Mohan SawhneyKellogg School of ManagementAugust 30, 2013
India Outside: From IT Services to Technology Products
• Indian exports of IT and BPM services reached $69 billion in 2012
• India controls 58% of the global sourcing industry
• The IT and BPM industry accounted for 25% of India’s exports in 2012
• BPM and Analytics services are the more recent success stories
India leads the world in IT services
Source: NASSCOM
• Software product exports are a paltry $1.5 billion, less than 5% of the Indian software industry.
• There are 3,400 Indian software product companies but the average revenue is less than $600K
• Software product exports have grown at a CAGR of only 10% from 2008 to 2013
• India lags behind China, Israel, Russia and Brazil in software product revenues
But where are the products?
• Banking products like i-Flex and Finacle (Infosys) and BaNCS (from Tata Consultancy Services) are the only notable Indian software products
• While Indian IT majors have excelled in outsourced R&D and product development, they haven’t developed meaningful products themselves
Even the IT Majors lag behind
The Indian IT industry journey
People
Projects
Processes
Products
We are stuck here
Why products? Scaling revenues
Revenues
Time
Products
Services
India can learn a lot from Israel
• Culture of fighting against adversity
• Entrepreneurial mindset and “chutzpah”
• Mandatory military service• Israeli Defense Forces as a leading-
edge customer • Strong connections to the United
States financial community• Startup funding assistance from
Government
Israel’s success factors
• Services are less risky and produce predictable revenues
• The success of Indian IT majors in services limits the need for product innovation
• Entrepreneurial ecosystem and culture still leave a lot to be desired
• Indian companies lack marketing capabilities including branding and marketing communications
Why India lags behind in products
There is a world of opportunity
Cloud infrastructu
re
App economy
Domestic market
• Create a mass-market consumer software service
• Acquire the “first 1 million” customers in India
• Leverage learning and customer base to enter U.S. market
• Trade Indian multiples for U.S. multiples
The “People Arbitrage” Play
Examples of “People Arbitragers”
Arenas of opportunity• Education• Human capital development• Logistics• Financial services• Healthcare• Mobile applications• Healthcare services
What it will take to win in products
Product Investment
Mindset
Marketing Capabiliti
es
Startup Ecosyste
m
We can do it!
