The first myth to be broken: mix your service business with a product business, don’t drop it.
1.Why stick to the service business? Apparent issues with mixing.
Understand customer needs
Get beta customers
Sales force oriented to product sales
Cookie cutter ‘design’ for competitive price
Product is service
Customer proactively gives needs
Design from customer
Product devpt by customer
No beta customers needed
Sales force more tech oriented.
No distribution network
Neg. promotion spending
One-off price for each sale
Product Business Service Business
1.Why stick to the service business? Why mixing ‘services’ with ‘products’ works!
Use India’s ‘service’ delivery strength to deliver products competitively!
Design products that have a large service/ integration/ customization component – Plays to the Service strength
Learn the customer needs better by providing services to them first – Your service customers are your best window.
3.Mixing services with products works! Some key global companies that mix services with products.
IBM : products and consulting services
Oracle: Database platform and implementation
3.Mixing services with products works! Indian experience also proves it works!
TCS Banking, manf.g and health
I-FLEX Corporate & Retail banking
ORBITECH (Polaris) Financial Products
2. How to use India strengthened strategies for better product biz.
Myth No. 2: The best product opportunities are in the overseas markets (where we will lose on marketing), while our domestic market is small !
Myth No. 3: There are well entrenched product businesses already that will be difficult to dislodge.
2. India strengthened – Break myth No. 2 Brazil & China domestic product biz indicates a big opportunity in India. 220 2,960 3,311 Dom. Prod Sales-$ mil 8,200 7,400 7,700 Total sales - $ mil. 80 58 56 Services-% 76% 5.5% 1.5% Exports-% 100% 100% 100% 20 42 44 Products-% India China Brazil
2. India strengthened – Break myth No. 2 Brazil & China domestic product biz indicates a big opportunity in India. 3.9% 5.7% 8.3% ICT Expend; % ofGDP 4.5 15.9 44.1 Pc’s; per 1000 pop India China Brazil
2. India strengthened – Break myth No. 3, ’Well entrenched competitors’. True, there are no large Indian Product companies in India or Overseas (DQ survey)
Top ten Indian companies (domestic and exports) revenues: Rs 927 crore.
Domestic vs. Export = Rs 357 crs vs. Rs.608 crs
Top three: i-Flex, Infosys and Tally account for: Rs 632 crore.
Next largest product revenues:
TCS: Rs 66 crs
Polaris/Orbitech Rs 60 crs
Ramco >Rs 50 crs
Aditi >Rs 50 crs
2. India strengthened – Break myth No. 3, ’Well entrenched competitors’. Brazil & China show that we can beat MNC’s on our home turf
Domestic Brazilian product companies in areas such as financial products, ERP, telecom, etc ahead of MNC’s.
Domestic Chinese product firms dominate in accounting software, ERP, operating systems adapted to Chinese language, etc.
Opportunity for Indian IT companies to build products better suited to local conditions ie.,
Local language computing
Brazil - $ mil China-$ mil Local companies have bested overseas competitors in both Brazil & China. - 2. India strengthened – Break myth No. 3, US 78 IBM Br 72 Microsiga Cn 93 Top US 77 Consist Cn 94 CVIC Br 104 Politec Cn 107 Yian Tai Ger 124 SAP Cn 115 T.DongFa US 182 Oracle Cn 125 ChangTin US 194 Accenture Cn 126 ChonRan Br 204 CPM Cn 134 DongFan US 240 EDS Cn 175 Legend US 260 Comp As Cn 186 PuTian Br 372 SERPRO Cn 438 Founder US 362 Microsoft Origin Sales Company Origin Sales Company
3 1.Piggyback off service businesses to build a product business 2.use the sevice/Implentation/customisaton componant of the product as our compettitve advantage
With substantial investments and the long period of incubation required, it is tough for upstart product companies to survive.
The cushion has come from services, sometimes by accident and sometimes by design. Infosys managed to invest in Finacle because of its large services revenues. i-Flex looked toward services to be its bread and butter when it was developing Flexcube. Pune-based Kale Consultants has a slew of products for the airline and banking industry that bring in 30% of its revenues. The rest comes from services, which includes outsourcing (that uses the company’s own products) and a managed process services business, both of which are essential to keep the cash register ringing.
There are different opinions, however, on whether the twain should ever mix. Companies like Kale, i-Flex and Infosys have managed to run both the services and the product model. Subash Menon, chief executive officer of Subex, differs and would prefer to hive off the services arm into a different company altogether.
4. Build a base with the domestic product market first before going overseas.
In fact, the two big majors—i-Flex and Infosys—had a clear and very closely matched go-to-market strategy that has been very successful: India—ME and Africa—Europe—finally the US, in that order.
Other companies are beginning to make sense of and adopt similar go-to-market strategies.
Bangalore-based telecom software product company, Subex Systems, realized that carriers in the US and Europe demanded that the company should not only show proof of concept, but demonstrate the product’s ability to handle a 4-5 million subscriber base. For a new product company like Subex to straightaway pitch for such clients was almost impossible. So, Subex went for clients in India, Africa and the Middle East with a subscriber base of 2 lakh customers. It went on adding such customers till larger customers were willing to look at them. Even though the domestic market accounts for barely 10% of Subex’s product revenues of Rs 25.5 crore, the company handles almost all the important carriers in India—BPL Mobile, Bharti Cellular, Escotel, Hutch and Idea Cellular. Today, Subex’s clients have a subscriber base of 6-7 million.
4. Focus on the needs that are below the radar of the big players: ie SME sectors needs
SME sector forms a significant percentage of the Indian software and services industry and the contribution of this sector will be crucial for India to retain its competitive advantage and sustain future growth. As per NASSCOM estimates, approximately 50-60% of the industry revenues will be from the SME segment by 2008.
” entrepreneurs and academics & researchers have very little in common”.
He sums up the difference by referring to the business philosophy of his friend, Ralph Flanders, a machine tool manufacturer:
“ I got to the top in my business by getting up earlier than anyone else – working harder than anyone else – inventing a machine that made a great deal of money, and ….
by marrying the daughter of the owner”.
2. Lack of funds or lack of opportunities? Comparing the Silicon Valleys Source: D. Rosenberg, The Cloning of Silicon Valley 4.35 5 5 5 4 4 4 Taiwan 3.20 5 3 5 4 3 2 Singapr 3.05 2 2 4 2 3 4 India 4.25 1 4 5 5 4 5 Israel 3.45 3 5 3 3 4 3 Finland 3.45 4 4 2 4 4 3 Britain Composite Taxes & Regulations Universities / R&D Institutions Global Links Venture Capital Human Talent Start-up Activity
2. Global lessons Entrepreneurship- survey Source: GEM, Kauffman Center for Entrepreneurial Leadership Global Entrepreneurial Monitor survey of entrepreneurial activity prevalence rates measures the percentage of adults either starting a new business or considering starting one (2000) 6.3 India 12.7 US 4.7 Germany 4.0 Sweden 2.2 France 4.5 Spain 3.9 Finland 2.1 Singapore 4.5 Denmark 7.9 Norway 7.9 Canada 14.3 South Korea 5.2 Britain 1.3 Japan 12.3 Brazil 5.7 Italy 2.4 Belgium 4.2 Israel 11.1 Australia 1.2 Ireland 7.8 Argentina %