach never works.

The company has been bootstrapped to generate funds.

Inspiration

In college, Shalin had a neighbour – another youngster who was only older by a few years. This was in the year 1998 – 99. Shalin was in a stage in life where he wasn’t easily distracted and thus had the opportunity to study his neighbour’s methods, his drive, passion. This was perhaps the single-most important trigger.

Building Successful Products

A product can be very good, but with average business scope, whereas it can also be average but with a huge business potential. Every product developer needs to figure out which market they would like to operate in. Here are some tips offered by Shalin for startups:

  • Have the end consumer in mind and build accordingly
  • Be clear on what is the exact problem you’d like to address by building this product
  • Trying to build too much. Too many functionalities might not be the right way
  • All great products have a solid focus on design and make sure you have one!

On Product Ecosystem

When he started in 2000, there was nothing of the kind. Developers at that stage, including Shalin were used to experimenting and working without much support. Having said that, it was important to get the right advice, inspiration and a direction. There should be a system in place to do a reality-check. Mentoring sessions usually turn out to be hype. The need of the hour was to get away from jargon-throwing and hand-hold some of the young boys and girls who are only equipped with a brilliant idea. And, there are many.

The country has huge potential and an opportunity to come up with top-notch products which can be world beaters.