Is there any advantage for an enterprise #startup product company to start in India?

Last night I had the chance to be at the event organized by Helion Ventures on Enterprise product startups. The event itself brought about 50 entrepreneurs and investors in the space. I believe the best part of these events is the quality of individuals, which has a direct correlation on the quality of the conversations. This event brought the best folks building enterprise software companies in India.

As a prelude to the conversations, Helion shared results of the survey they had commissioned. This survey had many CIOs (of Indian companies) and about 50 entrepreneurs building companies in the space.

While the results of the survey will not be surprising to those who live and breathe enterprise software, I thought I’d first highlight 3 most important things I took away from the event.

  1. Over 60% of CIO’s in India, were willing to “kick the tires” or talk to startups, engage with startups, conduct POC’s and look at early stage software solutions, but only 13% were willing to buy. Entrepreneurs selling to Indian CIO’s know this very well. CIO’s cited lack of understanding of enterprise support requirements and deficient customer service as the top 2 items for their unwillingness to purchase. (P.S. I rolled my eyes on this one. My 2 cents, they are just amazingly risk averse).
  2. Entrepreneurs, on the other hand, cited the (in) ability to sell (hiring sales people, delivering strong sales value propositions and building great sales teams) as the #1 issue they faced, followed by hiring and building great product management talent in their companies.
  3. Finally both entrepreneurs and investors were more likely (over 60%) to focus on North American markets as their first (and in many cases only) target, followed by Indian markets or global markets. Another part of the survey was size of the target customer. While many were focused on large enterprise, there was a good mix of SMB targets as well.

The more interesting part was the discussions and key questions that followed, each of which could be a blog post in themselves.

  1. Is building an enterprise company out of India, an advantage or disadvantage?
  2. What should investors in enterprise software do to create a better environment for startups?
  3. Is field sales dead?

There were 2 other questions, but these were the most interesting to me.

Participants gathered into teams of 10 people each and they had to discuss the question and help come up with some potential topics and points to consider for research.

We did come up with a framework for the first question – when is building an enterprise company out of India an advantage and when is it not, and when is it a disadvantage.

I’d love more feedback on the framework we came up with to answer the question #1.

Manju Gowda (from i7 networks) and Sachin were part of the team that presented our point of view. The key framework we came up with was a 2X2 matrix with Cost of the product and Value delivered to the customer on the 2 axes.

If you look at the 4 quadrants, only if the Average Selling Price (ASP) was low and the value the customer got was very high – both in terms of time and the economic benefit, was being an enterprise software company from India an advantage. So SaaS companies that offer an order of magnitude better capability and value at a much lower price point (small enough to buy online without a sales person’s help) then being in India helped.

If however the ASP was high and the value from the product was high as well, then unless you have a field sales team that can help sell, you have a distinct disadvantage being in India.

Similarly, if you had a low priced product and the value that the customer got was low as well, it is neither an advantage nor disadvantage to be in India.

Finally if you the ASP is high and the value a customer got was low, then US enterprise software Product Company would do better.

We gave many examples how this model makes sense, but since this was something we came up with in 15 min, I was curious what the rest of you think?

Except if you have a low ASP and unreasonable ROI (Value) for the customer, I don’t think enterprise startups benefit from being founded in India.

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10 thoughts on “Is there any advantage for an enterprise #startup product company to start in India?”

  1. I was going to scream at point 1 and was cooled off after I saw this “P.S. I rolled my eyes on this one. My 2 cents, they are just amazingly risk averse”

    Having sold to large enterprises in India and to some extend in US too, I can confidently say, CIOs do well in surveys, in real world they really suck! This applies to CIOs in general across the world and much worse in India. Of course, there are 1-2% exceptions like Pramod (http://in.linkedin.com/pub/pramod-krishnamurthy/0/865/82a) – they are god send!

  2. Here are my observation based on running a hugely successful enterprise product at ZOHO for about 5 years
    Disclaimer: I managed the product from 2004 to 2008 and so the observation is dated.
    1. It is reasonable to assume that you would be competing on (lower) price, in addition to feature parity and equal / better user experience when compared to more expensive vendors based in NA / European markets. You would leverage the fact that cost of development is significantly lower here to deliver the price advantage for the customers.
    2. You would look to target NA / European markets with upto 70% of more of your sales coming from there largely through Google Adwords since your lower price might not offer you the luxury of expensive field sales teams.
    3. Selling in India was EXTREMELY difficult. All the more so if your product was in the areas of security / configuration management. Monitoring / analytics tools were comparatively easier (only comparitively). I do not believe that you get better reception from the typical Indian CIO just because you are an Indian company. A customer who is also a startup MIGHT give you some slack
    4. Once you get some initial traction, things do start get a lot easier here. Its easier to convince Big-Service-Company-A if Big-Service-Company-B and Big-Service-Company-C are already using your product (but remember getting B and C are a big challenge)

    Thanks
    Raghu Ramanujam
    Founder & CEO, PoolCircle

  3. Hi Mukund,

    Thank you for the great article. I liked you analogy on “building an enterprise company out of India”. I fully agree with your points. I need your help in doing a similar analysis on building a mobile technology company (Building mobile apps or something you think one should try) out of India.

    Thanks,
    Murty

  4. Less than 1% of our customers (for grexit.com) are from India – and this is over a fairly large base – large enough for you to draw far reaching conclusions from this.

    A startup trying to sell only to Indian businesses is doomed from day 1. But the question is – given the reach that internet gives you, why would you even focus on Indian businesses. The world is your playground.

  5. Even the enterprise focussed startups in the north american markets have been thriving on the early adopters. Example – Oracle – Eloqua deal. It became too difficult for Eloqua to grow into the mainstream markets.

  6. Why talk only about the risk averse CIO of any large Indian company, does it not say the same thing for any Indian company itself. They just dont want to take any “risk”. After all their jobs are on the line. They have all grown from very middle class “save and safety” mentality and most senior managers are “single income”, saving and waiting for their retirements !

    Only if an idea passes such ” their safety tests” will the companies be able to build new businesses. Look at how many “great companies” been recently built by Indian Family business ?
    Most Indian focused successful companies like Just Dial or any e commerce companies are all started by individuals willing to take the risk
    Building a successful Indian product business for the Indian Manager is a uphill task.

    I like that last comment by Rout, when the internet is gives such a wide access, why build at all for the Indian Market ? For every Rupee of effort, you have 60 chances to try in an global market ! and 59 chances to fail ( I USD = 60 rs ).
    Why wait for a Rupee return.?

    Let us hear from any of the Indian Managers who can defend their opinions on why they dont buy from Indian product enterprises ?

    Shivaram

  7. I run a product company selling MES solutions to global markets. I see huge advantage of being an India based company targeting Global Customers. Key advantages of being in Bangalore are abundant availability of Specialized Skills. I work with more than 15 part time consultants with very specialized technical skills. They all work for very reasonable rates and help us build a product that is extremely valuable to our customers. I don’t think we can get such value anywhere else in the world. We have to build sales/support partnerships to penetrate global markets, but as an Indian company based out of Bangalore, we have an unfair advantage in building niche products/solutions that can be sold into Enterprise Class customers with huge value for money differentiation in it. So far we have never under-sold ourselves when we fight with competition from the world. However, the overall value we deliver is significant and customers see that clearly. It is like a Hyundai car V/s a BMW. Hyundai can pack significant value for the money and we are able to drive the Hyundai Value with the BMW quality, because we are based out of Bangalore.

  8. Mukund, Great insight on the ASP-Value matrix . I am the co-founder of a SaaS e-commerce platform and we are targeting India retailers. In our case, the Average Selling Price is low because we are offering platform with free design templates. We acquired a few customers and seems like a bumpy ride. What do you think..should we continue to focus on Indian retailers or go out and target north america – just like most of the indian B2B start-ups are doing.

  9. Great to see a post with a clear solution to the “problem” of the “risk averse Indian CIOs”. While I feel like saying, “whiners never win, winners never whine”, when a struggling entrepreneur is relating his tale of woes, I have to bite my tongue). Now, thanks to Mukund, I can recommend that this might be “the right quadrant for you!”.

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