The “MADE IN INDIA” Software Industry

The Indian software industry is estimated to be worth $73 billion today ,and has a respectable status in the global perspective ,but a view of the top 10 software companies in INDIA ,as ranked by National Association of Software and Services Companies (NASSCOM) ,shows that all of them are primarily software service providers, with modest presence in the software products sector.

According to a recent analysis of the revenues of about 418 top software product companies across Chennai, Bangalore, Pune, Delhi, Trivandrum, Bhubaneshwar, Chandigarh, Ahmedabad and Hyderabad, the Indian product firms’ revenues fell to about  $1.64 billion, during the financial year ended at March 2010, from around $1.89 billion during 2008-2009 and nearly 100 s product based startups had to be closed down.

The major factor hindering the establishment of a Microsoft or Adobe like venture in India instead of a service based company is --product companies usually require some R&D and investment before revenues materialize, while service companies, which in the Indian scenario are mostly based on the business stratagy of hiring from the relatively large pool of talent present in India and providing their services to overseas clients at a relatively cheaper rate than other service providers of the globe, can become profitable very quickly. For an entrepreneur, the service providing route would be less risky and quicker to earn profits, than building a software product based company. Also from a venture capitalist’s perspective, investing in the more low risk and better rewarding -IT service is more reasonable than investing in a product based idea, making it tougher for the product ‘ideators’ to get started.

Another significant factor is that the current software product companies around the world like Microsoft, Oracle, Adobe, and many others are well established and have created sense of trust and loyalty in their users. Also many of the software startups initiated today in the world are done so by employees of these successful software companies making them reliable to users. To overcome this disadvantage, a foundation of product experts is needed in India, which may take a while to establish from the specialist working in present product companies.

Recruitment is also a big drawback for Indian software industry. With companies like Microsoft, Adobe, Google and other big players directly recruiting software engineers from various colleges all over India providing them great packages, financial stability, added perks and growth opportunities, it is harder for India based companies to get find the quality talent pool of software engineers required for developing new products. Also with these companies setting up regional offices and R&D sections within the country, it is very rare for individuals to choose an Indian firm over these global giants.

The present India based software product have very specific applications and cater to niche markets, thus, even though they have a successful revenue model, it is harder for them to brand themselves and diversify to become widely used. Examples of such companies would be –Tally, the financial accounting software firm and Subex, the telecom software product maker, -- both niche markets, with low scope of brand development.

In general, a software product holds more scope of earning than a service as it is developed once and installed or implemented but India’s current condition is such that most product companies are either shutting down or modifying into a service based business model, as reflected by the adjoining graph depicting the above stated in various fields.