Product landscape In india - Presentation by NASSCOM & Zinnov


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India is entering the product era:
•Over 2400 product firms generating revenues ~USD 2.0 Billion
•The cost of setting up a product startup has gone down significantly from hundreds of thousands of dollars to a few thousand dollars.
•This coupled with increasing connectivity, talent pool, ecosystem readiness, convergence of platforms has created a very favorable environment for product startups to flourish and compete globally

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  • Like presentations that are factual, simple to understand, clear in their message, have a take-away, over the ones which are overtly graphic, too abstract, hard-to-relate-to, need 100% attention with the speaker in the room to explain what each slide says. In a nutshell, far too many people try to be Steve Jobs.

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Product landscape In india - Presentation by NASSCOM & Zinnov

  1. Product Landscape in India Bengaluru 9-10 November 2011
  2. Key messages 1. India is entering the product era • Over 2400 product firms generating revenues ~USD 2.0 Billion • The cost of setting up a product startup has gone down significantly from hundreds of thousands of dollars to a few thousand dollars. • This coupled with increasing connectivity, talent pool, ecosystem readiness, convergence of platforms has created a very favorable environment for product startups to flourish and compete globally The past five years have seen the emergence of new consumer segments for 2. products such as SMBs and Government • Small enterprises use startup products across both core processes and non-core processes • The government sector uses Indian products for local governance and for information management across public sector units13-Nov-11 2
  3. Key messages 3. Software products industry enabling balanced regional growth • Number of product firms from tier 2/3 cities have almost doubled in the last 3 years • Over 330 product companies based in Tier 2/3 cities 4. Established product firms experimenting with new models and initiatives • Multiple growth strategies followed by industry players • Established product firms are expanding horizons, incubating products for new verticals and segments, and formulating partnerships and alliances Technological disruptions, improvement in infrastructure and availability of capital 5. have helped create a level playing field • Improving connectivity across the country, specifically in tier 2 and tier 3 cities, and higher access to computing is growing the consumer base for homegrown product software and services • Availability of skilled talent, disruptive technologies, sources of funds and strong industry support driving the market13-Nov-11 3
  4. Key messages 6. Thriving startup landscape, focusing on localized solutions for India • ~1100 startups in last 5 years; Key focus areas for startups include mobility, SMBs, E- Commerce and Education • Education startups are leveraging IT in developing digital contents for students, provide distant learning, virtual classroom and other related services • Startups focusing on serving the large SMB market are leveraging cloud and web based technologies to widen their customer reach 7. The funding ecosystem has seen significant enhancement • Software , internet and mobile industry accounts for almost 66% of total VC investments in India • Investment community in India comprises of VCs, Angel Investors; additionally various state and national government schemes now in place to provide funding • Indian success stories such as Makemytrip, Flipkart, inMobi has increased confidence levels of global VCs to invest in Indian product startups13-Nov-11 4
  5. Software product play has been gaining increasing importance IT Services IT Services + BPO IT Services+ BPO+ IT Services +BPO + R&D R&D + PRODUCTS 1980s 1990s 2000 2010 • The IT revolution began in • The IT revolution was • The IT captives began to • The cost of setting up a India in the early 1980s. followed by a wave of mature and move up the product startup has gone Lot of BFSI products came BPOs and MNC captives value chain in the early down significantly into picture at this stage. riding high on the cost years of the previous arbitrage provided by low decade • This coupled with • During the economic cost, English speaking increasing connectivity, liberalization of 1990s, Indian graduates • This paved the way for talent pool, ecosystem large global enterprises higher-end Engineering readiness, convergence of began outsourcing their IT • This led to the creation of Services firms to establish platforms has created a management activities to a large number of jobs for a presence in the country very favorable India non-engineering Indian directly or outsource their environment for product graduates requirements to large and startups to flourish and niche Indian SIs alike compete globallySource: Zinnov analysis13-Nov-11 5
  6. Indian software products market- Picking up tremendous pace 2400+ Number of Product firms in India 1.9 USD billion worth revenue from Indian products 22% Growth in revenue since last 5 years 6 Major product segments 30 Major geographical centers for product firms 46 Number of product categoriesSource: Zinnov analysis, NASSCOM13-Nov-11 6
  7. Over 2400 product firms in India generating ~ USD 2 billion revenues Indian Software Product Business Landscape Product Companies Export Revenue (USD billion) Domestic Revenue (USD billion) CAGR 2428 14% 1888 1573 1.9 22% 1260 1.4 1.1 1.3 27% 1.0 0.7 0.7 0.4 0.5 0.6 15% 0.3 0.4 FY 2006 FY 2007 FY 2008 … … FY 2011 (Est)Source: Zinnov analysis, NASSCOM13-Nov-11 7
  8. Explosive growth, especially in the digital and business productivity software segments Increase in number of Product Firms Segment 2007 2011 CAGR Key Users 121 147 Server/Infrastructure BFSI, telecom, Government, software and Storage 5% Datacenters 595 843 Business and Productivity Software 9% SMBs, Mid-market, Enterprises 1051 Digital 584 16% Consumers Client / Desktop, 67 91 System 8% SMBs, Mid-market, Enterprises Software and Tools 24 Hardware equipment Semiconductors 15 12% manufacturers 272 191 Web infrastructure, Backup Others 9%Source: Zinnov analysis13-Nov-11 8
  9. New customer segments for Indian products have emerged- Consumers, SMB, Government • Large enterprises within telecom and healthcare sectors use startup products B2B • Products are generally deployed across non-core processes such as value added services (VAS) within the telecom sector and management information systems (MIS) within the healthcare sector CURVE • Consumers use most of the products within the e-Commerce and Internet category B2C • E-Commerce revenue have grown significantly over the past few years due to increasing awareness, improving connectivity and payment scenario ADOPTION • Small enterprises use startup products across both core processes and non-core processes B2b • Indian products are gaining traction across all major sectors such as retail, manufacturing, professional services • The government sector uses Indian products for local governance and for B2G information management across public sector unitsSource: Zinnov analysis13-Nov-11 9
  10. Products industry enabling balanced regional development- Significant growth in Tier 2 cities 2007-2011 CAGR Product companies split across major regions in 2011 and growth over 2007 Tier 1 Tier 2 Cities Cities Bangalore Mysore, Belgaum, 18% Gulbarga, Hubli 735 11% Hyderabad Secunderabad, Vishakhapatnam, NCR 330 Vijayawada Pune Pune Chennai Calicut, Trivandrum, Madurai, 481 10% Tier 2 82 13% Coimbatore, cities Cochin, Vellore Mumbai Kolkata Mumbai Goa, Ahmedabad, 200 9% 470 18% Hyderabad Vadodara, etc. Pune Delhi Gurgaon, Noida, 359 10% Chennai Chandigarh, Mohali 950 11% Kolkata Patna, Bhubaneswar Bangalore Product companies have grown fastest in Tier 2 citiesSource: Zinnov analysis Note: The13-Nov-11 cities marked in bold are emerging Tier-II cities for product startups 10
  11. Established product firms expanding horizons…. • Product firms are focusing on emerging sectors such as SMBs, retail, healthcare, and education. Vertical Focus • These sectors face several challenges which can be overcome by technology • Product firms are exploring emerging technologies such as Cloud computing and virtualization to deliver solutions to customers. Product Architecture • These technologies help reducing cost of acquisition for customers due to amortization and economies of scale • Product firms are innovating on business models to enable reach by partnering both across and within industries. Business Model • Large product firms are partnering with smaller channel players while small product firms are partnering with large enterprises • Large product firms are broadening their focus beyond the metros and tier-1 cities. Location Focus • A large addressable market opportunity which is currently untapped lies within the tier- 2 and tier-3 cities and product firms are on their way to create this marketSource: Zinnov analysis13-Nov-11 11
  12. …And are incubating products for new verticals and customer segments SMBs • TCS has a SaaS offering for SMBs, TCS iON, which is an integrated suite of hardware, software, and network solutions • mKrishi by TCS is a mobile agro advisory system that connects farmers to an ecosystem to make better decisions Cloud computing • HCL offers solutions for cloud computing: Migration++, Nimbo and Agora which help businesses migrate to the cloud and offer a service delivery platform • Persistent Systems has launched eMee, a social networking tool for businesses Healthcare • Mphasis’ Hygea is a Hospital Management Information System which helps manage complete hospital operation and workflows • Wipro has separate healthcare solutions for Large hospitals and Mid-sized hospitalsSource: Zinnov analysis13-Nov-11 12
  13. Industry players establishing partnerships for success TCS Co-Innovation Network (COIN™) Infosys Flypp TCS’ Co-Innovation Network (COIN™) is a rich and diverse network that provides value to its customers within the entire technology landscape Alliances Services Offered Startups VCs - India Academia Developer Portal Retailing Platform Helion Customer Service WorkLight IIT, Kanpur End User Interface Ventures Portal Common Integration Cicero Nexus IIT, Bombay Analytics Gateway Focus area Solution platforms • Solutions in emergent and disruptive technologies • Risk mitigation in deploying futuristic solutions • Flypp for Mobile is a white-labeled mobile application marketplace. • Simplification in an increasingly complex technical environment It enables mobile operators, device manufacturers, retail brands, media companies, advertisers and enterprises to engage their Model consumers by delivering experiences across numerous mobile devices, platforms and operating systems COIN™ is led by TCS Innovation Labs and includes academic institutions, start-ups, venture funds, strategic alliance partners, • Flypp for Brands empowers advertisers, media companies, brands multilateral organizations and key clients. This helps COIN™ bring and enterprises to engage consumers and provide new experiences forth true synergies and provide an ecosystem-like perspective to through branded applications and retailing zones innovationSource: Zinnov analysis13-Nov-11 13
  14. Disruptive technologies and increasing IT adoption levels have boosted the products market • Number of engineering • Cloud computing Emergence of graduates passing Disruptive and Huge “Native to Key Drivers IT” Population out in India is • Mobility solutions Innovative growing at more Base Technologies for Software than 20% • Sustainability Product • Over 80 million • Social networking companies active internet users in India presently Availability of VC funding and expansion of seed funds • Many marquee VC firms such as Sequoia Capital, Helion Venture Partners and Nexus Capital India have dedicated India funds to fund seed stage companies. Ventureast, an Indian VC firm has a dedicated fund, BYST growth fund, for SMBs • Global MNCs such as Citrix have started incubators and seed funds to attract product startupsSource: Zinnov analysis13-Nov-11 14
  15. Improved infrastructure, availability of capital and talent have acted as key enablers • Improving connectivity across the country, specifically in tier 2 and Better connectivity & tier 3 cities, and higher access to computing is growing the consumer computing infrastructure base for homegrown product software and services • National Broadband Policy aims to substantially increase the reach of Favorable government broadband and double the existing speeds policies • Steps to ease procedural aspects of setting up a business • Disruptive web technologies in mobile and cloud computing are SaaS / Cloud computing providing Indian startups a level playing field Key Enablers Availability of skilled • The number of skilled computer science, information systems and talent design engineering graduates is on the rise • Indian success stories such has increased confidence levels of global Ability to raise funds VCs to invest in Indian product startups • The evolution of the Angel networks is helping seed stage startups • Industry veterans and leaders are increasingly willing to invest time, Industry support mentor and champion the cause of startups in their chosen area • Industry-Startup-Academia collaboration is on the riseSource: Zinnov analysis13-Nov-11 15
  16. Thriving startup landscape- ~1100 startups in the last 5 years Indian Software Product Startup Landscape Total 313 315 228 221 91 23 30 14 12 3 3 22 26 2 7 173 4 7 188 117 112 4 8 9 9 5 64 76 89 71 67 2 21 2007 2008 2009 2010 2011 (YTD) Business and Productivity Software Client / Desktop,System softwares and Tools Digital Semiconductor Server / Infrastructure Software and Storage Others Among all startups set up in past five years, digital (which includes ecommerce, mobile and internet) and business and productivity software segments account for 56% and 28% respectively13-Nov-11 Source: Zinnov analysis 16
  17. Startups focusing on localized, India specific solutions Key Startup Focus Areas Startups focusing on mass visibility solutions are Mass Visibility Solutions leveraging IT as a backbone to make services available to the customers in an effective and sustainable way Education startups are leveraging IT in developing Education digital contents for students, provide distant learning, virtual classroom and other related services Startups focusing on serving the large SMB market SMB Niche are leveraging cloud and web based technologies to Applications widen their customer reach Large number of startups are mushrooming on mobile Mobile Applications delivery platform. These startups are enabled by a for Reach robust IT infrastructure at the back end E-commerce is on a rise and startups in this space E-commerce are dependent on IT to reach out to the customers effectively. And the backend infrastructure is required to be highly scalable and elasticSource: Zinnov analysis13-Nov-11 17
  18. Startup activities around mobility The Opportunity Mass Advertising and localized Search • Any Solutions that provides a valuable service to broad based customer segments and monetization is through acting as a direct lead generation engine for SMBs/Enterprises Listing Director • Example areas: • Foursquare for India with direct monetization SMB’s/ Enterprises/ Individuals model ( Register with Just Dial and list • Earlier successes: services by location • Job sites with feet on the street to sign customers (Naukri), Travel sites with feet on Call to the street to signup hotels 69999999 Trainer and Reasoning articulate executives to guide you. • 47 Million SMB’s in India all whom struggle with Listing Sent to customer acquisition Mobile • SMB’s are willing to pay Rs.8000-Rs.15000 for listing solutions and hence these make the direct channel viable, • These solutions are cheaper and more effective than hiring a sales resource for a number of Micro Enterprises Success Driven by 3500 feet on street who educate the traders on the need to be listed and how marketing at mass scale is absolutely essential to grow your business.Source: Zinnov analysis13-Nov-11 18
  19. Startup activities around Education Student Management solution delivered using a The Opportunity human interface • Solutions that enable education enterprises to scale rapidly and efficiently. • Solutions that enable collaboration between all constituents interested in welfare of student- i.e. parents, teachers, administrators, etc. Services Offered • Example Areas: Attendance • Teacher-Teacher Collaboration Solutions across Report Cards Reporting schools, and with in schools with branches School Event • Student Data Management Solutions PTA Intimations Updates • Learning Management Solutions • Knowledge Based Intelligence Systems Bus Schedule Other Alerts Updates Reasoning Value Proposition • India has the highest addressable population in the The firm will deploy a resource onsite at the school who will world seeking education collect required data, and feed it into the system. This • Current total enrollment in education institutions is 273 helps ease adoption and change management pains Million and there are potentially 327 Million more enrollments because of the RTE • Parents want to be involved in the up bringing of their Business Model children. • Increased disposable income is being spent on education Charge the parent per pupil for the information that is being provided because of usage of the system.Source: Zinnov analysis13-Nov-11 19
  20. Startup activities around SMBs Solutions focused on BFSI Vertical with niche focus on The Opportunity Micro Finance • Solutions that address niche vertical and horizontal needs of SMB’s are likely to succeed as these solutions address pain points • Example Areas: • Collections Management Solution Services Offered • Retail POS Solutions for Mom & Pop Stores Micro Finance Micro Insurance • Pharma software for batch tracking Platform Platform • Litigation Management Software for lawyers Litigation Software Insurance Software Reasoning Value Proposition Niche Vertical focused solutions that address a specific • 47 million SMB’s in India customer pain point and is required by SMB’s to scale their • They are spread across multiple verticals and follow business unique business processes. • They want solutions that address their niche pain points Business Model and are willing to pay a premium for such solutions • The SMB spend on software and services -USD 2.1 Billion Support technology platform with strong set of business in 2010 services that will allows the firm to remain continually engaged with the client.Source: Zinnov analysis13-Nov-11 20
  21. Startup activities around mobility The Opportunity Financial Inclusion – Through mobile banking •The EKO customer walks up to any of the • Any solutions that enable large industry verticals retail outlets licensed to operate as an looking to scale to reach a broader set of customers authorized "Customer Service Point" (CSP) in and provide their services on mobile devices present a the area significant opportunity in India •For these customers, their banker is none • Example Areas: other than the friendly neighborhood "kirana • Retail Campaign Management Solution store” • Virtual Insurance Solutions •Plan is to set-up 500,000 such licensed • Vaccination Tracker outlets within the next two years •Eko has developed a low-cost banking platform called "SimpliBank" which ensures real-time transactions Reasoning •SimpliBank is a stripped down version of a core banking platform with limited • 520 Million mobile phone subscribers in India functionalities (reducing cost to the • Industries such as BFSI, Retail, & Healthcare are looking consumer) to grow rapidly by providing services to those outside •Eko customers type the bank’s short code, their current service net. then an asterisk, then the mobile number of • Given the cost of sale and cost of reach, these firms will the person you are paying, then an asterisk, look to leverage mobile devices to provide their services then the amount, then another asterisk to customers and scale. •Account holders get booklets with pages of • The services would have to be customized to the mobile 11-digit codes. Seven digits of it are random form factor and delivered numbers, with four randomly placed black marks, where the person enters his or her PINSource: Zinnov analysis13-Nov-11 21
  22. Startup activities around e-Commerce Online Taxation Services- Ease of use, low touch, The Opportunity reasonable pricing For Products & Services that do not require touch and feel • Examples: Medicine purchase, Earlier successes: Flipkart – Books/Movies/Music Services that allows better user experience and Services Offered integrated work flow of online services • Examples: Consolidated Bill payments, Government services customized for a customer Tax Returns Business Accounting profile Setting up Business Tax Laws PAN Card Digital Signatures Reasoning • Advent of social media will drive peer information gathering online, and hence easier adoption of such Value Proposition solutions e.g. Insurance, etc. Have productized a service that is traditionally something where the business is not standardized Business Model Subscription schemes for individuals, corporate tie-ups, for revenue generation. Tie up with ex- accountants and IT professional and accounting firms for service deliverySource: Zinnov analysis13-Nov-11 22
  23. The enabling ecosystem for startups is getting ready for a big story Financial Ecosystem Investment community in India comprises of VCs, Angel Investors who are actively investing in sectors like cleantech, e-commerce, education, healthcare and infrastructure VCs Company Sector Amount Investors ($Mn) Angel Investors E- 7 Canaan Partners commerce Seed Funds Tyfone Mobile VAS 5 Ojas Ventures, Others Xcel Telecom Telecom 154 Q Investments Others Technology Ecosystem Many companies have startup focused programs to fuel innovation and create win-win for both sides  Startups get access to resources like technology platforms, marketing resources etc  Companies get to evangelize their products/platform and gain market share Microsoft’s BizSpark program help software Assists software developers in writing startups succeed with right resources and distributing applications for Intel AppUp Access to current tools and platforms to design, Software development support and application Software Development validation through access to technical information develop, test & demonstrate software application and updates Support A connection to over 2,000 BizSpark Network partners who can provide guidance and resources Worldwide distribution channel to manage Distribution distribution of applications and application An opportunity to achieve global visibility to an Visibility components in app stores audience of potential investors, clients, and partnersSource: Zinnov analysis13-Nov-11 23
  24. Product startups are being funded across all major verticals VC Investments in India, 2005 – 2010 VC Investments by Industry, 2010 1200 180 14% 15% 3% 144 5% 900 125 10% 110* 120 94 92 2% 600 51% 876 60 44 740 Mobile Retail Healthcare 300 508 540* BFSI SW & IT Education 475 Others 268 0 0 • Majority of the VC investments in 2010 have been in the 2005 2006 2007 2008 2009 2010 SW & IT segment • e-Commerce has emerged as the favorite theme Deal Value Number of Deals followed by internet businesses • Mobile businesses, specially location based services were also well received by VCs*Data to filled in for other stagesSource: Startup landscape study by Zinnov, Indian venture capital association, Venture intelligence, TSJ Venture Intelligence India13-Nov-11 24
  25. Government encouraging product startups through various schemes KITVEN - Karnataka Other Schemes by Information Technology Government Venture Capital Fund OBJECTIVE  Support for Entrepreneurial and Management  Develop competitive products and cutting-edge Development of SMEs through Incubator: This technology scheme is sponsored by Ministry of Micro Small  Manufacture and commercialize the product development Medium Enterprises (MoMSME) PORTFOLIO  Pawaa Software Pvt. Ltd.: IT security company  Micro Venture Innovation Fund (MVIF):  Mitra Biotech Pvt. Ltd.: Biotechnology company Supported by National Innovation Foundation  Sloka Telecom Pvt. Ltd.: Radio access network solution (NIF) provider  New Millennium Indian Technology India Inclusive Leadership Initiative (NMITLI): Sponsored by Innovation Fund Council of Scientific & Industrial Research OBJECTIVE (CSIR) and provides grants (up to a few  The Government of India aims to strength the innovation Crores) to Public Institutions and Soft Loan to eco‐system, Invest in innovative enterprises engaged in Private Sector Companies providing solutions for the ‘bottom of the pyramid’  Mentoring entrepreneurs to build their enterprises  Micro Technopreneurship Support: Supported by Department of Scientific & Industrial STEPS TAKEN Research (DSIR)  Set up a National Innovation Council (NInC) with the mandate to formulate a Roadmap for Innovations for  Small Business Innovation Business Research 2010‐2020 with a focus on inclusive growth Initiative: Supported by Department of Bio-  Structure of the Fund and its governance is now being Technology designed13-Nov-11 Source: Zinnov analysis 25
  26. Investors exits have only fuelled further entrepreneurship  India has seen investors exit ventures through acquisitions as well as IPO offerings. The PE/VC industry witnessed 37 exits through M&A worth $1.67 billion and 15 exits through IPOs worth $1.64 billion in 2010  In India, M&A is the preferred route with studies showing investors exiting through IPOs in 34% of cases Target Acquirer Year of entry Year of acquisition Post-exit M&A exit examples VM Logix Citrix 2004 2010 • Alok Kejriwal, a serial entrepreneur Dimdim 2006 2010 has founded 3 companies Contest2win, Mobile2win (sold to Yasu SAP 1999 2007 Disney) and Games2win Indiagames Disney 2000 2011 • Satish Madira, cofounder of Yasu Armedia Broadcom NA 1999 and a serial entrepreneur, started Dealivore, a startup in the daily Athena Broadcom 2001 2005 deals space Pari Network Cisco NA 2011 • Vishal Gondal, founder of Indiagames, has started Blood and Akorri networks NetApp NA 2010 Sweat Venture Group to invest in Hy Trust Cisco 2008 2011 seed startups Company Year Investors IPO exit examples Persistent 2010 Norwest Venture Partners 2010 SAIF Partners, Helion Venture Partners, and Sierra Ventures Thinksoft Global 2009 EurIndiaSource: AVCJ research, Business Standard13-Nov-11 26
  27. Primed for success- Projected billion $ mcap Indian product startups companies ILLUSTRATIVE Category Key Highlights •Went live in 2007 •11.5 M book titles, 8 M visits/month E-tailing / Online •1 M registered users, 28,000 items shipped/day Megastore •Raised $31 M in venture funding from Tiger Global, Accel Partners. Reported to raise $150 M soon •Founded in 2007 •World’s largest independent ad network Mobile •Serves 50.4 B impressions monthly Advertising •Funded by SoftBank, Kleiner Perkins Caufield & Byers, Sherpalo Ventures and Mumbai Angels •Inception in 2007 •Bootstrapped Data Visualization •18,000 customers. 3,75,000 users •Used by 80% of the Fortune 500 •Founded in 2007 •750 customers in 26 countries. Backing up 300,000 laptops Enterprise Backup •Raised $17 M in venture funding from Sequoia Capital, Nexus Venture Partners and Indian Angel Network (IAN)Source: Zinnov analysis13-Nov-11 27
  28. Industry is set to experience accelerated growth in future • The evolution of disruptive Internet and mobile technologies such as cloud Technology infrastructure and delivery, HTML5 will usher in a new wave of cloud-ready development startups to cater to the global audience • The availability of highly-skilled engineering talent, specifically in Computer Science, Information Systems and Design will aid the growth of product startups Human Capital development • The return of successful, skilled Indian immigrant talent from the US to India will help shape up the ecosystem and provide much needed leadership • The readiness of the Indian market will likely improve significantly due to improved Internet/Wireless connectivity (3G, LTE and Broadband) Market development • Improvement in the ease of doing business, basic physical infrastructure development such as power will contribute significantly to spur startup growth • The per capita income in India is likely to double in five years. This will help drive consumption, specially in e-Commerce Economic conditions • The economic profile of businesses will improve significantly and help fuel the consumption of business software by businessesSource: Zinnov analysis13-Nov-11 28
  29. Thank You