India as a Product Nation

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India as a Product Nation The Next Google can come from India June 2014

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Simplifying Terminology Software Products Telecom Services Software Services Restaurants Auto Ancillary Plant Telecom Equipment Online Content Taxi Services E-commerce Startups Defense Aerospace Tech Industry All Startups Tech Startups Digital Industry Product Startups Software Product Industry is at the intersection of “Tech Startups” and “Product Companies” Industry View Entrepreneurship View 2

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Important Characteristics of the Software Product Industry 3 SCALABILITY. Cost of production is low and business scales rapidly once the product is established. VALUATION. Markets value Product Companies far higher than others, due to the non-linear scalability and Intellectual Property REGENERATING. One successful company spawns many more for service, support, distribution, etc. into a recursive growth POTENTIAL. Innovation and new product development has endless potential, once mastered.

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Software Product Industry A brief Introduction to the industry. Establishes the power of the industry and its potential for value creation. 4 1

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What is the Software Product Industry? 5 * The Neti Neti (Not-this, not-this) definition has been traditionally popular in India, in defining a concept as distinct from other known or established ones Tailor who can make shirts Ready-made shirts makers SERVICE INDUSTRY PRODUCT INDUSTRY Software products are not IT Services* IT services companies are like tailors who can either stitch custom suits or alter a standard design for the client. Software product companies make readymade suits (mass production). People select the suit they like, try it for fit, and buy it on the spot.

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Distinct Business Model As distinct as the Airlines (people moving service) and Aircraft (enabling Airlines) industry 6 SERVICE INDUSTRY PRODUCT INDUSTRY

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Service Industry is built on other people’s Products 7 TCS Global Services Company Infosys SAP Oracle Microsoft Customers (India & Aboard) Global Customers Impact: Viability and market success of products is mainly established by adoption by customers, particularly in Winner-take-all software product market

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Growing Service = Growing Product Adoption = Growing Value Creation. 8 Airtel Verizon Apple Samsung Cisco India Customers US Customers Recent Example: WhatsApp bought by Facebook for $19 Billion Over $40/user. Had substantial Indian user base. Same price/user paid to Hotmail by Microsoft in 1997.

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9 Trends indicate gradual, global shift from custom-made (expensive to build-own) to mass-customized. Investments into products is accelerating world over. Brand creates value.

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Branded Products capture value 10 Apple prints “Designed by Apple in California” on the back of every iPod and iPhone it sells, sometimes in a ridiculously tiny font size Foxconn the leading manufacturer of Apple* products gets $8 Per iPhone**. Apple, the owner of the design and Intellectual Property has $319 in operating margin per iPhone. * http://www.technobuffalo.com/2014/03/28/foxconn-credits-apple-with-13-profit-bump-in-2013/ ** http://www.slate.com/blogs/moneybox/2012/09/25/foxconn_getting_by_on_8_per_iphone.html

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Why India needs The Software Products Industry The Macro-economic argument 11 2

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Innovation and Software Products are deeply Linked 13 in many ways The fastest pace of innovation happens in the tech world Innovation leads to Intellectual Property (patents) and further leads to product development Software Products are the quickest way to deploy innovation at scale

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Software Product Startups > Entrepreneurship >> Competitiveness 14 Most new startups in India are software product startups Increased consumption of innovative technology at an affordable cost They solve important problems of small enterprises and consumers Other industries too becomes globally competitive and attain scale

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Product imports are growing faster than Services exports 15 Growth in Indian IT Services Exports to Slow Down** Nasscom. 2012 India electronics import bill could surpass oil* - senior advisor Govt. of India * http://www.reuters.com/article/2011/11/13/india-wef-electronics-idUSL3E7MC08E20111113 ** By John Ribeiro, IDG News Service. http://www.pcworld.com/article/249598/growth_in_indian_it_services_exports_to_slow_down_says_nasscom.html

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Now, the need to play the Product innings 16 Natural Resources Iron-ore, marble, etc. (unfinished) Leather, gems, etc.(semi-finished) Body shopping (human) Made-in India Services Telecom (Airtel) Airlines (Indigo) SW Services (Infosys) Hospitals (AIIMS) Made-in-India Products Defense Aerospace Electronics Software Products First innings Second innings NOW! Third innings Need to build Higher-value Export Portfolio

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Transforming India Our Software Product Industry is solving India’s hardest problems 17 3

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Productivity Gains = Transformative Potential 18 Software products offer solutions that can be deployed in a distributed fashion to millions of small enterprises and consumers untouched by technology till today.

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Example. Tally accounting software product has helped nearly a million SMBs gain control on their finances and taxes 19 Made in India. Made for India

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Software Products for Agriculture 20 Agriculture Farmers can embrace new knowledge and information to improve efficiency and speed in the agri supply chain

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Education Software Products for Education 21 Creation of innovative test-prep products and state-of-art teaching to bring in learning effectiveness.

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Healthcare Software Products for Healthcare 22 Software based medical devices and personalized oncology treatment is improving productivity manifold.

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SPI will provide innovation blowback to the rest of the world. Not just India for India. 23 Tremendous untapped potential to innovate exists in India

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What creates a successful industry? This section outlines some of the factors that influence creation of a successful software products industry. 24 4

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Lack of Productization. We are unable to create value out of our successes. Examples. 25 We conducted the World’s largest successful election. Are we becoming the “Microsoft” of Polling machines? Should we not be a global leader in identity implementation, apps and services with “Aadhaar”?

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Why Indian Products are unable to gain advantage from large domestic opportunities 26

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Can we tilt the balance? Creating level playing field. 27

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Buying Services rather than products leads to inefficiencies 28 Cost of development is far higher than cost of customization. Maintenance and update cost would exceed cost of development. Lost product opportunity. Main issues:

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Does the Government have a role in developing an Industry? 29 Government as a Participant Government as a Catalyst Many examples are available where the government has set the agenda that was fulfilled by private enterprises

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Software Product Markets = Winner-take-all. 30 * Branding, euphemistically ** Depiction borrowed from Concept Green, LLC. Although the idea is very common. http://www.conceptgreen.net/buzz/blog/hello-world-welcome-to-concept-greens-inaugural-blog Opinion* Matters. Startups wielding less opinion-making power, lose out to established players despite good product

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Government Could help. While the Private sector helps itself. 31 Industry think tanks and organizations would create buyer awareness for “Made for India” products, Govt. should create platforms for apps through APIs. Govt. should promote incubation centers under PPP-model to improve odds of success for startups. Pool of Software products of importance d d d While the Industry promotes entrepreneurship and employment in startups as a good career option, the Govt. should draw focus of the best minds on critical problems through Challenge Grants. d Software Product Industry recognized as a National priority Market Making, to create viable domestic opportunity Make it easier for startups to climb the ladder Strategic software technologies d Reward success

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India’s ticket to becoming a Product Nation Shift from Services to Products is not easy 32 5

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Why “Product Nation” 33 Based on the Story of Israel (called “Startup-Nation”) that has become a power house of Technology product startups that gain global acceptance. ISRAEL Second largest in companies doing IPO on NASDAQ Second highest number of tech acquisitions in the world

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Software Products Industry can do what the Space Program did in the 90’s 34 The train has not left the station and a small nudge for Software Products will deliver big wins for the country

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The possibilities are astronomical Indian SPI touches 3m small enterprises today. It will touch 30m enterprises – small businesses, rural schools, primary healthcare centers, small farms, etc. - in 10 years Creation of 1,00,000 Software Product Companies in India, leading to employment of 3.5 million technical people, and creation of $500+ billion in Market Value in 10 years 35

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Brand India 36 Software services branded Indian talent Software products will brand Indian innovation across the world GREAT ENGINEERS GREAT IDEAS Gradually change the branding (reflection in the minds of outsiders)

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The Two-part Products Story The Current Theme 37 Gradually shift from Current theme “Made In India” or “India Inside” Global Brands Software developed in India

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The Two-part Products Story The New Theme 38 We are in the best position to understand and meet the needs of India Our innovation and scale can serve global market demands To a new theme of “Made for India” + “Made from India”

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Three fold controls The Software Product Industry could provide 39 The choice of technologies that could provide the best outcomes, chosen through studied approach. Focus on building user experiences that work best under local conditions (e.g. Mobile First approach). Products made in India could address the current and pressing needs of the local market. 2. Consumer Experience 1. Customer Priorities 3. Technology Rollout

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Enablers of the Transformation Do we have the right enablers that are needed for the emergence of Indian Software Product Industry in a big way 40 6

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4 Major Technology Enablers 41 Mobile Smart phone that can run application and deliver services When and where you want Cloud Pay-as-you-go inexpensive infrastructure. Scalable as needs grow API Flexible, safe and easy way to combine applications that use each other Open Source Free to use software that can be combined effectively into apps and platforms

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Cloud makes Infrastructure Affordable and Accessible 42 “Public Cloud” (Lease Rented Apartment) Infrastructure from a service provider. Pay for use only, one machine at a time “Private Cloud” (Self-owned Apartment) Your owned Infrastructure made easy to use All paid upfront. Privacy means confidentiality Comes in Two Flavors Cloud Providers Any Corporation Any Government Build and own your Cloud. Tools available

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One device formula User Computing Device = Smart phones with Apps 43 India is seeing a surge in Smart phones (one device for voice and computing needs) and could become the default user computing device to build “Made for India” apps Smartphones Are PCs.. ...only they're more personal... ...and do nearly everything better... Headlines from the article on LifeHacker: http://lifehacker.com/5681573/your-smartphone-is-a-better-pc-than-your-pc-ever-was-or-will-be

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The Apps Economy: How it works. 44 Software Platform API Management Key technologies of Cloud (distribution), API (secure, controlled access to platform), App App Store (Marketplace on Cloud) Apps (Paid or Free) Developers End Users Choose Apps they need and install Sell apps they make

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The World is moving towards API 45 API* enables independent entities to build software (products) that can link and work together with ease. Integrated applications or products is necessary for good user experience. Core Banking Application with API access Personal Finance App Tax Planning App * Application Programming Interface (API) is fast moving to become a business concept than a technical one.

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API Technology mature and now available 46 Many products and major apps Provide API service Advertising App Games Other well-known API providers

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47 Free and open-source software now powers every computing need * The world has realized that Open-source cannot compete on price alone Certain critical areas of technology may need National initiatives to make open source software usable and practical

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National Initiatives on Open-source Infrastructure: A Chinese Example 48 * People’s Republic of Open Source: China Preps National Linux Distribution The reference architecture is being defined by the Ministry of Industry and Information Technology’s The China Software and Integrated Chip Promotions Centre, or CSIP * Some useful links on the subject: http://www.wired.com/2013/03/ubuntu-china/ Technical Evaluation Report. The Emergence of Open-Source Software in China [http://www.irrodl.org/index.php/irrodl/article/view/331/762]. Open Source in China http://www.slideshare.net/jaaronfarr/open-source-in-china-updated

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Affordable Platforms that enable Product Innovation 49 Cloud Computing Smart Phones & Apps API-driven Development Open-source software Reduce capital expenditure on hardware infrastructure Subscription pricing affordable Designed for building software that integrate with each other Easy to build services that get widely adopted Smart phones would be the future of user computing devise Easy to build with small teams Reduce capital expenditure on software infrastructure Free, but needs work on making effective use

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50 Thank you