product landscape in india - presentation by nasscom & zinnov

Product Landscape in India

Bengaluru

9-10 November 2011

Key messages

2 13-Nov-11

India is entering the product era 1.

• Over 2400 product firms generating revenues ~USD 2.0 Billion

• The cost of setting up a product startup has gone down significantly from hundreds of

thousands of dollars to a few thousand dollars.

• This coupled with increasing connectivity, talent pool, ecosystem readiness, convergence

of platforms has created a very favorable environment for product startups to flourish and

compete globally

The past five years have seen the emergence of new consumer segments for

products such as SMBs and Government 2.

• Small enterprises use startup products across both core processes and non-core

processes

• The government sector uses Indian products for local governance and for information

management across public sector units

Key messages

3 13-Nov-11

Software products industry enabling balanced regional growth 3.

• Number of product firms from tier 2/3 cities have almost doubled in the last 3 years

• Over 330 product companies based in Tier 2/3 cities

Technological disruptions, improvement in infrastructure and availability of capital

have helped create a level playing field 5.

• Improving connectivity across the country, specifically in tier 2 and tier 3 cities, and higher

access to computing is growing the consumer base for homegrown product software and

services

• Availability of skilled talent, disruptive technologies, sources of funds and strong industry

support driving the market

Established product firms experimenting with new models and initiatives 4.

• Multiple growth strategies followed by industry players

• Established product firms are expanding horizons, incubating products for new verticals

and segments, and formulating partnerships and alliances

Key messages

4 13-Nov-11

The funding ecosystem has seen significant enhancement 7.

• Software , internet and mobile industry accounts for almost 66% of total VC investments

in India

• Investment community in India comprises of VCs, Angel Investors; additionally various

state and national government schemes now in place to provide funding

• Indian success stories such as Makemytrip, Flipkart, inMobi has increased confidence

levels of global VCs to invest in Indian product startups

Thriving startup landscape, focusing on localized solutions for India 6.

• ~1100 startups in last 5 years; Key focus areas for startups include mobility, SMBs, E-

Commerce and Education

• Education startups are leveraging IT in developing digital contents for students, provide

distant learning, virtual classroom and other related services

• Startups focusing on serving the large SMB market are leveraging cloud and web based

technologies to widen their customer reach

Software product play has been gaining

increasing importance

5 13-Nov-11

Source: Zinnov analysis

IT Services +BPO +

R&D + PRODUCTS

IT Services+ BPO+

R&D IT Services + BPO IT Services

1980s

• The IT revolution began in

India in the early 1980s.

Lot of BFSI products came

into picture at this stage.

• During the economic

liberalization of 1990s,

large global enterprises

began outsourcing their IT

management activities to

India

1990s

• The IT revolution was

followed by a wave of

BPOs and MNC captives

riding high on the cost

arbitrage provided by low

cost, English speaking

Indian graduates

• This led to the creation of

a large number of jobs for

non-engineering Indian

graduates

2000

• The IT captives began to

mature and move up the

value chain in the early

years of the previous

decade

• This paved the way for

higher-end Engineering

Services firms to establish

a presence in the country

directly or outsource their

requirements to large and

niche Indian SIs alike

2010

• The cost of setting up a

product startup has gone

down significantly

• This coupled with

increasing connectivity,

talent pool, ecosystem

readiness, convergence of

platforms has created a

very favorable

environment for product

startups to flourish and

compete globally

Indian software products market- Picking up

tremendous pace

6 13-Nov-11

Number of Product firms in India

USD billion worth revenue from Indian products

Growth in revenue since last 5 years

Major product segments

Major geographical centers for product firms

Number of product categories

2400+

1.9

22%

6

30

46

Source: Zinnov analysis, NASSCOM

Over 2400 product firms in India generating

~ USD 2 billion revenues

7 13-Nov-11

Indian Software Product Business Landscape

Product Companies Export Revenue (USD billion) Domestic Revenue (USD billion)

0.7

1.1

1.4

1.9

1260

1573

1888

2428

FY 2006 FY 2007 FY 2008 … … FY 2011 (Est)

0.3 0.4 0.5 0.6

0.4

0.7

1.0

1.3

CAGR

14%

27%

15%

22%

Source: Zinnov analysis, NASSCOM

Increase in number of Product Firms

SMBs, Mid-market, Enterprises

SMBs, Mid-market, Enterprises

Consumers

BFSI, telecom, Government,

Datacenters

Hardware equipment

manufacturers

Web infrastructure, Backup

Explosive growth, especially in the digital and

business productivity software segments

8 13-Nov-11

Business and

Productivity Software

Client / Desktop,

System

Software and Tools

Digital

Server/Infrastructure

software and Storage

Segment

Semiconductors

Others

2007 2011 Key Users


121 147

595 843

584 1051

67 91

15 24

191 272

5%

9%

16%

8%

12%

9%

CAGR

• Large enterprises within telecom and healthcare sectors use startup products

• Products are generally deployed across non-core processes such as value added

services (VAS) within the telecom sector and management information systems

(MIS) within the healthcare sector

New customer segments for Indian products

have emerged- Consumers, SMB, Government

9 13-Nov-11

• Small enterprises use startup products across both core processes and non-core

processes

• Indian products are gaining traction across all major sectors such as retail,

manufacturing, professional services

• Consumers use most of the products within the e-Commerce and Internet

category

• E-Commerce revenue have grown significantly over the past few years due to

increasing awareness, improving connectivity and payment scenario

• The government sector uses Indian products for local governance and for

information management across public sector units

B2B

B2b

B2C

B2G


AD

OPTIO

N C

URVE

Products industry enabling balanced regional

development- Significant growth in Tier 2 cities

10 13-Nov-11

735

481

200

950

NCR

Mumbai

Pune

Bangalore

Hyderabad

Kolkata

Product companies split across major regions in 2011 and growth over 2007

11%

9%

10%

11%

13%

359 Chennai 10%

18% 470

Tier 2

cities 82

18%

330

Tier 1 Cities

Tier 2 Cities

Bangalore Mysore, Belgaum, Gulbarga, Hubli

Hyderabad Secunderabad, Vishakhapatnam, Vijayawada

Pune Pune

Chennai Calicut, Trivandrum, Madurai, Coimbatore, Cochin, Vellore

Mumbai Goa, Ahmedabad, Vadodara, etc.

Delhi Gurgaon, Noida, Chandigarh, Mohali

Kolkata Patna, Bhubaneswar

Note: The cities marked in bold are emerging Tier-II cities for product startups Source: Zinnov analysis

Product companies have grown fastest in Tier 2 cities

2007-2011 CAGR

• Product firms are focusing on emerging sectors such as SMBs, retail, healthcare, and

education.

• These sectors face several challenges which can be overcome by technology

Established product firms expanding horizons….

11 13-Nov-11

• Product firms are exploring emerging technologies such as Cloud computing and

virtualization to deliver solutions to customers.

• These technologies help reducing cost of acquisition for customers due to amortization

and economies of scale

• Product firms are innovating on business models to enable reach by partnering both

across and within industries.

• Large product firms are partnering with smaller channel players while small product

firms are partnering with large enterprises

• Large product firms are broadening their focus beyond the metros and tier-1 cities.

• A large addressable market opportunity which is currently untapped lies within the tier-

2 and tier-3 cities and product firms are on their way to create this market

Vertical Focus

Product

Architecture

Business Model

Location Focus


…And are incubating products for new verticals

and customer segments

12 13-Nov-11

SMBs

Cloud computing

Healthcare

• TCS has a SaaS offering for SMBs, TCS iON, which is an integrated

suite of hardware, software, and network solutions

• mKrishi by TCS is a mobile agro advisory system that connects

farmers to an ecosystem to make better decisions

• HCL offers solutions for cloud computing: Migration++, Nimbo and

Agora which help businesses migrate to the cloud and offer a

service delivery platform

• Persistent Systems has launched eMee, a social networking tool for

businesses

• Mphasis’ Hygea is a Hospital Management Information System

which helps manage complete hospital operation and workflows

• Wipro has separate healthcare solutions for Large hospitals and

Mid-sized hospitals


Industry players establishing partnerships for

success

13 13-Nov-11

Developer Portal

End User Interface

Analytics

Retailing Platform

Customer Service

Portal

Common Integration

Gateway

Solution platforms

• Flypp for Mobile is a white-labeled mobile application marketplace.

It enables mobile operators, device manufacturers, retail brands,

media companies, advertisers and enterprises to engage their

consumers by delivering experiences across numerous mobile

devices, platforms and operating systems

• Flypp for Brands empowers advertisers, media companies, brands

and enterprises to engage consumers and provide new experiences

through branded applications and retailing zones

Infosys Flypp

Services Offered

TCS Co-Innovation Network (COIN™)

Alliances

WorkLight

Cicero

Focus area

TCS’ Co-Innovation Network (COIN™) is a rich and diverse network that

provides value to its customers within the entire technology landscape

Model

COIN™ is led by TCS Innovation Labs and includes academic

institutions, start-ups, venture funds, strategic alliance partners,

multilateral organizations and key clients. This helps COIN™ bring

forth true synergies and provide an ecosystem-like perspective to

innovation

Startups

Helion

Ventures

Nexus

VCs - India

IIT, Kanpur

IIT, Bombay

Academia

• Solutions in emergent and disruptive technologies

• Risk mitigation in deploying futuristic solutions

• Simplification in an increasingly complex technical environment


Disruptive technologies and increasing IT

adoption levels have boosted the products market

14 13-Nov-11

• Cloud computing

• Mobility solutions

• Sustainability

• Social networking

• Number of

engineering

graduates passing

out in India is

growing at more

than 20%

• Over 80 million

active internet

users in India

presently

Key Drivers

for Software

Product

companies

Huge “Native to

IT” Population

Base

Emergence of

Disruptive and

Innovative

Technologies

Availability of

VC funding and

expansion of

seed funds

• Many marquee VC firms such as Sequoia Capital, Helion Venture Partners and Nexus Capital India have dedicated

India funds to fund seed stage companies. Ventureast, an Indian VC firm has a dedicated fund, BYST growth fund,

for SMBs

• Global MNCs such as Citrix have started incubators and seed funds to attract product startups


• Improving connectivity across the country, specifically in tier 2 and

tier 3 cities, and higher access to computing is growing the consumer

base for homegrown product software and services

• National Broadband Policy aims to substantially increase the reach of

broadband and double the existing speeds

• Steps to ease procedural aspects of setting up a business

• Disruptive web technologies in mobile and cloud computing are

providing Indian startups a level playing field

• The number of skilled computer science, information systems and

design engineering graduates is on the rise

• Indian success stories such has increased confidence levels of global

VCs to invest in Indian product startups

• The evolution of the Angel networks is helping seed stage startups

• Industry veterans and leaders are increasingly willing to invest time,

mentor and champion the cause of startups in their chosen area

• Industry-Startup-Academia collaboration is on the rise

Key

Enablers

Improved infrastructure, availability of capital

and talent have acted as key enablers

15 13-Nov-11

Industry support

Ability to raise funds

SaaS / Cloud computing

Availability of skilled

talent

Favorable government

policies

Better connectivity &

computing infrastructure


Thriving startup landscape- ~1100 startups

in the last 5 years

16 13-Nov-11 Source: Zinnov analysis

76 89 71 67

21

9 8

9 5

2

188 173

117 112

64

3 3

2 4

14 12

7 7

23 30

22 26

4

2007 2008 2009 2010 2011 (YTD)

Business and Productivity Software Client / Desktop,System softwares and Tools Digital

Semiconductor Server / Infrastructure Software and Storage Others

Indian Software Product Startup Landscape

313 315 228 221 91 Total

Among all startups set up in past five years, digital (which includes ecommerce, mobile

and internet) and business and productivity software segments account for 56% and

28% respectively

Startups focusing on localized, India specific

solutions

17 13-Nov-11

Key Startup Focus Areas

Mass Visibility

Solutions

E-commerce

Education

SMB Niche

Applications

Mobile Applications

for Reach

Education startups are leveraging IT in developing

digital contents for students, provide distant

learning, virtual classroom and other related services

Startups focusing on mass visibility solutions are

leveraging IT as a backbone to make services available

to the customers in an effective and sustainable way

Large number of startups are mushrooming on mobile

delivery platform. These startups are enabled by a

robust IT infrastructure at the back end

E-commerce is on a rise and startups in this space

are dependent on IT to reach out to the customers

effectively. And the backend infrastructure is

required to be highly scalable and elastic

Startups focusing on serving the large SMB market

are leveraging cloud and web based technologies to

widen their customer reach


Startup activities around mobility

18 13-Nov-11

The Opportunity

• Any Solutions that provides a valuable service to broad

based customer segments and monetization is through

acting as a direct lead generation engine for

SMBs/Enterprises

• Example areas:

• Foursquare for India with direct monetization

model (revu.in)

• Earlier successes:

• Job sites with feet on the street to sign

customers (Naukri), Travel sites with feet on

the street to signup hotels

Reasoning

• 47 Million SMB’s in India all whom struggle with

customer acquisition

• SMB’s are willing to pay Rs.8000-Rs.15000 for listing

solutions and hence these make the direct channel

viable,

• These solutions are cheaper and more effective than

hiring a sales resource for a number of Micro Enterprises

Mass Advertising and localized Search

SMB’s/ Enterprises/ Individuals

Register with Just Dial and list

services by location

Success Driven by 3500 feet on street who educate the

traders on the need to be listed and how marketing at mass

scale is absolutely essential to grow your business.

Listing Director

Listing Sent to

Mobile

Call to

69999999

Trainer and

articulate

executives to

guide you.


Startup activities around Education

19 13-Nov-11

The Opportunity

• Solutions that enable education enterprises to scale

rapidly and efficiently.

• Solutions that enable collaboration between all

constituents interested in welfare of student- i.e.

parents, teachers, administrators, etc.

• Example Areas:

• Teacher-Teacher Collaboration Solutions across

schools, and with in schools with branches

• Student Data Management Solutions

• Learning Management Solutions

• Knowledge Based Intelligence Systems

Reasoning

• India has the highest addressable population in the

world seeking education

• Current total enrollment in education institutions is 273

Million and there are potentially 327 Million more

enrollments because of the RTE

• Parents want to be involved in the up bringing of their

children.

• Increased disposable income is being spent on education

Student Management solution delivered using a

human interface

Services Offered

Attendance

Reporting

School Event

Updates

Bus Schedule

Updates

Report Cards

PTA Intimations

Other Alerts

Value Proposition

The firm will deploy a resource onsite at the school who will

collect required data, and feed it into the system. This

helps ease adoption and change management pains

Business Model

Charge the parent per pupil for the information that is

being provided because of usage of the system.


Startup activities around SMBs

20 13-Nov-11

The Opportunity

• Solutions that address niche vertical and horizontal

needs of SMB’s are likely to succeed as these solutions

address pain points

• Example Areas:

• Collections Management Solution

• Retail POS Solutions for Mom & Pop Stores

• Pharma software for batch tracking

• Litigation Management Software for lawyers

Reasoning

• 47 million SMB’s in India

• They are spread across multiple verticals and follow

unique business processes.

• They want solutions that address their niche pain points

and are willing to pay a premium for such solutions

• The SMB spend on software and services -USD 2.1 Billion

in 2010

Solutions focused on BFSI Vertical with niche focus on

Micro Finance

Services Offered

Micro Finance

Platform

Litigation Software

Micro Insurance

Platform

Insurance Software

Value Proposition

Niche Vertical focused solutions that address a specific

customer pain point and is required by SMB’s to scale their

business

Business Model

Support technology platform with strong set of business

services that will allows the firm to remain continually

engaged with the client.


Startup activities around mobility

21 13-Nov-11

The Opportunity

• Any solutions that enable large industry verticals

looking to scale to reach a broader set of customers

and provide their services on mobile devices present a

significant opportunity in India

• Example Areas:

• Retail Campaign Management Solution

• Virtual Insurance Solutions

• Vaccination Tracker

Reasoning

• 520 Million mobile phone subscribers in India

• Industries such as BFSI, Retail, & Healthcare are looking

to grow rapidly by providing services to those outside

their current service net.

• Given the cost of sale and cost of reach, these firms will

look to leverage mobile devices to provide their services

to customers and scale.

• The services would have to be customized to the mobile

form factor and delivered

Financial Inclusion – Through mobile banking

•The EKO customer walks up to any of the

retail outlets licensed to operate as an

authorized "Customer Service Point" (CSP) in

the area

•For these customers, their banker is none

other than the friendly neighborhood "kirana

store”

•Plan is to set-up 500,000 such licensed

outlets within the next two years

•Eko has developed a low-cost banking

platform called "SimpliBank" which ensures

real-time transactions

•SimpliBank is a stripped down version of a

core banking platform with limited

functionalities (reducing cost to the

consumer)

•Eko customers type the bank’s short code,

then an asterisk, then the mobile number of

the person you are paying, then an asterisk,

then the amount, then another asterisk

•Account holders get booklets with pages of

11-digit codes. Seven digits of it are random

numbers, with four randomly placed black

marks, where the person enters his or her

PIN


Startup activities around e-Commerce

22 13-Nov-11

The Opportunity

For Products & Services that do not require touch and

feel

• Examples: Medicine purchase, Earlier successes:

Flipkart – Books/Movies/Music

Services that allows better user experience and

integrated work flow of online services

• Examples: Consolidated Bill payments,

Government services customized for a customer

profile

Reasoning

• Advent of social media will drive peer information

gathering online, and hence easier adoption of such

solutions e.g. Insurance, etc.

Online Taxation Services- Ease of use, low touch,

reasonable pricing

Services Offered

Tax Returns

Setting up Business

PAN Card

Business Accounting

Tax Laws

Digital Signatures

Value Proposition

Have productized a service that is traditionally something

where the business is not standardized

Business Model

Subscription schemes for individuals, corporate tie-ups, for

revenue generation. Tie up with ex- accountants and IT

professional and accounting firms for service delivery


Angel Investors

Seed Funds

Others

VCs Company Sector Amount ($Mn)

Investors

Naaptol.com E-commerce

7 Canaan Partners

Tyfone Mobile VAS 5 Ojas Ventures, Others

Xcel Telecom Telecom 154 Q Investments

Investment community in India comprises of VCs, Angel Investors who are actively investing in sectors

like cleantech, e-commerce, education, healthcare and infrastructure

The enabling ecosystem for startups is getting

ready for a big story

23 13-Nov-11

Financial Ecosystem

Technology Ecosystem Many companies have startup focused programs to fuel innovation and create win-win for both sides

Startups get access to resources like technology platforms, marketing resources etc

Companies get to evangelize their products/platform and gain market share

An opportunity to achieve global visibility to an

audience of potential investors, clients, and partners

Microsoft’s BizSpark program help software

startups succeed with right resources

Development

Distribution

Software

Support

Visibility

Assists software developers in writing

and distributing applications for Intel

AppUp

Access to current tools and platforms to design,

develop, test & demonstrate software application

A connection to over 2,000 BizSpark Network

partners who can provide guidance and resources

Software development support and application

validation through access to technical information

and updates

Worldwide distribution channel to manage

distribution of applications and application

components in app stores


http://en.wikipedia.org/wiki/File:Canaan-partners-logo.JPG

Product startups are being funded across

all major verticals

24 13-Nov-11

268

508

876

740

475 540*

44

94

144

125

92

110*

0

60

120

180

0

300

600

900

1200

2005 2006 2007 2008 2009 2010

Deal Value Number of Deals

VC Investments in India, 2005 – 2010

15%

3%

10%

2%

51%

5%

14%

Mobile Retail Healthcare

BFSI SW & IT Education

Others

VC Investments by Industry, 2010

*Data to filled in for other stages

Source: Startup landscape study by Zinnov, Indian venture capital association, Venture intelligence, TSJ Venture Intelligence India

• Majority of the VC investments in 2010 have been in the

SW & IT segment

• e-Commerce has emerged as the favorite theme

followed by internet businesses

• Mobile businesses, specially location based services

were also well received by VCs

Government encouraging product startups

through various schemes

25 13-Nov-11

OBJECTIVE

Develop competitive products and cutting-edge

technology

Manufacture and commercialize the product development

PORTFOLIO

Pawaa Software Pvt. Ltd.: IT security company

Mitra Biotech Pvt. Ltd.: Biotechnology company

Sloka Telecom Pvt. Ltd.: Radio access network solution

provider

OBJECTIVE

The Government of India aims to strength the innovation

eco‐system, Invest in innovative enterprises engaged in

providing solutions for the ‘bottom of the pyramid’

Mentoring entrepreneurs to build their enterprises

STEPS TAKEN

Set up a National Innovation Council (NInC) with the

mandate to formulate a Roadmap for Innovations for

2010‐2020 with a focus on inclusive growth

Structure of the Fund and its governance is now being

designed

India Inclusive

Innovation Fund

KITVEN - Karnataka

Information Technology

Venture Capital Fund Support for Entrepreneurial and Management

Development of SMEs through Incubator: This

scheme is sponsored by Ministry of Micro Small

Medium Enterprises (MoMSME)

Micro Venture Innovation Fund (MVIF):

Supported by National Innovation Foundation

(NIF)

New Millennium Indian Technology

Leadership Initiative (NMITLI): Sponsored by

Council of Scientific & Industrial Research

(CSIR) and provides grants (up to a few

Crores) to Public Institutions and Soft Loan to

Private Sector Companies

Micro Technopreneurship Support: Supported

by Department of Scientific & Industrial

Research (DSIR)

Small Business Innovation Business Research

Initiative: Supported by Department of Bio-

Technology

Other Schemes by

Government


Investors exits have only fuelled further

entrepreneurship

26 13-Nov-11

Target Acquirer Year of entry Year of acquisition

VM Logix Citrix 2004 2010

Dimdim Salesforce.com 2006 2010

Yasu SAP 1999 2007

Indiagames Disney 2000 2011

Armedia Broadcom NA 1999

Athena Broadcom 2001 2005

Pari Network Cisco NA 2011

Akorri networks NetApp NA 2010

Hy Trust Cisco 2008 2011

Company Year Investors

Persistent 2010 Norwest Venture Partners

MakeMyTrip.com 2010 SAIF Partners, Helion Venture

Partners, and Sierra Ventures

Thinksoft Global 2009 EurIndia

IPO exit

examples

M&A exit

examples

Source: AVCJ research, Business Standard

• Alok Kejriwal, a serial entrepreneur

has founded 3 companies

Contest2win, Mobile2win (sold to

Disney) and Games2win

• Satish Madira, cofounder of Yasu

and a serial entrepreneur, started

Dealivore, a startup in the daily

deals space

• Vishal Gondal, founder of

Indiagames, has started Blood and

Sweat Venture Group to invest in

seed startups

Post-exit

India has seen investors exit ventures through acquisitions as well as IPO offerings. The PE/VC industry

witnessed 37 exits through M&A worth $1.67 billion and 15 exits through IPOs worth $1.64 billion in 2010

In India, M&A is the preferred route with studies showing investors exiting through IPOs in 34% of cases

Primed for success- Projected billion $ mcap

Indian product startups companies

27 13-Nov-11

Category Key Highlights

E-tailing / Online Megastore

•Went live in 2007 •11.5 M book titles, 8 M visits/month •1 M registered users, 28,000 items shipped/day •Raised $31 M in venture funding from Tiger Global, Accel Partners. Reported to raise $150 M soon

Mobile Advertising

•Founded in 2007 •World’s largest independent ad network •Serves 50.4 B impressions monthly •Funded by SoftBank, Kleiner Perkins Caufield & Byers, Sherpalo Ventures and Mumbai Angels

Data Visualization

•Inception in 2007 •Bootstrapped •18,000 customers. 3,75,000 users •Used by 80% of the Fortune 500

Enterprise Backup

•Founded in 2007 •750 customers in 26 countries. Backing up 300,000 laptops •Raised $17 M in venture funding from Sequoia Capital, Nexus Venture Partners and Indian Angel Network (IAN)


ILLUSTRATIVE

Industry is set to experience accelerated growth

in future

28 13-Nov-11

• The evolution of disruptive Internet and mobile technologies such as cloud

infrastructure and delivery, HTML5 will usher in a new wave of cloud-ready

startups to cater to the global audience

• The availability of highly-skilled engineering talent, specifically in Computer

Science, Information Systems and Design will aid the growth of product startups

• The return of successful, skilled Indian immigrant talent from the US to India

will help shape up the ecosystem and provide much needed leadership

• The readiness of the Indian market will likely improve significantly due to

improved Internet/Wireless connectivity (3G, LTE and Broadband)

• Improvement in the ease of doing business, basic physical infrastructure

development such as power will contribute significantly to spur startup growth

• The per capita income in India is likely to double in five years. This will help

drive consumption, specially in e-Commerce

• The economic profile of businesses will improve significantly and help fuel the

consumption of business software by businesses

Technology

development

Human Capital

development

Market development

Economic conditions


Thank You