Bus. Std: Selling Software in India

My latest column in Business Standard:

The business of selling software in India is a tough one. For one, there is a small installed base of computers about 10 million, in contrast with 75 million wired and mobile telephone connections and 55 million cable television households. In addition, only a minority of the users pay for software the rest are fine with just making illegal copies and using it.

Software production, like other digital products, has a high fixed cost but a low marginal cost. For the most part, it is easy to copy. While the large enterprises need customisation and therefore have to pay for the software they use, the small- and medium-sized enterprises can use standardised solutions to start with. The consumer market does not see the benefits of paying for something that takes a few minutes to duplicate.

India is a market where 90% of population has to do with non-consumption of software. Of the remaining, 90% use pirated software. Legal software in India has only a 1% marketshare. So, even as India creates software for the world, our domestic market languishes. Little wonder then that we have few software success stories in the local market. Software is the oil of the information age there is no way India can build the next-generation digital infrastructure without it. If software companies and entrepreneurs do not feel they can make money from India, our growth will be hampered in the long-term.

Atanu Dey wrote recently on his weblog (http://www.deeshaa.org): As someone noted, people don’t want a quarter-inch drill — what they really want is a quarter-inch hole. So also, it is not that people want a personal computer — they want the services that a PC delivers. Owning a PC is not a great idea if there aren’t sufficient number of services one can obtain from one. Whether these services are available or not is not within the control of consumers of PCs. The conclusion therefore is that people will buy PCs only if it fits a larger ecology that is largely outside the control of any one single entity.

To build the ecology of computing and software in India, there are five issues which need to be addressed: availability, desirability, affordability, delivery and localisation.

First, computer deployment in India needs to increase not by 40% but many times that. India needs to build a base of 100 million computers across its small and large enterprises, governments, schools, colleges, homes, and rural hubs. This will provide the necessary base for developers to look at the market seriously. For this to happen, the total cost of ownership has to come down not just of the hardware, but also of support and maintenance. What is needed is a rethink of the computer architecture the availability of cheap silicon and storage and the coming world of cheap and plentiful bandwidth creates a platform to centralising computing and making thin and low-cost user devices. For every one new thick desktop, we could be deploying four times the number of thin access terminals.

Second, the value of software needs to be demonstrated. There is a need for better communication of what software can do both for our personal and for our work lives. Look at the computer ads that newspapers have there is barely a mention of what it can do. The focus is entirely on a gobbledygook of terms which describe the hardware. The experience of computers must be brought closer to people. This can be done through the creation of computing centres in every neighbourhood in India much like the way the STD/PCO booths brought the telecom experience to people.

Third, most software is priced in the Indian equivalent of US dollars. While this needs to change to more locally affordable levels, only clamouring for cheaper software without bringing in other elements is not enough. For example, by making available financing options for software as part of the complete computing solution, the entry costs can be significantly reduced allowing more users to start using it and see the benefits for themselves.

Fourth, there needs to be a change in how software is delivered. As broadband connections start proliferating, it will become possible for software to be delivered as a utility from centralised computing facilities. This utility approach to software will ensure that piracy is all but eliminated. A similar approach to gaming in China has created a large market with users paying on a usage basis. In addition, software needs to be part of a whole solution comprising hardware and maintenance.

Finally, there is a need for locally relevant solutions. Two approaches that need to be taken are to create content and software in local Indian languages, along with taking in the local context for business applications.

The software ecosystem needs to be built for businesses and entrepreneurs to thrive. It is not just about commercial or open-source software both are needed, just as we have the bicycles and the luxury cars. What users need is choice, and the current ones piracy or non-consumption are unhealthy for the industry and the country.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.