Report findings indicate annual revenue aggregate of Indian software product businesses forecast to clock ~USD 9.5 to 12 billion by FY2015

NASSCOM, the premier trade body and ‘voice’ of the Indian IT-BPO industry, released the findings of the 'NASSCOM Software Product Study: Outlook for Indian Software Product¹ Businesses' at its second annual Product Conclave, that kicked off in Bangalore today. In addition to the Conclave, NASSCOM also organised an exclusive first time platform for product companies to display and demonstrate their products to the delegates of the conference, through the ‘Product Expo’.

NASSCOM has undertaken a path-breaking report on the Product Business in India that aims to define a roadmap on the market opportunities and key recommendations to help India emerge as a `product’ country.

As per the report, the next decade will play a crucial role in bringing about disruptive growth for the Indian Software Product segment, and the annual revenue aggregate of this segment is forecast to grow from USD 1.4 billion in FY2008 to USD 9.5 to 12 billion by FY2015². This is evident from the recent trends in market activity aided by a maturing ecosystem, which indicate that the Indian software product businesses are now approaching an inflection point in their evolution, and the time is right to bring about disruption. Enterprise application software will present the largest opportunities with BI, ERM with storage and security being the key priorities.

Speaking about the report Mr. Som Mittal, President, NASSCOM said, “The product segment in India has the potential to grow ten times its current size and touch anything between USD 9.5 to 12 billion, over the next decade.  We have a lot of work to do and have identified all the stakeholders who can make this happen.”

Dr Ganesh Natarajan Chairman NASSCOM and Deputy Chairman and MD, Zensar said, "The Product industry in India is coming of age with world class IP now being created from India in key domains and end-to-end design and development services provided to global ISVs by captive and third party units in India. With new models like SoA and SaaS now maturing, the opportunity exists for Indian product development to take the global spotlight. This will need focus on breakthrough innovation and global marketing with access to multi-level funding. An ecosystem for creativity must evolve in the leader and challenger locations to enable this, and NASSCOM is committed to making this happen."

Commenting on the potential of the segment, Mr. Subash Menon, Chair NASSCOM Product Initiative, Founder Chairman, MD & CEO, Subex Limited said, “the first ever study of the software companies in India and their business has revealed several startling facts. The industry seems to be spawning product start-ups at an amazing speed. This much needed momentum will fuel a mass movement in the products business in India. I am also thrilled to note that there are at least 10 to 15 companies that seem to be scaling up, apart from being successful in the global arena. These companies will act as the pillars of this nascent, yet promising industry. The required growth rate of 30 to 35% to take the industry from the current revenue of US$ 1.4 billion in FY08 to about US$ 10 billion in FY15 seems quite achievable, given the fact that the industry has been growing at 44% over the past 3 years. India clearly is poised to emerge as a key player in the lucrative and fast growing software products arena within the next few years.”

Talking about the findings of the report, Mr. Pari Natarajan, CEO, Zinnov said, “The Indian software product story so far has been an export driven story with 68 per cent of the revenues coming from just exports of these products. However, going forward, home-grown software product businesses will surely witness an increased acceptance in the domestic market, thereby increasing the revenue share from domestic sales. We very strongly feel that by 2015, Indian software product business revenues would be more evenly balanced between domestic and export based sales and share of revenues from the domestic market would increase from 32 per cent in FY2008 to an average of 41 per cent by FY2015 to reach US$ 4 to 5 billion. Key parameters such as proximity of Indian software product businesses to the local market requirements; excellent understanding on localization requirements, and ease of adopting customized and targeted sales approach would fuel this growth”.
India’s R&D offshoring experience, software product talent landscape, the high innovation – low cost advantage, domestic market potential, changing VC environment and support ecosystem all contribute towards positioning India as a strong contender in this space and position it to capture a slice of the global software product pie.
 
Industry CEOs, CIO’s of user industries, product startups, technology seers, venture capitalists, angel investors, and marketing experts will congregate at Bangalore for this two-day action packed agenda of debate, sharing of new initiatives, and showcase of Indian products in the market.

Product Connect
NASSCOM and Intel also launched a new initiative “Product Connect” to empower Software Product companies in India with Technology, Marketing and Business Development support across their business lifecycle. In an effort to help Indian Software Product companies become competitive, the program provides a unique combination of tools and resources to help address some of the software community’s key challenges, needs and demands. Beginning with strategic planning and insights into Intel’s technology roadmaps, support on product development, application enablement, assistance in augmenting marketing campaigns and access to the Intel’s network of resellers, the program aims to cultivate a richer and more robust software ecosystem of innovative solutions.  The NASSCOM Intel Product Connect initiative was launched during the NASSCOM Product Conclave & Expo 2008. Intel was represented by J. Scott Harrison, Director, Intel Software Partner Program and Narendra Bhandari, Director, Intel Software and Solutions Group, APAC.

Key highlights of the report Recent trends in market activity aided by a maturing ecosystem indicate that Indian software product businesses are now approaching an inflection point in their evolution. The next decade will be a period of disruptive growth for this segment, with the annual revenue aggregate of Indian software product businesses forecast to grow from USD 1.4 billion in FY2008 to USD 9.5 to 12 billion by FY2015.3 Market: over the past two decades, India has emerged as a global hub for product research and development (R&D) activity, especially in the technology industry. Today, there are over 600 multinational companies (MNCs) undertaking product R&D in their subsidiaries in India Accelerating growth: over the past 3 years, the annual revenue aggregate of Indian software product businesses has grown at a CAGR of 44 per cent. Leading Indian software product firms have strengthened their product portfolio through steady investments in organic growth as well as through overseas acquisitions4, and have reached credible business scale Broadening industry base: Of the existing 371 software product start-ups since 2001, over two-thirds have been formed in the past three years – of which ~100 companies have started their operations in 2007 alone. As a result, while the top 10 companies still dominate, accounting for 84 per cent of the segment revenues, there are over 200 midsized companies and start-ups that have started generating revenues and are contributing to its growth Incubation support and venture capital (VC) interest - today there are 38 incubation centres spread across the country that are actively focused on assisting technology start-ups with funding and mentorship. Since 2005, total VC investment in India has grown at a CAGR of 42 per cent to reach USD 543 million in 2007. Over the same period, funds invested in the software products segment have grown at a slightly faster CAGR of 43 per cent, from USD 76 million in 2005 to USD 156 million in 2007 Growing market - India is forecast to be the world’s fastest growing IT market over the next few years, with its share of the global software market growing threefold by 2015. Increasing IT penetration across small and medium businesses (SMBs) and the government/public sector are likely to be the key drivers of this growth. Estimated SMB share of domestic IT spending is forecast to grow from 38 per cent, currently, to over 50 per cent by 2015

Current trends in the evolution of these factors indicate strong momentum, supporting a positive outlook. Targeted actions by key stakeholders across four key themes will help accelerate the next phase of growth, and enable the annual revenue aggregate of this segment to reach USD 9.5-12 billion by 2015. These are
o Influencing market development
o Enhancing talent pool
o Strengthening capital ecosystem
o Augmenting the support ecosystem

Key Highlights of the Product Summit
- NASSCOM Product Business Study Launch
- Key emerging opportunities for the Indian Product Industry
- High potential sectors : customer Insights on Industry Verticals; their Expectations of Products
- Talent proposition for Product Business in India
- Product Business - Shift from Product Development to Product Management
- Understanding Markets, Customers and “Go-to-market” strategies and methodology
- Industry analysts on Issues around capital, growth, organizational structuring; Angel, VC and PE investment priorities and value propositions
- Showcase of 4/5 emerging companies

^{1An Indian Software Product Business is defined as a company headquartered in India, that has developed and/ or owns the software IP (includes software IP owned through acquisitions) and undertakes the packaging and / or selling of the software itself or through channel partners}

2FY indicates the 12 months ending on March 31 of the respective years

^{3FY indicates the 12 months ending on March 31 of the respective years.}

^{4While the segment analyzed in this study only includes overseas acquisitions by Indian software product businesses, the acquisition of leading Indian software product businesses by global players have also helped in revalidating the case for a successful Indian product play.}

 

 

Updated on: 28 Aug, 2008