Made in India: Local Software products That Sell

In FY11-12, the IT services export market painted a very rosy picture as the IT services exports industry rose by over 27% (source : DQ Top 20 Vol 3) registering the total industry valuation at Rs. 271,475 crores.

The rise, however, was partly on account of the US $ pushing up the valuations in accordance to its global fluctuations as well as the exports market on a mode of recovery with major projects previously stalled commencing back with the BFSI segment as usual driving the major chunk of the growth plan. The push, however, as usual was more in the services front rather than the products segment which froze at a status quo position. The domestic software product market, on the other hand, however, saw a gradual increase in its actual valuation with the advisory firm Zinnov staging the same at Rs. 16851 crore (US $ 30.4 billion). Again, like the software exports market, even in the domestic front, software remained at a meagre 15% as hardware (53%) took most of the domestic share followed by services.

Furthermore, the study, which focused on the Banking, Financial Services and Insurance (BFSI) sector, found that the segment accounted for 11.1% of the total IT market. The Zinnov report found that growing business requirements are driving rapid adoption of IT in the BFSI sector. IT spend in BFSI vertical is expected to reach Rs. 19400 crores by FY 2014, growing at a CAGR of 13%, it said.

Rule of Foreign Powers

Although it may seem the domestic market is at a boom phase and indigenous companies are having a good time, yet, according to the report, foreign companies continue to dominate the domestic IT market, with a 63% share as compared to 37% share of domestic companies in terms of overall IT service offerings to BFSI sector particularly.

The segment, where the domestic companies can claim to have a better market share is in the SMB front (less than 400 employees) and the SME front.

As industry experts and research firms continue to stress upon the control over indigenous IT industry from the foreign firms, a number of Indian companies (headquartered in India) has made it big, not just in the domestic market only, but in the middle-eastern countries too.

In this edition, DQ Channels unveils the story of 5 Indian companies which made it successful in the business war between India and the world.

 

Quick Heal Technologies Pvt. Ltd. -

With the advent of security software, it was the US based firms like Symantec and McAfee which took the initial lead globally and India was no exception. Soon, east European companies and Germany emerged on the security front with products like BitDefender and Avira (offering free AV in the initial stages) to compete against the dominance from USA. In that era, Quick Heal Technologies Pvt. Ltd (QHTPL) also evolved in India with solutions and pricing tailored for the domestic market and the story has been a very impressive one.

In 1993, QHTPL commenced operations as CAT Computer Services (P) Ltd. primarily as a computer service center. The two entrepreneurial brothers, along with a handful of resources embarked on a quest to bring anti-virus solutions to a market that was relatively unexposed to the term 'Computer Viruses'. Today, nineteen years later, QHTPL (CAT Computer Services (P) Ltd. was renamed in 2007) is a company that has pioneered anti-virus research and development in India; set the benchmark for computer security standards and has established itself as a complete IT security solutions provider with its brand Quick Heal.

The Company opened its first branch in Nashik in 2003 followed by branches in Mumbai and Nagpur. The fourth branch in Hyderabad became fully operational in 2004. Delhi opened its doors for Quick Heal with Bangalore and Chennai quickly following suit along with branches at Ahmedabad, Surat, Indore and Chandigarh. The company launched Quick Heal's multi-lingual version of the product in Hindi, Marathi and Tamil and the corporate Weblog in 2006.

From mouth-to- mouth publicity to understanding what channels want and expect from vendors, to grappling new routes that provided wider and deeper market coverage, Quick Heal started implementing the convergence trends to get resellers and expand its network. Vendor loyalty was replaced with business profitability, clarity and transparency and growth potential of the product.

In 2005, the company took a huge technological leap with the introduction of DNAScan technology capable of detecting unknown viruses in real time without depending on latest signature patterns. It bagged the 12th consecutive Virus Bulletin 100% Award. Quick Heal 2005 Corporate edition 2.0. was released. The company was the first to detect Black worm. Quick Heal PC Tuner received Microsoft certification for Windows Vista.

Today QHTPL is a leading IT security solutions and ISO 9001 certified company. The company has continued to grow its domestic and global footprint with a string of new branches in India and offices in US, Japan and Kenya. Quick Heal has a revenue share of 33% over the past three years.

"Indian software companies have done surprisingly well over the past five years, quickly moving up the value chain by providing wide-ranging software development services. These companies have built client value and now deliver benefits in new service segments such as product design and information science outsourcing", said Abhijit Jorvekar, Executive Director, QHTPL.

Also, talking about the forthcoming age of technology in India, Jorvekar added, "Definitely, the domestic solutions market will see a surge in the coming years. Recent trends in market activity aided by a maturing ecosystem, suggest that Indian software companies are undergoing rapid transformations. Aided by a decent availability of skilled manpower and enhancements in communication technology these companies have stayed abreast or even exceeded in comparison to their foreign counterparts. While the rest of the world displays stagnation and in some cases negative growth, Indian software companies are on an accelerated growth path".

However, the company has faced challenges amidst the continuous flux in technical advancements. The nature of some software products and the framework in which product creation is carried out often influence the complexity and challenges.

"Keeping up with the enhancements in technology in products and solutions, the associated high costs of maintaining and servicing a product over its lifetime impact creation and management. Piracy or copying key features is easy while providing adequate protection of intellectual property rights is difficult. Marketing software products in international markets at times require localisation of the product itself as well as the marketing mix", he added.

Besides, the company is mostly competing with the MNCs and to an extent, indigenous developers for the Indian market.

In terms of its channels hierarchy, QHTPL has a regional distribution model with branches in 23 cities across India and over 6000 resellers and distributors. Partners are empowered with training and resources to help them provide high quality and cost-effective capabilities to enhance the value for customers through customization and support services. Quick Heal offers a wide range of benefits and resources to the partners as part of the Partner Program.

"There has been no significant change in the channel structure or hierarchy", Jorvekar concluded.

Busy Infotech Pvt. Ltd. -

Busy Infotech Pvt. Ltd. (BIPL) is a sister concern of Digitronics Infosolutions Pvt. Ltd. (DIPL) which was incorporated on August 12, 1997 essentially to focus on development and marketing of business accounting software under the trademark of Busy, which was hitherto being undertaken as software division of DIPL.

DIPL was founded on September 17, 1990 by a group of computer professionals with the primary objective of providing professional IT services including third-party maintenance of PCs and Peripherals, customized software solutions and turnkey IT projects. Presently, besides these activities, DIPL is also a leading player in sales of branded PCs and distribution of IT Products.

Busy was launched at IT' ASIA' 94 held at Pragati Maidan, New Delhi and has received an overwhelming response since then. Busy is sold and supported all over the country through an ever-increasing network of Channel Partners. More and more computer training institutes are also taking up Busy to teach computerized accounting.

The product is a brainchild of Dinesh Gupta and Rajesh Gupta who worked round the clock to develop the software and tailor it to the needs of the SME segment. The development and production of the software was solely aimed at promoting the growth of the SMEs by providing a software solution that is simple to use, powerful and scalable.

As expected the product was an instant hit with this segment. 1000 successful installations within a short span of two years from 1994 to 1996 is a testimony to product's potential. The product grew at a steady pace till 2004 when VAT was introduced. The introduction of VAT proved to be the inflection point for Busy. The visionary approach of its founders made the transition very smooth and the product adapted exceptionally well to the VAT transactions.

With more than 6 lakh happy customers and 1.25 lakh installations, BUSY is now one of the leading accounting software in India. The company operates through a robust network of more than 250 channel partners and 5000 resellers. Currently BUSY has presence in over 20 countries with South Asia, MEA and Africa being the stronger markets. With the talk of GST gaining mileage in India, the team is alert and geared up to take up this challenge as it will surely take the software to the next level.

"We have seen growth in the domestic market in recent years owing to the increase in IT knowledge & increase in the awareness of the impact of business application on the productivity. We can expect the trend to continue as there's still a huge untapped market for IT solutions, especially the SME market. As stated by NASSCOM also, the SME market is expected to grow higher than the industry average. We're pretty sure the next demand for IT solutions will be mainly driven by SMEs", said S.P. Ranjan, General Manager, BIPL.

As with all other Indian companies, BIPL too was no exception to the challenges faced in India. Cost has always been the biggest challenge on the marketing front for a growing organization like Busy coupled with the availability of skilled manpower which tends to shift to the MNCs and big players.

"The gestation period, the time you start conceptualizing the product till the time you acquire the first customer, is quite long and tedious. Moreover, the Indian market, especially the SME segment, is relatively price sensitive which also pose a challenge of providing a value-for-money solution", Ranjan added.

However, unlike the anti-virus segment, Busy never truly faced competition from MNCs.

"Our taxation system is complex so are the demands of SME segment which makes it difficult for other accounting solutions to make inroads in this market. There are many regional software but on national front BUSY and Tally predominantly cater to the accounting software segment. So, we don't see much competition except from piracy. More than 50% users are using pirated accounting software", he added.

Over its channels and distributorship front, 90% of its business comes through the channel. Its partners do the implementation and provide the support to end customers, hence are completely responsible for secondary sales.

"When we appoint a partner, we mainly focus on enhancing their technical capabilities by providing them pro-active support. We also arrange onsite visits for complex implementations. In addition to that, we regularly seek inputs on their technical and marketing requirements and work on them so that they stay motivated. On commercial front, we provide additional quarterly incentives to partners which are over and above their regular margin", Ranjan said.

Also, earlier, the company used to have a single tier structure of channel partners where all channel partners were linked to the company. Now, BIPL is experimenting with a two-tier structure where it would have a Master Channel Partner (MCP) for a region and channel partners (CP) associated with the MCP. MCP will provide local support and will act as billing point for associated CPs.

"On channel structure front, we don't see any major change in near future. We will continue to focus on enhancing our reach by having aggressive reseller network. We will also expedite our regional training & education program", Ranjan concluded.

Tally Solutions Pvt. Ltd.

Tally Solutions Pvt Ltd (TSPL) a name synonymous with accounting software is a 26-year-old company known for India's most popular business management software product. Today, Tally's products serve millions of users across industries in nearly 100 countries. Support and services, including customisation and integration, are delivered to customers via a network of over 23,000 experienced partners. With a 400+ strong R&D team future-proofing the product, Tally ERP 9 continues unchallenged as the simplest to deploy, learn and use ERP product.

A Bengaluru based software company; TSPL currently sells into more than 100 countries beyond its native base in India, including the United Kingdom, Bangladesh and the Middle East. Tally's software is mainly used for vouchers, financial statements, and taxation in many industries, and has specialised packages for retail businesses. More advanced capabilities are found in its ERP package.

Tally Software is developed with a core proprietary engine with a SDK Wrapper. Most of Tally's Interaction Forms and Reports are developed using Tally Definition Language TDL. Customization of Tally Application can be done using this TDL SDK.

According to TSPL, the domestic market is fundamentally dominated by the SMB which is approximately 2.6 crore in size. This sector plays a key role in the economic growth of the country with innovation, or "Juggad" as is the colloquial reference is the key to its success. The sector has been serviced for its technology requirements by local IT vendors. Software solutions in many instances have been locally developed, giving rise domain specialist software solution providers. Typically these specialists work in restricted geographies and are the unsung heros of the IT industry.

Tally has been focused on this market and has been the dominant player across all segments and geographies, with over 8 lakh licensed customer base. The midmarket is being focussed by a few domestic and International ERP software solutions.

According to the company, TSPL has pioneered the development of software products in India addressing the Indian market. The challenge that Tally, the brand of TSPL had to face is create the market for its product on a massive scale, to address the nuances of various business and types of customers. Customer adoption has been possible, thanks largely to its intuitive design, flexibility in usage and Simplicity of all elements of the customer experience.

"Developing the mind-set and culture of the product business with its employees and partners, creating an awareness of its nuances and its benefit to the customers, servicing their diversified and growing needs with an agile system and technology are some of the biggest challenges that Tally has faced", said Shoaib Ahmed, president, TSPL.

Also, about the challenges faced by the company, Ahmed added, "Tally has over 90 % market share in the SMB market, with a large percentage i.e. over 70 % of our customers using non licensed software. The biggest challenge for Tally is to reach out to its customers and consistently demonstrate value (of using licensed product) to them. Our efforts are now showing results - Tally's piracy rate has dropped to below 60% today".

In terms of its channels hierarchy, TSPL has designed a two-tier partner structure. Master Tally partner (who works directly with Tally) and a Tally Partner attached to the Master partner. Our Business managers work with the partners in their enablement and effective tally adoption by the customers.

"Tally has commenced a massive effort in developing the eco system and will continue to work by inviting technology vendors to work together in making it easier for the partners to reach out to the market. Educating the market on technology benefits and equipping the customers to make informed decisions will make selling a lot simpler for the partners", Ahmed concluded.

Elitecore Technologies Pvt Ltd

Founded in 1999, Elitecore Technologies Pvt Ltd (ETPL) is an information technology products and software solutions company headquartered in India. Envisioned as a platform for innovators, it has grown to become a dynamic technology company in IP-based technologies. Leveraging its global sales and distribution channel spanning across more than 110 countries, it provides business critical solutions for telecommunications, network security and access gateway.

ETPL is a Carlyle Group investee which is a leading global alternative asset manager with approximately $153 billion in assets under management across 89 funds and 49 funds of fund vehicles investing in Corporate Private Equity, Real Assets, Global Market Strategies and Fund of Funds Solutions as of March 31, 2011. Carlyle combines global vision with local insight, relying on a top-flight team of more than 500 investment professionals operating out of 35 offices to uncover superior opportunities in Africa, Asia, Australia, Europe, Latin America, the Middle East and North America.

ETPL's product suite includes Cyberoam network security products, Crestel, a real time carrier-grade OSS BSS platform that enables next generation data, voice and video services over wire-line and wireless networks to manage and profit from application, media and communication services offered directly and through distribution channels. EliteAAA, an active mediation that can integrate with 3rd party rating and PPS (Prepaid server) for real time credit control and real time accounting; NetVertex, an industry compliant Next Generation dynamic policy manager that makes policy enforcement decisions real time, based on the services, applications, network resources, subscriber profile and SLA to ensure end-to-end QoS and bandwidth allocation; and 24online Access Gateway, a complete billing and bandwidth management solution that enables broadband, dialup, WiMAX and Wi-Fi service providers, hotels, hotspots and cafes to provide time and usage-based Internet access and manage subscribers and franchisees.

The company, is however, mostly known for its premium suite positioned uniquely in the securities domain.

Cyberoam is the only identity-based unified threat management (UTM) solution worldwide, offering comprehensive network security to enterprise, SME and SOHO clients. Cyberoam's CR series of UTM appliances have installations across 75+ countries in all continents, across diverse verticals such as healthcare, finance, retail, IT, educational institutions, public sector, defence and government.

Cyberoam's all-inclusive UTM solution offers a well-coordinated defence through tightly integrated best-of-breed security solutions over a single interface -Stateful inspection firewall, VPN, Wireless Security, Gateway anti-virus and anti-spyware, HTTPS Content Visibility, Gateway anti-spam, intrusion prevention system (IPS), content and application filtering, intrusion prevention system, data leakage prevention, IM Management and control, Layer 7 visibility, bandwidth management, multiple link management, High Availability, 3G/WiMax Modem Support, IPv6 Traffic forwarding support, Traffic discovery and integrated iView Reporting. Cyberoam is unique among UTM appliances due to its identity-based security management paradigm. Most UTMs only offer IP-address based security. Cyberoam is the only UTM solution that offers user identity-based security, protecting enterprises from unpredictable, insider threats.

A star product of ETPL, Cyberoam UTM's credentials have been endorsed by leading IT research and advisory firms, product analysts and certifying agencies. It was rated as amongst the top five (5) as Visionary by Gartner in its June 2009 "Magic Quadrant for SMB Multifunction Firewalls". The Cyberoam CR Series is currently UTM Level 5 Checkmark-certified which further corroborates its design, performance and effectiveness for global installations. Cyberoam Firewall and High Availability features are certified by ICSA Labs. Cyberoam is doubly certified from the Virtual Private Network Consortium (VPNC) for both Basic and AES Interop. Also, its SSL VPN feature is certified by VPNC. Cyberoam is also IPv6 Gold Logo certified, thereby, offering identification and processing of IPv6 traffic across its UTM appliances which is now a mandatory requirement in government and enterprises.

Also, ETPL is now targeting the home segment aggressively introducing the home version of NetGenie reducing the price to Rs. 5490 compared to its earlier pricing of Rs. 10990. Moreover, it is reaching out to 2,500 resellers in 14 cities and carrying demo zones at the partner's retail counter in the next 2 months. Over the price slash in July this year, Bishwajit Sutradhar, national sales manager, Netgenie earlier told The DQ Week, "Looking at the growth of internet in home users, we have decided to offer an entry level home security device with price advantage. The latest version comes with features like age-wise parental controls, secure Wi-Fi for multiple devices, in-built anti-virus, firewall, intrusion prevention system, 3G Ready and pre-set Wi-Fi Security. We are positioning it not as a router device, but home users can have secured internet experience and enhance the productivity."

ETPL is one of the several Indian firms which has laid its footprints globally and is eyeing for acquisitions in Europe. It is in talks with some of the leading telecom products players in Europe for a possible acquisition for $ 30 million (Rs 162 crore approx.).

"We are in talks with some players mostly in the telecom segment in Europe for possible acquisition in the range of $25-30 million", Hemal Patel, CEO, ETPL had said in late September, 2012.

To fund such an acquisition, the company is looking at private equity investment either from Carlyle Group or any other player, apart from debt and internal accruals. In 2007, Carlyle Group had invested close to $11 million for 33% stake in ETPL for a 9 year period.

Omnitech InfoSolutions Ltd

With the company's inception in 1987, Omnitech InfoSolutions Ltd (OIL) has offered its clients with the finest IT development and sustaining solutions. In keeping with the increasing demands of these organizations, innovative products and services have been added, so that clients can be IT ready in their rapid growth. Having evolved as India's first IT Managed Service Providers, it offers multi location Disaster Recovery sites to clients. Overcoming every obstacle and making it a true challenge has been OIL's ultimate goal.

Specific to its business strategy, OIL is aiming to position itself as a Cloud Integrator and has a separate BTU (Business Transformation Unit) which, according to the company will enable customers to work with its existing capabilities and take them on Cloud. Although revenue earnings for the company from cloud is not significant at present, the company is optimistic about the forthcoming opportunities and the gradual adaptability of cloud and is aiming for about 20% topline contribution in the next FY.

In its business plans, OIL is targeting both emerging Enterprises and large established Enterprises defocusing on the SMB opportunity altogether. However, as of now, it has harnessed over the opportunities in the emerging Enterprises only.

From OIL's perspective, Cloud is one of the most efficient IT service delivery model where various service deliverables can be converged on a single platform to offer customer availability service levels at business function level. Shah sees this as a tipping point of technology convergence, aimed to create incredible value for customer and long lasting relationships. As a result, the company is strongly focusing on launching new cloud services and is also planning to refine its current services bundled with cloud benefits.

As part of its cloud portfolio, the company has recently launched REVIVE, a Disaster Recovery as a Service (DRaaS) under its cloud offerings. This initial cloud service offers cost benefit in the range of 30% to 40% YoY over traditional DR model. Apart from cost benefits, it delivers all the value propositions that any cloud offerings would offer like pay-for-use, higher scalability and others.

In the last FY, OIL posted a strong revenue growth of 51.4% but PAT fell by 4.8% but OIL seems optimistic enough with newer opportunities and revenue contributions occurring from Avensus operations and some large turnkey projects in India. Both these businesses continue single digit % in terms of bottom line.

According to Crisil, OIL reported a net loss of Rs 1.1 crore primarily on account of the high interest cost, on the back of increase in working capital debt for subsidiaries, and tax rate of ~72% this quarter as the company booked deferred tax liability. Accordingly, the results were below expectations. Europe and Asia Pacific subsidiaries continued to make losses at the EBITDA level in the quarter. Also, increase in competition in the domestic market is putting pressure on margins. Also, APAC declined due to closure of some project-based contracts in Q3. The company reported a loss of Rs 1.1 crore compared to a profit of Rs 12.7 crore in Q3FY12 and Rs 8.4 crore in Q4FY11.

Time to Leap Forward

The growth story for domestic IT in India has often been overlooked and players in the tier 1 segment, mostly in the services export front has gained much of the limelight. However, domestic companies in India producing an indigenous technology have proved that it is only a matter of investment and entrepreneurship which is needed at to push the domestic companies into evolving as global players. Even Infosys and the likes of McIntosh has humble beginnings with share capital and manpower; if these companies can today evolve into standard bearers of IT (services and products), these domestic companies too have their own potential into evolving as the game-changers atleast in the middle-eastern markets.

On the security front, already east Europe and Russia has overrun the market share from US-based firms in terms of licenses sold (although revenue remains lower compared to the US players) and product quality scoring higher ranks across different product review sites and labs. It is valuation and the value proposition now which makes the difference and the perspective of Made in US and Developed in US or EU is now dwindling. A same grade product with a lower monetary valuation can beat off competition both at home as well as abroad and these companies (discussed previously) have proved that it is time now for India's own domestic IT to take the leap forward with an Indian patent and a sticker "MADE IN INDIA".