iSPIRT works to transform India into a hub for new generation software products, by addressing crucial government policy, creating market catalysts and grow the maturity of product entrepreneurs. Welcome to the Official Insights!
India’s B2B software product industry has grown nicely since we published the first edition of this index in November 2014 – the top 30 companies are valued at $10.25 billion (₹65,500 crores) and employ over 21,000 people. The index has grown 20% in USD terms and 28% in INR terms from October 30, 2014 to June 30, 2015.
There has been an acceleration since 2010 in the pace of creation of B2B companies. Vertically-focused offerings in retail, travel, financial services, media have reached scale and we are likely to see some larger exits in terms of IPOs or M&A over the next couple of years. In parallel, we are seeing horizontal offerings targeting global markets emerge and start to breakout of India into the US and other global markets – we are starting to see not only India-based venture funds backing these companies but also Silicon Valley funds coming in once there is initial customer adoption in the US.
A new set of founders are coming into the B2B software products ecosystem. These include an increasing proportion who have worked at consumer and B2B startups that have scaled in India and who have identified problems that they can solve with software automation. We are also seeing continued venture creation from founding teams that have backgrounds from established enterprise software companies and some from IT services companies.
In terms of target markets, fast-growth Indian companies (in sectors such as organized retail, organized healthcare services and technology startups in product commerce and services commerce i.e. online-to-offline) are starting to purchase software from Indian B2B software product startups and have globally-aligned requirements, helping these startups get closer to product-market fit before or in parallel to starting to sell globally. We are also seeing many startups go global from day-one through a desk-selling model, as evidenced by many of the companies in the index. And finally, several startups have moved founders to the US and are succeeding in direct selling models there.
Some of the numbers: 80% of companies have global customer bases, while the rest are India-focused. 67% of companies are domiciled in India, with the rest principally in Singapore and the US. Bangalore and NCR account for half the companies’ principal city of operations with Chennai and Pune as key secondary hubs – there is a trend to newer companies starting up in Bangalore, Chennai and Pune and away from NCR. Average enterprise value per employee is climbing toward Silicon Valley levels – the index currently nets out to $480k per employee.
In this fascinating story, Kailash Katkar recalls the past almost two decades of running a business that at one time faced closure. But riding on quality people, constant innovation and proximity to the customer, Quick Heal has become a leading anti-virus software company that is giving even the international anti-virus companies a run for their money. Read on….
Why did you start this business? Why did you form Quick Heal? What was the intention behind it, and did you go for it alone or do you have partners?
When I started this company I never thought I will convert this company into Software development. It started as a computer repair shop. I used to do calculator repairing first, and then I was into laser printer machine repairing. And in those days it was a monopoly in Pune. But when I saw that these machines were not going to continue for a long time and computers are going to take over I started, computer maintenance and started taking AMCs. In fact, I had a lot of customers. I was not into computer sales. I was purely into computer maintenance.
My younger brother(Sanjay Katkar) after his 12th standard wanted to get into electronics for his graduation, but I instead said why don’t you do computers. He was a bit reluctant because it was very new and the fees were high but on my advice he did that and used to come to my shop for practice because I had computers in my shop. Now those days, nobody bought antivirus software. In fact it cost a prohibitive Rs. 14-15,000. Customers assumed it was the responsibility of the contractor to provide it and when computers came for maintenance it was the contractor who had to format the machine, re-install the OS, and reload the data.
Now my younger brother as part of his curriculum had to do a project so I asked him to write some tools which could automatically remove viruses since formatting the machine and reloading all the data was very time consuming and cumbersome. The Michelangelo virus was infamous in those days and was quite a problem for many computer users. He managed to write one simple utility that could eradicate the virus and it worked very well. So I started distributing the tool to my customers and that was the beginning of the anti-virus business.
So based on customer feedback, I ventured into anti-virus software and believe me I had no knowledge of the software industry. We started work on a full-fledged anti-virus software in 1993 and the first version of Quick Heal was released at the end of 1994 most likely.
It was quite funny actually when I think back. The software was a DOS version that came in a floppy, and then we designed a small envelope with colorful packaging and started selling it. It was a bit tough for me to sell, but then gradually I started getting success, and I got this success through channel partners, because since I was into computer repairing, I used to know most of the computer repairing people.
So, what was the competition like in those days, Kailash?
There were a lot many antivirus software. I mean, there was Norton antivirus; there was McAfee; there was Dr. Solomon. And there were a lot of Indian antivirus also.
From Pune itself, there were three antivirus software manufacturers. The two prominent ones were Cure and Vaccine.
In Chennai there was Vx2000 and Star antivirus software. And from Mumbai, there was Red-Armour antivirus software, Red Alert antivirus software. From Delhi, there were three antivirus software. So overall across the country, I think there were about 10-11 software, and this doesn’t include international software.
So from a customer perspective, was there a leaning towards the imported software or Indian software?
People were more fascinated by imported products and software was no exception. McAfee and Norton were the preferred choices in the market.
Correct. you must have had a lot of courage to kind of get into the market at that point.
Yes. Actually, my computer maintenance work was still on. I continued my computer maintenance until 1998 and this gave me the cash to pump into the anti-virus software development and marketing also. Personally, I used to spend 50% time on computer maintenance and 50% time on software sales. And my younger brother was fully focused on development.
What was your proposition to the customer?
Actually, it was quite difficult considering the huge competition, with so many number of antivirus software. But in the late nineties, a virus called Dir 2 came into the market. The virus was extremely dangerous and used to decrypt the hard disk. In fact, users never knew when the machine is infected and after infection how many times the machine was rebooted. Now if you applied an anti-virus software in the traditional way, it was just remove the virus but whatever data was decrypted would be lost and the machine would crash. So every time the machine was formatted about 30-50% of data would evaporate.
So Quick Heal pioneered a unique approach. We managed to find out how much data was decrypted and encrypt it before cleaning the virus. That way we got the virus out and the data restored. This way Quick Heal was the first antivirus software in the market which used to do this. Even Norton and McAfee were not doing this.
What was your communication strategy to inform the market of such developments?
I was not able to go pan India, but I was able to communicate with most of the customers in Pune. In fact soon after Dir 2 came Natash a dangerous polymorphic virus. Again many of the antivirus software companies took a hit but we were able to find a solution and gradually started converting larger customers like the Times of India who took a corporate decision to adopt our software.
How did you scale that now? From a development perspective, how did you scale it?
Now we have a team of around 650 people but we went through some tough times. In 1998 I decided to close down the computer maintenance business because it was very difficult to run two business together. I focused on a distributor strategy but that put a strain on my business because while the distributors sold the product they never paid me on time. In fact it reached a stage when in early 2000 I decided to close down the company.
In 2001-2, I had about Rs.2 to 3 lakhs in the bank, and then one of my friends advised me that if you really want to scale and grow your business, invest in a proper technical team. Also get a good business team. So finally we decided to do it under a lot of strain because in those days banks never supported software companies.
I somehow inserted a big advertisement in the Times of India, almost a half page ad, saying that I’m looking for country managers and city managers. I was then able to hire good people and together we changed the entire structure of the company.
Why did they come and join you? What was it that they saw in Quick Heal that was the game changer for them?
Quick Heal had become a bit popular in the Pune market and most of these people were from Pune itself. So, they knew about this product. They knew about the quality of the product, but they were quite also that the product was not reaching the masses. So they joined the company to take up the challenge and I am proud to say that more than 10 years later they are still with the company.
With these new people, we embarked on a strategy to open branches in other cities. Soon I developed a lot of confidence that sitting in Pune I can manage branches in other locations also. We started with Nasik. And after Nasik started running well, in three months’ time I started an office in Bombay and then in Nagpur and then in Indore, and then gradually I went into Gujarat and then I went into North India and South India. Today, we have around 23 offices, apart from Pune, across India.
So you still believe that a large part of your sales has to be achieved by physical presence?
Yes, yes. Most software companies try to appoint national distributors whenever they scale their product to other countries. And perhaps a few regional distributors. I don’t believe in that. Because what happens, if you….if you appoint a national or a regional distributor he expects a lot many things to be done by the company. He really does not make efforts. He just waits for customers. If the customer demands the product, then he sells the product.
When I appoint more than 100 channel partners, then I try to appoint one stockist on top of it, so that I don’t have to deal with each and every channel partner for a transaction like billing and invoicing and payment collection and all these things. I can just deal with all the channel partners just to maintain a relationship and make sure that they are comfortable selling Quick Heal, and if they have any issues or problems, we can go and help them.
So, this is how I started developing a market all over India, and now we have around 12,000 channel partners across India. We have direct connectivity with each of our channel partners.
How do you keep this channel partner base updated about the product and about new developments?
By giving continuous training. Every branch has a set of people for a sales team, a set of small – one or two persons – for marketing. Then a team for support, and then the administrative team. And among the support team, there is one person who is a trainer who keeps on training all the channel partners about the product features and product support and other functions. We have a training program conducted every Saturday for a specific set of channel partners.
And how do you keep updated about the innovations that you need to bring into the products? So, the new antivirus, antidotes, whatever.
Actually, since the team is spread out across India we always have meetings with the branch managers once in a quarter, and then we keep on getting a lot of feedback from the entire market through these branch managers as to what the customers are looking for.
Okay. Looking at this 15 year journey now, what would you pinpoint as the most important thing that you have done.
Customer relations are very important for me and understanding the customer is very important for me. So, I have to focus more on that, what exactly customers are looking for and how I can get that service with less effort for me as well as for my team by developing some tools or something like this, you know.
How do you keep abreast of fast changing technological developments?
Our senior level team of about 7 to 8 executives constantly are attending conferences and travelling across the globe. For instance, we attend the Red Hat conference and this Hackers conference and most of the antivirus conferences and a lot many security conferences that keep on happening….Not only do they attend, but we also keep on presenting our research papers in these conferences. So every year, around four to five papers are being presented by Quick Heal.