The last few years have witnessed the mushrooming of many product development companies. At present, there are about 500 product development firms in India, and each year about 80 new companies are added to the list. Software industry body, Nasscom, has been promoting the product development concept in India through various initiatives. In the first half of this month, it is organising its second annual product conclave in Bangalore — a forum that provides a platform for software product firms to share ideas and excel. In an interaction with Bibhu Ranjan Mishra, Nasscom Vice President Sangeeta Gupta discusses the key trends in software product development sector.
In which direction is the software product development companies moving?
The software product industry in India, if you look at the trends over the past few years, is yet to attain any momentum, when compared with the software services or BPO industry. However, we have done an extensive report on the product industry, wherein we have identified 4-5 factors, which tell us the time is ripe now for India to emerge as a hub for product development.The emergence of technology is fast changing the way delivery of software happens. Companies earlier were selling products through channel or retail partners. Now the whole delivery of products can happen through software as service, cloud computing and the like. There are multiple ways by which Indian product firms can tap into a much larger market through the delivery platform enabled by technology. Of course, there has been a healthy growth within the domestic market, leading to development of more products which can be tested in India, and then be taken to international market.
Do you see good demand for software products in the domestic market?
We are now beginning to see a healthy adoption of both hardware and software by the Indian companies. More companies in India, whether in the private or government sector, are adopting technology to enhance productivity. Obviously, the next step would be the usage of software products more suitable for the Indian market.
But most software product firms are in the start-up phase, and are facing tough times in terms of having access to funding, market,...
Funding continues to be a challenge if you are a start-up. However, we see venture capitalists or angel investors put in money in the products industry, though the quantum of the investment may not be as high when compared to IT or BPO firms. It means it is a trend, which shows that product companies are attracting attention of venture capitalists or angel investors. We are seeing a lot of investment happening in product companies, who are focussed in 7-8 high growth areas (sectors).
What is the biggest challenge for product firms in India?
Marketing, certainly, is one of the factors that has hindered growth of the product industry. People have not been able to develop a large marketing budget that is required for a product company, especially in India, since we did not have a large domestic market. Most other countries which specialise on product development have a domestic market where they could sell their products. Therefore, their marketing budget is not so huge.
But many companies in India, which start focussing on product development, lose track after some time and start offering services as well?
For most software product companies, enhanced revenues come from support services and the customisation around that product. There is always a mix of products and services, but the core of a product company is always focussed on products. That is the reason why many private companies show their licensed revenue in the balance sheet quite less.
By when can we expect to see a billion-dollar software product company in India?
Let’s have more software product firms first rather than a billion-dollar one. Our focus should be on niche products that can have a much more penetrated market rather than only seeing billion dollars in revenue as in the services sector. There are examples of many billion-dollar product companies globally, but those are products which are more business-to-consumer (B2C). Our focus is a little more on the enterprise segment at the moment.
