In his column in the March 20 issue of Red Herring, Jason Pontin calls on India to sell branded software products and premium consulting services with higher profits to the world. He argues that India must move up the value chain and develop its own international brands, saying that India is no longer the cheapest place for software development.
While there is no immediate threat to the Indian software industry, companies definitely need to look at the branded software products market. A good example ahead of is what the Indian pharmaceutical industry is looking at doing. Look at what Cipla has done to the AIDS market in Africa by introducing its own products at a fraction of the prices of what the bigger multinational companies were charging. Indian firms like Ranbaxy and Dr Reddy’s Laboratories are also going international with their products. An excerpt from an article by Joanna Slater writing in the March 8 issue of the Far Eastern Economic Review:
Last month, Mumbai-based Cipla said it would sell a combination of anti-Aids drugs to governments around the world for a fraction of the price quoted by multinational pharmaceutical companies. The cost to countries would be $600 a year, while Medecins sans Frontieres, a non-governmental organization, could buy the medicine for $350 provided it was distributed free. That’s well below $1,000–the lowest price offered so far by the major drug companies as part of a limited programme negotiated with three African governments. Normally, treatment in the United States and Europe costs around $10,000.
In an industry where price is discussed in whispers, Cipla’s highly public, no-strings-attached proposal has had an explosive effectCipla’s real contribution has been to demonstrate that the prices of anti-Aids drugs are malleable.
Yusuf Hamied, its chairman, says that with time, prices will fall even further. “There is a place for the multinationals at their prices and there is a place for us at our prices. And tomorrow, believe me, other Indian companies will give it at $200.”
Can India do something similar in software? If so, which is the area that should be targeted?
As we seek to answer these questions, let us consider what Michael Porter has to say on the Internet is an article in the March 2001 issue of Harvard Business Review:
The key question is not whether to deploy Internet technology – companies have no choice if they have to stay competitive – but how to deploy itInternet technology provides better opportunities for companies to establish distinctive strategic positionings than did previous generations of information technology…The next stage of the Internet’s evolution will involve a shift in thinking from e-business to business, from e-strategy to strategy. Only be Integrating the Internet into overall strategy will this powerful new technology become an equally powerful force for competitive advantage.
The Internet and the innovations and disruptions it fosters offers Indian companies a tremendous software to make an entry into the international market of branded software.