Need for Software Product Companies for India's Economic Growth
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Transcript of Need for Software Product Companies for India's Economic Growth
© 2014 Infotech Enterprises. All Rights Reserved
We deliver Global Engineering Solutions. Efficiently.April 7, 2023
Need fo r Sof tware P roduc t Compan ies fo r Ind ia ’s Economic Growth
© 2014 Infotech Enterprises 2
Can India use the foundation created by the software services industry to go to the next level in terms of economic growth? – Software products offer one viable route
Global Software Products Industry = $1.2 trillion
India = $2.2 billion
The Software Product Industry is a $1.2 trillion opportunity globally…
… with India’s revenues from software products at $2.2 billion in FY13
The Software Outsourcing Industry in India expected to rise to $99 billion in FY14-15 (FY14 estimate at $86b).
With our leadership capabilities developed in the software services industry, India has a higher chance of
succeeding in the Software Products Industry
© 2014 Infotech Enterprises 3
Software product revenues from India nearly doubled to reach $2.2 billion in 2013 and is expected to reach $10 billion by 2020
FY2008 FY2013 FY2020f FY2025f$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$1.3 $2.2$10.0
$100.0
Revenues
CAGR11.1%
CAGR24.2%
CAGR58.5%
Software Products Industry’s Market Size ($ in billion)
Source: NASSCOM, iSpirt
India has a potential to build a $100 bn software product industry by 2025, growing at a
CAGR of ~59% – contributing significantly to the nation’s current account
2014 will witness the emergence of “Made in India Software Products” on the global
stage
© 2014 Infotech Enterprises
Meeting and exceeding personal
expectations in today’s experience
economy is a top most priority for
innovative CIOs and entrepreneurs
This in turn is driving the need for
companies to produce ‘experience’
apps for their digital customers
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Transition to an ‘Experience Economy’, ‘Disruptive Innovations’ in Technology, and the Rise of a ‘Digital World’ are helping unlock significant potential for Indian software product businesses
1. Transition to an Experience Economy
Where were we?
Time
Where are we now?
Agrarian Economy
Industrial Economy
Service Economy
Experience Economy
Fo
cu
s
With a rapidly changing mobile and social world, people demand the very best experience
© 2014 Infotech Enterprises 5
Transition to an ‘Experience Economy’, ‘Disruptive Innovations’ in Technology, and the Rise of a ‘Digital World’ are helping unlock significant potential for Indian software product businesses (cont’d…)
2. Disruptive Innovations in Technology
TechnologyInnovations
Big Data Mobility Cloud Computing Virtualization Service Oriented
Architecture Open Source
Delivery ModelInnovations
Packaged/ License Infrastructure as a
Service Software as a Service Software Appliance Software Enabled
Solutions
Revenue ModelInnovations
License Subscription/ On
Demand Transaction Ad Based Outcome Based
Customer Needs
Software Market Disruptions
Solution Viability
Technology Innovations
Delivery Model Innovations
Revenue Model Innovations
Disruptions are happening at a much faster pace offering huge opportunities in the software product market
© 2014 Infotech Enterprises 6
Transition to an ‘Experience Economy’, ‘Disruptive Innovations’ in Technology, and the Rise of a ‘Digital World’ are helping unlock significant potential for Indian software product businesses (cont’d…)
3. Rise of a Digital World
A nexus of converging forces, i.e. Social Media, Mobility, Analytics, and Cloud is creating a hot bed for
new business opportunities
Social Media
• Address customers’ social media requirements
Mobility Mobile-enabled business
processes and platforms such as: m-Commerce, m-Banking, etc.
Analytics Data Explosion and the
need for Real-time Insights, end-to-end Analytics
Cloud Cloud platforms, cloud-
specific testing Cloud-enabled solutions pay-
per-use
© 2014 Infotech Enterprises 7
While India’s role in global technology IP creation has grown steadily, several challenges have constrained the growth of home-grown software product business
Talent starvation at the entry levelFinding/Retaining
talent
Large initial investment and uncertain future
cash flows
Over 50% Completely
self-funded or ‘Bootstrapped”(a)
78% have homogenous
founding partners
Lack of original technology
development mindset
Low presence in global packaged software market
Challenges
(a) Low valuation of the startup: Around 50% of Indian product startups are valued anywhere between $1 million to $10 million, with
nearly 34% of them valued at less than $1 million
Very few exit options for the VCs or angle investors: In Israel the M&A exit value was 7X of the VC/PE investment during the same
period. In US the multiple was 5X. In India it was only 1.1X
© 2014 Infotech Enterprises
However, a maturing ecosystem has helped accelerate the growth of homegrownsoftware product businesses over the past few years
Angel, VC investment boosting the product sector owing to the high potential
Tier II/III cities are rapidly emerging as viable product hubs. Ex: Ahmedabad, Trivandrum, Kochi,
etc.
A number of incubation centers have been established across India, that are helping technology
startups with funds and mentorship. (Approx. 40 incubation centers)
Startups are attracting talents by providing attractive roles, ESOPs etc
iSpirt has partnered with Signal Hill (US based boutique bank) to facilitate M&A activities in Software
product industry and bring in the valuation boost. Example: Facebook’s acquisition of Little Eye Labs
7 7
43
32
48
2006 2013
Angel Funds
VC Investors
Number of active investors
8
© 2014 Infotech Enterprises
Fast growing domestic market requirements will aid the growth of India’s Software product
industry in the days to come
o Small and Medium Businesses (SMB) market in India (India’s growth engine) is huge and the current IT
penetration is very low
India has a critical mass of software product companies (~3,500) which have entered the Maturity
stage of the industry
Currently going through a period of ‘Combinatorial Innovation’
o A host of SaaS success stories by Indian Origin Companies are examples to this
New SaaS markets being created are very large, currently valued at USD 600 billion globally.
Indian SaaS product companies are a part of this emerging market opportunity right from the
beginning
Close to 40% of founders come from the R&D section of an MNC, such as: Yahoo, Intel, IBM, etc.
o A lot of senior talent from MNCs are starting software product companies
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Domestic market in India is unique in multiple ways – this is fueling opportunities for India-based software product businesses
© 2014 Infotech Enterprises 10
Why should India focus on Software Products and Expected Outcome for the Country
Rich leadership skills that the country already has in the IT sector
Entrepreneurial Aspirations that exist amongst India’s youth particularly in the IT (software) space
Established vibrant software ecosystem
Facelift for the country – Labor arbitrage has a limit and the IT services space is crowded with the large organizations. Product startups will give the most needed facelift for the country
The product industry with a potential of $100Bn in 2025 could be the next big thing to drive the Indian Economy & to become the aspirational industry for the huge engineering population of India
With the developing favorable ecosystem we can foresee the increase in exit options for the VCs and Angle investors
Leverage existing resources
Expected outcome
© 2014 Infotech Enterprises
Incorporate the teaching of Entrepreneurship and Innovation into our educational system
o India scored a mere 4.95 on entrepreneurship culture as compared to the highest of 7.67 (United States)
o Additionally, we scored the lowest in comparison with 20 countries on Education and Training (at 3.49)
compared to the highest of 6.58 in the recent G20 summit
Research work in Academia has to see light of the day with entrepreneurship
The key to building a successful product company is to have a diverse founding team – i.e.
a combination of technical and business skills vs. a homogeneous founding team
Very early stage funding requires more support (prior to Angel Investing). Government through
proper mechanism has to make small amounts (~5-10Lakhs) available to entrepreneurs. This
needs to be a national Mission
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