The battle ahead for product warriors

Software product development is a significant area of opportunity for Indian companies. Many of them are developing world-class products, hoping to make significant inroads into the Indian and global markets. Although Indian companies are known for software services, they are yet to make a mark in the product arena. ABHINAV SINGH examines the strategies of India’s top software product companies and the direction in which Indian software product development is headed

N R K Raman says in order to gain confidence, i-flex focused on emerging markets in Africa, Asia-Pacific and the Middle East before dealing with mature markets like the US

NASSCOM data reveals that Indian companies developing software products have a minuscule 0.2 percent share of the $180 billion global market for software products. Software export revenues from product sales in India have remained constant at Rs 1,500 crore for the last three years. Product revenue accounts for only 3 percent of Indian software exports.

Despite this, the significance of software products cannot be underestimated. There are a few major Indian companies that are into software product development but there is still a huge market waiting to be tapped.

Though they face stiff competition from MNCs and local players across the world, Indian software product companies are working hard to make India a world-class IT destination, offering not just software services but also premier software products.

Software product development comes with its own unique challenges and risks. That’s why most software companies prefer to take the easy way out and concentrate their efforts on software services, which have a shorter gestation period and bring a quick return on investment (RoI). On the other hand, product development has a longer gestation period and requires huge investments. However, once a product wins market recognition it can be a tremendous revenue earner for the company that developed it. This is at odds with the case of service companies that are affected by sudden changes in the economic environment. Projects can be shunned or shortened due to a sudden change in the investment plans of the client but a product ushers in a long term association between the manufacturer and his customer.

Major Indian players

Tata Consultancy Services
Although TCS is known more for its software services than for its products, it is still one of the leading software product companies in India. Out of its 22,000 strong workforce, 2,000 work on products. TCS has facilities across the country, including Bangalore, Delhi, Mumbai, Kolkata, Chennai, and Hyderabad. Excluding the Latin American market, TCS products have established their presence across the globe. The main reason for the company’s foray into the product space, according to N G Subramanyam, TCS’ vice president for Bangalore operations, was to consolidate the company’s existing knowledge base and demonstrate it to the rest of the world.

Flagship product and its genesis

TCS’s flagship product QUARTZ is an integrated financial services platform targeted at the banking and financial services industry. TCS invested close to 750 man-years of effort to develop this product. As a solution framework, QUARTZ covers banking, trading and investment management functions. The product has components to handle trading and asset management (front- mid- and back-office operations and compliance), core banking (transaction processing and analytics), support a multi-channel service delivery model, wealth management and personal financial planning.

TCS developed this product based on feedback from its customers to develop an integrated financial services platform covering all areas within the banking and the financial services space as most products tend to cover only one or two specific areas. The other requirement behind the creation of QUARTZ was the need for an architecture that could handle large volumes of transactions on a 24x7 basis.

Major products & targeted verticals

Besides Quartz, TCS offers a mixture of technology as well as business products targeting the banking, financial, manufacturing and healthcare sectors. Some of TCS’ major products are Integrated Standard Banking System (branch computerisation) for the banking sector, installed in over 1,000 bank branches across 40 banks worldwide and Hospital Management System and Smart Clinic for the health sector.

Challenges & strategies

For TCS the greatest challenge has been to have a dedicated and efficient product management conceptualisation group. This group defines the scope of a product in terms of its functionality and draws its long-term roadmap by defining the product’s vision. Besides this, the group also tracks market changes that make it necessary to upgrade a product.

As Subramanyam says, "An efficient product team, which has a long-term commitment and is passionate towards a particular product, is a prerequisite for any product company. It is also necessary to have an efficient product support team coupled with a product marketing and implementation team, to be successful in the highly competitive product arena, especially in the international market."

The other challenge is to convince international customers of the usefulness of products with the ‘Made in India’ label, as customers abroad are tempted to use products offered by large MNCs. According to Subramanyam, this can be achieved by having the right marketing people who are able to understand the local market, its tastes and requirements, and are able to forge alliances with local distributors and resellers to sell the product. For TCS the Indian market poses a big challenge as customers in India demand tailor-made solutions.

Revenues from different geographies

The biggest chunk of product revenue for TCS comes from the US and European markets, followed by the Middle East and Asia-Pacific. Subramanyam adds, "The Indian market is moving towards a maturity stage but is still far off when compared to the US and the European markets."

i-flex
i-flex is primarily a software product development company, although it has some presence in software services. The company has about 2,255 people with 10 product development centres spread across the globe. A major chunk of its product development takes place at its Indian development centres.

Flagship product and its genesis

FLEXCUBE, i-flex’s flagship, is based on the Oracle database and Oracle development environment. The product was developed in late 1995 after the success of i-flex’s first product, Microbanker. The product was initially positioned for the European market. Today, it has gained entry into other markets as well with over 130 customers.

FLEXCUBE was developed by the company with an aim to provide integrated delivery of banking products across the branch network, telephone, ATM, point of sale, and the Internet. With an open architecture the product can integrate with third-party software for providing value-added services such as e-commerce.

Major products and targeted verticals

i-flex has a range of software products targeted at the banking and financial verticals. i-flex has products in the retail corporate and investment banking operations, fund management, central banking, stock exchange, treasury, credit (retail and corporate), trade finance, e-brokerage and risk management areas.

Besides FLEXCUBE, Primesourcing and Reveleus are other major products. The company’s products have 390
customers spread across 88 countries.

Challenges & strategies

Making a huge investment into creating, branding and marketing its products, especially in the international market, and the large gestation period were key challenges for the company. As N R K Raman, senior vice president, Global Sales at i-flex Solutions says, "The market launch of our products was a big challenge for the company as we needed to compete with large players in the international market."

Sanjay Aggarwala says that the lower rate of adoption as well as the low initial trial rate for any ERP product amongst Indian customers is the biggest challenge for product companies, as they then have to hunt for foreign markets for their products

Rather than concentrating on mature markets, the company started out by focusing on emerging markets in Africa, Asia-Pacific and the Middle East. The idea was to create a healthy customer base in order to be more comfortable in dealing with the mature US market at a later stage. i-flex established its presence in the US market only a year ago.

With regard to its product policy, the company works closely with its customers in order to gain recognition in the user community. It takes regular feedback from customers to develop new, scalable products.

Says Raman, "We showcase our products at industrial events and seminars and invite suggestions for improvement from the user community and work towards developing focused products." At the same time the company has alliances and implementation relationships with companies like Accenture, HP, IBM, Intel, Microsoft, Oracle and Sun Microsystems. The company is also working with 30 corporate business partners.

i-flex sees great potential in the Indian market and aims to tap it with its range of products and solutions. The company has had some recent wins in the domestic market, notably with Syndicate Bank and HDFC Bank.

Revenues from different geographies

32 percent of i-flex’s product sales revenues come from the US market; the European and the Asia-Pacific markets are evenly matched with 20 percent each while Latin America, Africa and the Middle East contribute the rest.

Polaris Software
The company is a strong player in the BFSI space and after its merger with OrbiTech, a technical subsidiary of the Citibank Group, Polaris acquired the intellectual property rights of OrbiTech’s Orbi Suite framework of banking solutions.

Major products & verticals

The company has a major presence in the BFSI space and its main product line consists of the Orbi suite of products. The OrbiPack product suite consists of eight product lines, which comprise 64 saleable GeneS (Generalised systems), developed and used within Citigroup during the last 10 years. The Orbi suite is aimed at fulfilling the needs of global banking for retail, corporate, investment and private banking environments.

Over the last few years the products have grown from being exclusive Citicorp solutions to providing a comprehensive range of ideal banking and financial services for major banks all over the world.

Challenges & strategies

Polaris executive director Govind Singhal points out, "As the Orbi suite covers the entire gamut of banking requirements, the greatest challenge for Polaris is to keep them up-to-date with the latest banking industry requirements. The business managers driving each of the product business lines regularly track requirements of the banking industry and plan investments for product enrichment accordingly."

Singhal adds, "Polaris is in the process of establishing an organisational structure with eight product business lines, each of which will be headed by a business manager. The business manager will define the product roadmap, marketing strategy and will have profit and loss responsibility. The business manager will be supported by a Global Sales Organisation (with geography-based sales heads in North America, Europe and Asia)." Polaris’ strategy for its Orbi product suite has been to target premium banks in the US, Europe and Japan. The aim has been to establish business relationships with a few key players in the BFSI space and then to leverage those referral sites in winning orders from other major banks in those regions.

Revenues from different geographies

40.8 percent of Polaris’ product sales revenue during the last quarter came from the US and the North American market, followed by the European market, which contributed 27 percent, the Asia-Pacific market with 23.8 percent and the Indian market with 8.4 percent.

Nucleus Software Exports

Delhi-based Nucleus Software Exports delivers software products for the financial services industry. It has some major customers in the retail-financing segment of the industry. The company has development centres in Delhi, Chennai, Bangalore and Singapore and has four wholly-owned subsidiaries in Singapore, US, Japan and Australia.

Flagship product & its genesis

FinnOne, Nucleus Software Exports’ flagship product, is a Web-based solution that has been built on a scalable Oracle platform and is targeted at the banking and finance market in India and abroad. The product enables banks to integrate multiple functions with a single solution from a single source. The product was developed keeping in mind the basic need for banks to deploy end-to-end core banking solutions. Nucleus has 23 installations in India and abroad.

Major products & verticals

Besides ‘FinnOne’ Nucleus Software Exports has a whole range of products targeted at the banking, financial, service and insurance (BFSI) segment in India and abroad. Its major products include CCAPS (a credit card application system), ReQuest (a scalable financial CRM solution), BanKONet (an Internet banking solution) and Infoedge (a data mining and warehouse solution).

Challenges & strategies

Nucleus Software Exports has been developing products right from its inception. The greatest challenge for the company was to develop a niche for its product range in the BFSI space. Vishnu Dusad, CEO, Nucleus Software Exports says, "To overcome such a challenge, a thorough understanding of market requirements, geography-specific marketing approaches and the ability to team up with local partners to create a distinct brand identity in each market is imperative for any product company. Also, a product company’s financial stability is critical as the gestation period for creating the product as well as the RoI is much more longer."

Nucleus is planning to go on a marketing drive and plans to enter the overseas markets by setting up its own bases or by entering into joint ventures and partnerships. The focus would be to target emerging markets in the Middle East, Japan, Singapore and Australia.

Revenues from different geographies

Nucleus Software derives 65 percent of its revenues from the overseas markets, mainly from Japan and Singapore, 5 percent from the US, 20 percent from India and 1.5 percent from the rest of the world.

Talisma

Talisma has a suite of CRM products focused on sales, service and marketing. Talisma’s chief technology officer, Anantharaman Iyer says, "We used our experience in technical support and customer service to build a product ideally suited for customer management. We stress on ease-of-use, right from the way the user interface (UI) is built to the way the product can be customised; rules can be added or modified as per the customers’ requirement as also the time taken to deploy the product."

Flagship product & its genesis

Talisma began life as a result of its parent company, Aditi’s requirement for a CRM product to handle Microsoft Product Support. The first version was an entry-level product based on Microsoft Access, but starting with version two Talisma has evolved into a robust CRM product suite.

Challenges & strategies

One of Talisma’s greatest challenges, according to Iyer, is delivery pressure and deadlines. "In order to be competitive and prominent in the software products market one has to successfully meet deadlines, otherwise there are chances that your competitor might overshadow you in terms of delivery and deadlines," he says.

Another important challenge according to him is to successfully brand a product, especially in the international market.

Company representatives regularly participate in seminars, events and symposiums to showcase Talisma’s product suite and win new customers. The company is focusing on customer service management through its products and of late there has been an emphasis on services built around its core CRM product suite. All its product development takes place in Bangalore.

Revenues from different geographies

The US dominates Talisma’s revenues, accounting for 70 percent, followed by Europe at 25 percent and the Asia-Pacific region at 10 percent.

Ramco Systems

Chennai-based Ramco offers a suite of ERP applications called e.Applications.

Flagship product & its genesis

Ramco’s ERP story began with a product called Marshall. This software product became famous as it was the only Indian product to be launched by Bill Gates on his first trip to India. Ramco’s product has now evolved into a suite of applications.

Anantharaman iyer says in order to be competitive and prominent in the software products market one has to successfully meet deadlines, otherwise there are chances that competitors might gain the upper hand in terms of delivery and deadlines

Major products & verticals

Ramco has packaged business solutions called the Ramco Enterprise Series and customs solutions titled Ramco Enterprise Custom Solutions. Both these componentised offerings are assembled on Ramco Virtual Works, a model-based development and integration architecture.

Ramco’s enterprise series consists of seven product suites. Ramco has chosen to focus on four major markets, including manufacturing, asset and maintenance intensive organisations, service organisations (finance and healthcare) and the government sector.

Challenges & strategies

The main challenge while developing software products has been providing solutions tailored to the unique needs of each business. Other challenges include developing a flexible architecture to continuously handle post-implementation changes in the product and to have products and solutions that can seamlessly integrate at the business process level with legacy systems and solutions from other vendors.

Kamesh Ramamoorthy, Ramco Systems’ vice president for Enterprise Applications says, "To face our challenges we have perfected a model-based architecture, Ramco Virtual Works, this helps us develop, assemble and deliver product and custom enterprise solutions faster and at a lower cost. With our flexible architecture capability and repository of domain knowledge available through reusable software components, we are geared to address both the product and custom enterprise solutions market in an economical way."

Revenues from different geographies

The US contributed 35 percent during the last quarter, followed by Europe and Asia with 30 percent and Africa with 5 percent.

First Apex

This Singapore-registered company carries out all its product development in India at its centre in Bangalore. The company has software products targeted at the insurance sector and claims to have a 60 percent market share in packaged solutions in the Asia-Pacific region.

Major products & targeted verticals

First Apex has products for the entire insurance supply chain, from the Internet to the front-office and back-office operations. Some of its important product suites include e-LIFE, which is a Web-based suite designed to manage the full cycle of operations for a life insurance company. The eX-GEN enterprise suite of products for property and casualty insurers and X-RE, an integrated solution designed for reinsurers, are its other products.

Challenges & strategies

One of the most important challenges that First Apex faces is to continuously scale its products and to market them internationally. D V Jagadish, First Apex group vice president for Sales and Marketing says, "The requirements of the insurance sector keep on changing as there is always a new policy or scheme launched by the insurance companies. So our products have to keep pace with these changing requirements. Secondly, to market our product in the international market is a big challenge for us as it is here that we have to convince potential customers that our product is unique."

In order to meet these challenges successfully First Apex works closely with its customers and takes regular feedback from them for product improvement and scalability. Its product development team is also exposed to the market on a continuous basis. Apart from this the company participates in insurance-related seminars and symposiums where it is able to get direct feedback from insurance experts.

First Apex also has a strategic alliance with Sun Microsystems, IBM, Microsoft, Oracle, SAP, Cognos and Lotus.

Revenues from different geographies

Japan contributes about 30-40 percent, followed by Greater China, which accounts for 15-20 percent and ASEAN with 10-15 percent.

Subex Systems

Bangalore-based Subex Systems makes software products for the telecom industry.

Flagship product & its genesis

Subex’s flagship product Ranger is a fraud management system. The company developed this product in order to provide a solution that would let telcos protect their revenues and plug leakages.

Major products & targeted verticals

Subex exclusively focuses on the telecom domain and its suite of software products is geared to help telcos maximise their revenues. The RevMax suite helps operators plug revenue leaks and build new sources of revenue. The suite includes three products: Ranger—a fraud management system, Incharge—an inter-carrier billing verification system and eProficio—an electronic business support system.

Challenges & strategies

Subex Systems COO Sudeesh Yezhuvath says, "To develop products that can be successful globally, the organisation has to have the ability to think big and be close to markets that drive change. India is yet to emerge as a powerhouse in global marketing (especially in software products) and that poses a big challenge for us."

Yezhuvath also states that Subex has a focused marketing strategy, revolving around the RevMax suite of products. The company is also building up necessary competencies and is working with international consultants and experts to expand its domain knowledge

Eastern Software Systems

Delhi-based Eastern Software Systems offers ERP products for SMEs.

Flagship product

ebizframe is an Internet-enabled enterprise resource planning product targeted at SMEs in India and abroad. It has customers in industries like engineering, retail, chemicals, apparel and textiles.

Challenges & strategies

The lower rate of adoption as well as the low initial trial rate for any ERP product amongst Indian customers poses one of the biggest challenges for the company as it has to hunt for foreign markets for its product. As Sanjay Agarwala, CEO of Eastern Software Systems says, "Due to a low domestic potential we have to prove ourselves and convince foreign customers to gain commercial success abroad. This is unlike the West where software product companies find a ready and quick market in their domestic constituencies."

The company is looking to offer long-term support at a manageable cost to its customers by offering a clear value proposition. It also wants to increase its share of the domestic market.

Revenues from different geographies

The Indian market constitutes the major chunk of ESS’ revenues, bringing in 65 percent, followed by the Middle East at 20 percent and the Far East at 5 percent.

Indian mindset has to change

Industry consensus is that there is not going to be an immediate rise in the number of product companies in India in the near future. While the potential is tremendous, product development is fraught with risks and uncertainties. TCS’ N G Subramaniam sums it aptly when he says, "The whole Indian mindset has to change, long-term huge investments, commitment for a long time and liabilities that come along with product development are major hindrances."

Lack of visibility abroad

The lack of visibility of Indian software products abroad is another limiting factor. D V Jagadish of First Apex says, "With the exception of a few products, the majority of Indian software products are not branded properly in the international market. This needs to change."

Industry bodies need to chip in

Many companies are working with Nasscom towards making software product development more popular amongst Indian software players. i-flex is one of them—it has joined hands with Nasscom in creating awareness through Nasscom’s product forum about the potential of product development.

Domain specialisation is the key

Some feel that domain specialisation by some Indian product companies will help them move up the value chain and would help them offer high value services.

Services will continue to dominate the Indian software arena, although there have been some developments on the product front. Services come with its set of advantages like low investments, shorter gestation periods, and quicker return on investments.

In the long term, Indian software players will need to shed their services mindset and venture into the products arena. The world’s large software companies—Microsoft, Oracle, Computer Associates and SAP—are all product companies. If Indian software companies want to be in that league, they will have to eventually take the product route.