India's success in the IT services space needs no introduction. The services business is essentially a cost arbitrage business where the business model primarily hinges on the cost differential between alternative models where lower employee costs and competitive billing rates provide an opportunity to profit.
However, when it comes to building successful software product based companies, it is an entirely different story. While Indian companies like TCS, Infosys, Wipro, HCL, and Tech Mahindra etc feature prominently in the list of the world’s top IT services companies, there is not a single Indian products company in the top 100 software products companies. Building a software product that customers -- enterprises or consumers -- will embrace requires a thorough understanding of the target customer needs, painful and detailed product management, an innovation driven workforce as opposed to one with a services delivery driven mindset besides the ability to invest in R&D for a prolonged period with little to no certainty on the eventual success of the end product.
Winds Business Solutions is a software product startup based in the small town of Palakkad, Kerala (the native place of politician Shashi Tharoor, actor Vidya Balan and ex-Delhi metro chief E Shreedharan; and the proposed site for Kerala‘s first IIT). It has created three cutting edge software products in the CRM, ERP and Salesforce automation space. How did they manage to build a products business sitting in a small town cut off from India's IT cities, venture capital hubs and education centres?
Like most Indian IT firms, Winds also started off as a services business in 2004 in the name of Winds Online. After executing more than 400 services projects, the company realized that the services business was repetitive and mundane work where employees felt more like robotic execution machines. It was a mindset where project delivery was more important than innovation and creativity.
In 2009, the company made a conscious decision to break free from the model, take a risk and reinvest all its profits from the services business into building an innovative products business. The company reworked all its branding collaterals, refurnished the interiors and re-trained its employees to inculcate a culture of innovation. It also tapped into regional industry bodies, business schools and trade meetings to provide the workforce with a new perspective in product development. Over the next five years the company patiently invested in and developed three cutting edge software-as-a-service products portfolio tailor made for businesses in the APAC region. Along the way they also won some local and international design awards.
Sumesh Menon, Founder and CEO at WindsCRM and a formally trained CRM expert, says, “We made a conscious choice to move away from a services model to a products business so that we could convert everyday work into innovation , creativity and fulfillment while also building robust intellectual property inherent in the products.” He also realized that most popular CRM and ERP offerings like the ones from Salesforce, SAP, and Oracle etc were primarily built for the western audience and reflected western business processes. He figured that there was a huge need to provide enterprise solutions that reflected the Asian and more specifically Indian business context if the regional customers were to derive true value from automating their business functions.
To bring a product-centric strategic positioning and global experience, they also joined hands with one of their friends - Vivek Chandrasekharan, -who was already part of a successful software product startup in New York. After hearing about the plans around the new products being developed, he got excited and joined as a partner leading the product strategy and marketing efforts.
He also pushed for creation of a new company that would focus exclusively on the products business and help develop an innovation driven organizational culture.
Winds Business Solutions was spun out as an independent company in 2013. Today the company counts among its clientele several leading retailers in India and overseas. Recently, Muscat Bakery, Oman’s largest bakery chain, signed up to roll out WindsCRM across their retail chain.
The WindsCRM story is not unique. We are increasingly hearing about innovative product startups springing up in small towns in India. Robosoft Technologies, a mobile app developer from Udupi, Karnataka, is another example. They also started out as an IT services firm in 1996 with an exclusive focus on Macintosh applications. Apple products in India were almost unheard of at that time. In 2008, after the Smartphone adoption skyrocketed, the company ventured into product and game development in the mobile platforms. Eventually, the company created two products - only subsidiaries Global Delight and 99Games - and created several highly popular games, including the massively popular ‘Dhoom3’. The games they have created have been downloaded more than 20 million times.
Today, with the proliferation of internet-based opportunities, there is a wave of young small town entrepreneurs from Chandigarh to Coimbatore launching new products. In advanced countries like the US, although Silicon Valley has the highest concentration of venture capital firms, startup activity is distributed across the country. Says Vivek Chandrasekharan, Co-founder and the first VP, -Marketing, at WindsCRM, “In the US, there are established startup ecosystems like the San Francisco bay area, Boston area and the greater New York region. Then there are smaller but well developed ecosystems like Seattle, Austin and Boulder where you will find startups as well as investors and talent pools. In India, the critical mass of startup activity as well as concentration of venture capital is still in large cities like Bangalore, Mumbai and Delhi. But that does not mean that there aren't innovative startups and entrepreneurs in smaller towns. The real challenge for small town entrepreneurs will be to bridge the gap when the startup goes in for follow-on funding and they need to bring in more experienced hands on board.”
But there are distinct advantages to starting up in a small town. One, attrition is significantly lower in smaller towns which means your employees stay with you for a long time through the development cycle. Both Winds and Robosoft have several employees who have been with them for more than five years. Second, the operating costs – rental, utilities, infrastructure, and transportation etc – are also significantly lower in tier 2 and tier 3 towns which means the startups can utilize their cash burn much more prudently.
Just like the larger Indian IT firms went through the value chain starting as pure offshore players and later maturing into more research intensive and innovation driven work as the Indian startup ecosystems become more mature, we will likely see more small town entrepreneurs taking the plunge and launching innovative products.