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Leveraging New Opportunities in Emerging Markets

Leveraging New Opportunities in Emerging Markets

Despite these benefits, there are challenges too. Subramanyam believes, these range from cultural and business practice diversity (which add an overhead of complexity for smaller organisations), price sensitivity, lower ticket sizes & monetisability, and lack of clarity & actionable advise on cross-border issues related to labour mobility, taxation, transfer pricing, lower levels of IP protection, etc.

Naveen Gattu, COO and founder of Gramener, an organisation dedicated to developing sustainable and socially responsible IT solutions, agrees that newer geos pose significant challenges for smaller IT-BPM firms.

"The first challenge is the geo itself. Considering that new geography will take time to adopt products and services and begin yielding revenues, smaller players need staying power to survive. The second challenge comes from the larger companies present in these markets, who have the business stamina and fiscal muscle to invest and wait for these markets to grow”, Gattu comments. In his opinion, both the scenarios become further complicated if the local governments have made the environment tighter with the stipulations of regulatory and trade compliances. “In this case, even assuming comparable products and services, larger companies with greater financial muscle and reach stifle the chances of smaller companies"

Both Subramanyam and Gattu also agree that government intervention can help smaller IT-BPM players to improve their chances in emerging geos. Their view is that government can help promote smaller organisations through differential taxes and subsidies for some select verticals, sourcing demographics (women, rural), etc. “These differential schemes will help companies not only to reach new geographies, but also experiment more with innovative products/services”, Gattu says.

Subramanyam states that both governmentand leading trade organisations need to focus on cross-border-related areas andIP protection.

"At a country/market level, the government should establish a dialogue and help define clear superstructures about labour, tax and cross-border fund movement. Setting up local entities and establishing a footprint in all these markets should be made easier. Bilateral agreements around IP protection need to be clearly defined”, Subramanyam says.

The general opinion is also that in thecontext of new geographies, it is verticals such as the government, financial sector (especially payment ecosystems for financial inclusion), retail and healthcare that will pay rich dividends to smaller organisations. What they will therefore need to provide are IT services and products that are outcome/value-based, low capex, multi-channel, easy-to-set-up and solve critical business problems in interesting ways.

Besides government support, smaller organisations are also looking to chambers of commerce such as NASSCOM, to further spur their growth and boost their potential, both on home turf and overseas.

NASSCOM has been actively supporting this ecosystem - including both service and product providers — enabling them to gain global competitiveness and traction within the chosen verticals. A range of initiatives have been launched by NASSCOM — covering outreach, policy, global efforts, funding, research, the domestic market, access and skilling, (as in the below mentioned box) — which are enabling organisations to get a leg up in various emerging markets.

A separate Emerge Forum has been created by NASSCOM that actively engages with smaller IT-BPM organisations across India on a regular basis, helping them overcome their challenges and enabling them to expand their global footprint.

Smaller organisations, including start-ups and software product development firms are expected to emerge as the growth drivers for the Indian IT-BPM industry going forward.

Over the last decade, there has been a surge in the size of the emerging community, owing a large part to the growth in the number of services providers as well as IT product firms. The product segment in fact, has experienced impressive momentum. Today, the industry boasts a robust IT products ecosystem, with organisations mushrooming in Bengaluru, the NCR region, Pune, Chennai and Hyderabad among others.

The emergence of cloud computing as a delivery model as well as disruptive Internet and mobile technologies have also spurred the rise of smaller players, giving them a level playing field in the marketplace. Product firms alone are expected to generate revenues of around USD 10 billion by 2020.

The growth in the number of Venture Capital (VC) firms and angel investors is also catalysing the expansion of the emerging market. Many marquee VC firms such as Sequoia Capital, Helion Venture Partners and Nexus Capital India have dedicated India funds to support seed stage organisations. Ventureast, an Indian VC firm has a dedicated fund, BYST growth fund, for SMBs. Global MNCs such as Citrix and Microsoft have also started incubators and seed funds to attract start-ups. Large organisations have begun incubating products for new verticals  and customer segments.

The smaller organisations, on their part, have been building themselves up by exploring new and emerging geographies (as opposed to the mature Western markets where the larger players are deeply entrenched). They are finding their feet in these locations and addressing their needs through innovative IT solutions.

It is clear that new and emerging geographies are creating huge opportunities for the smaller organisations, offering them special advantages.

According to Vivek Subramanyam, CEO, iCreate Software India, the high growth emerging markets - which are now heavily investing in new tech to become the best-in-class and on par or better than evolved markets - are becoming a hot bed of openings for Indian organisations.

"In their attempt to exponentially scale their capability and at a high velocity, corporates in the emerging markets are demonstrating relatively higher levels of risk taking. They are more open to experimenting and working with newer ideas from emerging companies if that gives them a good shot at jumpstarting their technology-driven innovation agendas”,
says Subramanyam.

A range of initiatives have been launched by NASSCOM — covering outreach, policy, global efforts, funding, research, the domestic market, access and skilling, which are enabling organisations to get a leg up in various emerging markets.

In his view, in emerging markets, smaller organisations have easier access to CXOs (making the sales cycle simpler) and face simpler procurement procedures. At the same time, these geos are open to and offer excellent prospects to organisations with unique business models that embrace local nuances. Smaller IT-BPM players that adhere to this trend by ‘being global and going local’ are certain to gain an edge in these locations, Subramanyam states.