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The Next Frontier
Then there is the next level of companies like Newgen, Infrasoft, Aftek,
Kale Consultants, California Software, KLG Systel, Compulink, Elitecore, and SP
Software that may not have grabbed a big share of the market but most definitely
have made it into mind share. This is followed by yet another layer of
companies, which could be the next wave of mind share grabbers.
Beyond the top 10 players, companies continued the three-digit
growth momentum. Both Nucleus and Newgen more than doubled their growth. Nucleus
product revenues in FY 07 stood at Rs 119 crore, up from Rs 57 crore in FY
06, a growth of 109%. The company had been working toward positioning itself
as a product expert in the banking domain for the last few years. This paid off
in FY 07: Nucleus bagged 22 new product orders for implementing 74 modules of
FinnOne suite and other products. Newgens revenues registered a huge 178%
growth, up from Rs 23 crore in FY 06 to Rs 64 crore in FY 07. Apart from a
strong show in traditional markets of the US and UK, the company strengthened
its position in the exports market by partnering with SinoSoft and Yindusoft in
China. Some of the major deals are from the Abu Dhabi Commercial bank, Mashreq
bank, Bank of America, Yes Bank, General Insurance Corporation (GIC) of India,
ICICI Lombard, ABN AMRO, Equinox, Central Depository Securities, Kuoni Travels,
and Bank of Baroda.
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They too are
made in India |
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The Indian products story
today is closely interwoven with its services capability. Many services
companies are productizing their skills, especially in selected verticals.
But that is probably half the story.
The other half is equally,
if not more, important. There is an equally strong set of players who do
almost the samethey develop products, often from scratch. The only
difference: they do not hold the IP for the end products and do not have
the responsibility of marketing those products. Yes, we are talking of one
of the most vibrant sub-segments of the IT services industrythe
outsourced product development companies.
These companies often work
for the Independent Software Vendors (ISVs) developing part of or full
products for them. Companies like Aditi, Aspire Systems, Aztec Software,
GlobalLogic, ISG Novasoft, Infogain, Persistent Systems, and Symphony are
some of the Indian players who compete on this space. In addition, others
like Israel-based Ness and Sri Lanka-based Virtusa also have significant
product development capability out of India. Some of the larger
multi-services IT firms such as Wipro, HCL, Satyam, and Patni also do
significant work in this area.
What is interesting about
this work is that unlike the other areas of IT and software services, they
do not just count Fortune 500 companies among their clients. A significant
number of their clients are start-ups. Today, in the US, the VCs
proactively push the start-ups to outsource their product development
completely. In many cases, the outsourcing company has just one VP of
engineering, with the rest of the technical team sitting in Bangalore or
Noida.
However, it is not just the start-ups who
develop their products out of India. Significant amount of the modules of
companies like Microsoft, Oracle, Google, and other ISVs also develop
modules out of India, either in their captive development centers or by
outsourcing it to the third party service providers. Adobe even develops
full products out of India. |
Ambitious, for Sure
FY 07 has been testimony to the growing ambition of Indian software
product companies. They certainly have not shied away from taking the inorganic
route. Take for instance 3i Infotech, which went on an acquisition spree in FY
07. Of the total nine acquisitions made during the year, six were in the
products space. Cranes Software too maintained the inorganic growth momentum
acquiring Dunn Solutions Group, Tilak AutoTech, Ariel, Analytix Systems, Caravel
Info Systems and Proland Software Solutions. Subex and Azure, on the other hand,
merged to form Subex Azure. Later, toward the end of FY 07 it acquired Canada
based Syndesis, thus strengthening its position in the telecom OSS space. These
inorganic growth ambitions were not restricted to big companies alone. Among
smaller players, Infrasoft acquired UKs M Consultinggrabbing a total of 25
new accounts in FY 07.
Expanding Footprint
The exports stronghold continued as the market accounted for almost 80% of
the Indian product revenues. While the US and UK continue to be major markets,
the Middle East and Africa are among the newer ones.
In terms of verticals, BFSI has been the mainstay so far.
However, the Indian software product industry is now beginning to find success
beyond this vertical in areas like telecom, aeronautics, geographical
information systems (GIS), etc. We are now also seeing products on healthcare,
small ERPs coming from smaller companies. One is also going to see niche
applications on Basel II and analytics being developed.
At a higher level, global vision, strategy, and execution are
the key elements required to move this industry forward. Factors like
understanding market needs, productizing these needs, ability to harness the
right talent for delivery, sales and marketing play a very important role in the
success of software product companies.
In order to successfully develop and market software products,
Indian companies also need to understand their customers business and
business environments. Companies should select and focus on a vertical and
develop deep domain expertise in it.
Shipra Malhotra
shipram@cybermedia.co.in Page(s) 1 2
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