India has done very well for itself as an IT services destination. In less than two decades, it has reached the #1 spot in the global IT services outsourcing league tables, with over US# 70B in 2010 revenues.
Recently, there has been a mushrooming of IT product companies in India. This trend could be driven by several factors including a passion to create intellectual property and grow up the value chain, frustration with being called “the IT coolies of the universe” and an apprehension with the dimming growth prospects of IT services.
Product companies need to recognize that the product business calls for a different mindset.
Unlike a services mindset, which can be crudely paraphrased by “you tell us what you want, we’ll do it for you – faster, better and cheaper”, a product mindset has entirely different traits.
From having closely observed a couple of the few successful Indian IT product companies, we believe that a product mindset has the following attributes:
- The belief that one size does fit all. Like Warrillow in this FORTUNE story, it’s important for a product company to believe internally that it is possible to create a product that is rich enough to fulfill the needs of multiple companies, albeit within a set of finite target markets defined by verticals, geography or company size. Such a belief comes from the ability to divine features from nebulous market requirements and abstract the generic from the specific – in short, product management.
- The determination to rally multiple customers around a single product roadmap and implementation methodology. Where some degree of industry-, country- or customer-specific modifications is inevitable, it’s important to create a versatile set of tools that help in their development without disrupting the core product. Ideally, such tools should be usable by third-party systems integrators and customers, and not be restricted to the product owner alone. While the toolset can begin with a simple report writer, it should eventually expand to include formula builders that allow reconfiguration of existing business rules and building new ones as well as screen painters for the addition of brand new functionality.
- Marketing, marketing, marketing. Part of a successful product mindset is to recognize that it’s because of marketing that a product company is able to scale up and sell multiple copies of the same software to different customers. When done right, marketing investments payback many times over by way of revenues from multiple customers without proportionately high product development costs. According to anecdotal evidence, a typical American product company invests 1.5-2X dollars in marketing for every X dollars of development. For a product company, it might be tempting to spend all the capital on engineering under the assumption that the resulting enhanced product would automatically sell more. A successful product mindset recognizes the folly of this notion – after all, the old adage “if you build, they will come” doesn’t work any longer – and resists the temptation.
It has been said that the product mindset is very much at odds with the typical services mindset that has dominated the fabric of the Indian IT industry since inception. Some have even gone to the extent of saying that the difference is so stark and irreconcilable that India shouldn’t bother with products. We don’t agree – it’s a matter of time and reorientation before product companies in India are able to develop the required mindset to succeed in the product business. Ramco Systems and Oracle Financial Services Solutions (formerly i-flex solutions) are two lighthouses that are already available for others to emulate. Maybe Infosys’ recent decision to develop products under a separate company is the way to go.