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GUEST COLUMN
Product Innovation
As the West turns to India to save costs, software product firms here should tap the opportunity
SUBHASH MENON
16 Jan 2009
Innovation calls for vision and conviction. Innovation being the starting point to build a software product company, vision helps us come up with a product idea. And innovation helps us make the product highly suited for the targeted application.
Ralph Waldo Emerson had said: “The creation of a thousand forests is in one acorn.” This could not be more true for software products firms. That proverbial acorn is the product idea on which depends the potential to succeed. But how does one identify a winner? The answer is: one never identifies a winner. One identifies a potential product idea, and makes it a winner.
Products can be grouped into ‘absolutely essential’, ‘need to have’, ‘nice to have’ and ‘frill’. One of the reasons for the bankruptcies of product companies during the tech downturn was that their products fell into the last two categories. Our process was to choose a few areas in the domain that we were familiar with. Then we used filters to qualify each, and thereby arrive at a shortlist. The next step was to speak with potential users of the shortlisted ideas. Finally, we applied a huge dose of ‘gut feel’ to choose the product.
The next step is to formulate a sound strategy covering markets to be addressed, sales channel, marketing methodology, product management, support, etc. From a market perspective, addressing a developing market (if market for the product exists in such geographies) and establishing a reference base in that market might prove to be quite helpful before addressing a developed market. This will help in overcoming the obstacles due to the lack of acceptance of India as an origin for software products.
While I may not be able to tell one sure way to succeed, I certainly can point towards one sure way to fail: lack of focus. It is imperative for firms to be totally focused in a niche or a narrow niche. Superior knowledge of the domain is essential to develop products that will be future- proof and to define the road map for them.
Depending on the complexity and size of the product being developed, it takes three-five years for the product to stabilise, and for the company to start making reasonable profits. Also, obtaining a beta site and ironing out issues in the product takes a fairly long time. Companies need to prepare themselves for this long gestation period with respect to funding, morale of personnel and staying power. The ride to profitability could be accelerated through tight cost controls. Even with that, profitability is a long way off compared to the services business.
Apart from identifying the product, this probably is the most critical and expensive aspect of the business: Product companies typically have to invest four times the amount invested in development, in sales and marketing. There really is no limit to the possibilities of expenses in this space, and calls for substantial attention to strategising, planning and execution.
The first step is to decide on the market approach — direct sales or channel partners, or both — depending on the nature of the product and market segment. Global sales call for personnel with suitable experience. Marketing in the software space is a little understood concept in India. This covers the entire gamut of product management, collaterals, trade shows, preparation of bids, etc. Indian firms need to learn a lot with respect to packaging and presentation, particularly when addressing overseas markets.
It has been established that overseas venture capitalists are increasingly demanding that product firms in the West should locate as many functions as possible in India to save costs. A recent example is that of a Silicon Valley firm that managed to get through two years of operations with only about $5 million (by depending on India) instead of about $15-20 million that they would have otherwise invested. When overseas start-ups have woken up to this advantage, Indian companies should not be left behind.
India is today at an inflection point with advantages eclipsing problems for setting up a software product company here. It is within us to pull off success at a grand scale, provided we tread with caution while paying considerable attention to these cardinal principles, and have strong commitment and conviction that India can be the thought leader of tomorrow.
The author is Founder Chairman, Managing Director and CEO of Subex, and Chairman of the Nasscom Product Forum
(Businessworld Issue 20-26 Jan 2009) |
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