Analysis of Market Opportunities for Indian Software Products

As a think tank, iSPIRT has been constantly thinking, exploring and encouraging numerous models of software product business, all in parallel. This process leads us to gather three distinct categories of inputs that can then be crystalized and shared with the larger ecosystem – practitioner experiences, market trends and industry strengths. Since all the three factors evolve, the class of opportunities becomes different over a period of time and the analysis needs to be repeated. The current document reflects the best of our understanding as of today.

iSPIRT is very appreciative of the efforts of entrepreneurs who pursue individual market opportunities and their will to succeed. Unlike a market analysis report by an Analyst firm, this document does not aid entrepreneurs to pick a particular opportunity or support an investment thesis, as it deals with mainly the macro-level factors. We believe that an articulation of the market reality (a blend of practitioner experiences, market trends and industry strengths) would provide insight to industry observers and policy makers as to how the Software Products Industry is working and why.

Here is a small outline that helps in understanding this document.

First section starts by clarifying segmentation of the market on internationally accepted lines. Two major impact areas are then analyzed – SaaS business model (pay as you go, for software) and Services industry (large population familiar with issues and delivery of services to enterprise customers, particularly, larger ones). Finally a picture of market opportunities across segments is derived from the above trends and other tailwind factors from an India perspective.

Analysis of Market Opportunities for Indian Software Products from ProductNation.in

Sandeep Todi

Jay, interesting to see the mapping of horizontal SaaS products across different types of enterprises. One of the challenges for a SaaS business is in aligning with services companies. These are the guys who are close to the customer. Do you have any experiences to share on how such relationships can be forged?
- Jay
  
  Sandeep, good question. My opinion is that, SaaS products find it challenging (if not impossible) to align with Channels, in general. Service companies can serve as a good channel where there is a symbiotic relationship, as outlined in the ppt. Similar argument exists for SaaS companies trying ‘reseller relationships’ (I talked about it during PN Camp, Pune at Anand Deshpande session).
  
  Service companies look for revenue opportunity from customer implementations or extra development. Most SaaS products are designed as “Self-service” and there is limited opportunity for service companies to make good.
  
  However, in case of SaaS products that naturally involve additional development or integration efforts, a mutually beneficial partnerships can be established. Examples include: An Authentication service (cloud-to-on-prem), or a Marketing platform that needs integration with corporate customer lists or traditional CRM systems. There are many Service companies offering SalesForce integration or app development services, although contracts might not be too large to entice bigger players to come on board in the early stages of product evolution (tend to wait till SaaS product goes mainstream and establishes as a platform).
  
  Additionally, Service companies do not target much of the smaller businesses that move into SaaS early and hence address a different market segment. Product startups have to evaluate their customer segmentation and then pick the channels that suit.
  
  Customers however are looking for Innovation and Service companies are aware of this. They can bring innovative products and expand/solidify their relationships.
  - Sandeep Todi
    
    Jay, wanted to have your thoughts on this:
    
    http://cio.economictimes.indiatimes.com/news/cloud-computing/indian-software-cos-losing-out-in-migrating-infrastructure-to-cloud-model/45487572
    - Jay
      
      I agree With the article. Cloud and SaaS reduce custom app development and maintenance. (1) Service revenue potential of SaaS is minimal to nil (2) intervention and Extension revenue is also minimal in most cases.
      
      IBM offers cloud I da thru its Softlayer and survives. Accenture and others thrive on showing customers savings by moving to cloud (aka consulting revenue). I think time for Indian service companies to think of business models beyond ‘people on time and material’. Hope they do it.
      
      Integration revenues would also likely hit due to REST API driven integration replacing the complex over-engineered ESB/SOA/SOAP.
      - Sandeep Todi
        
        Jay, this does this then present a significant opportunity for SaaS companies to align their products with the big IT services companies? I see two things as critical to make this happen:
        
        a) The SaaS company should develop a mindset to deal with large service companies, and be able to serve BIG corporations at scale (either alone or combine the might of the service cos)
        
        b) The service cos should start building business models around Saas based customer deployments. One big opportunity I see is for the service companies to own the entire service delivery lifechain and leave the SaaS company to engineer the product. Of course, they have to work very closely to avoid passing the buck to each other.
        
        What do you think a company like ours should do to leverage, if this is indeed an opportunity. We have mature technology that can scale, but not the DNA to deal with large enterprise.
      - Jay
        
        Sandeep, I would be open to thinking with you and the others in the community. I must admit that I may not know the perfect answer.
        
        a) Your point that SaaS company mindset needs correction towards big IT services company, does not seem right to me (as most often, the service companies ignore the smaller product/SaaS companies). Instead, it might be a mismatch in business models. SaaS company attempting to reduce up front commitment to investment (don’t worry about ROI, it will be manageable) might be running into the Big IT service provider’s message of providing inexpensive IT engineers on Time & Material, to reduce spending. I.e. there are two ways to reduce expenditure (a) move high capex to predictable, low opex (b) use inexpensive engineers or offshoring.
        
        b) Certainly Indian IT Services companies must find an innovation in biz model in the Cloud World. Obviously, more Cloud/SaaS means less need for FTE. However, if the service companies were to help their customers (larger enterprises) in their move to cloud, through data movement, innovative extensions/integrations or other means of helping them take advantage of Cloud/SaaS. I.e. help them with the goal of reducing Capex with safety and comfort.