marketing in software industry

Importance of Marketing in software service industry


The latest catch phrase in the Indian software services industry is about ‘moving up the value chain’ by doing it the product way. But companies are practicing just the reverse and setting up call centers. These are two opposite direction of value chain. There is nothing wrong or right in either di-rection of value chain, as long as it makes a business proposition. But it calls for an introspection of where we want to be as brand ‘India’. The success of Indian soft-ware companies hinges on their ability to tackle various challenges faced through a well-planned strategic framework.
The high end of the value chain i.e. the products require high amount of technical and marketing expertise and is a high risk, high return game. Today Microsoft in office softwares, Oracle in databases and Adobe in publishing software are the strong brands and command the ‘top of the mind’ recall. None of the Indian product can be thought of to command that recognition level. That is not only because of size, skills and scope of the Indian companies, but also the strategy and strength (weak-ness) of the IT companies. Indian compa-nies leveraging on the ‘low cost’ proposi-tion created a big market for themselves. But yesterdays business wisdom cannot be taken as maxim for tomorrow’s trans-forming markets, especially in technology domains. The need of the hour is to con-tinuously build up the capabilities and move from ‘low cost’ model to ‘premium product’ model. Here ‘premium product’ signifies the association of complete skill sets and resources for commanding pre-miumness and demand for the product. The high profit margins earned along with the long term brand building are the chief advantages of the product strategy. Few Indian brands like Marshall of Ramco, Fin-nacle of Infosys are there but are restricted to enterprise segment and hence are un-able to build consumer level ‘brand aware-ness’.
Despite rapid growth and having many cost-related and technical advantages in software sector the share of Indian soft-ware products and services in the global market is around 1 % and has stagnated there for quite some time. This indicates that the global market is expanding at a much faster rate than the capability of In-dian software market to cater to. In this scenario the ‘Product Way’ offers huge op-portunities and challenges for the Indian software industry.
Challenges in software product market-ing:
• Visualsoft fails to deliver on product model and to switches to solutions model
• i-flex’s Flexcube is world's second largest selling wholesale back office banking solution
• Products account for 7 percent of TCS' revenue, and 5 percent of Info-sys’
• Share of products in the India’s soft-ware exports is less than 5%
Above facts give a conflicting picture of what is the Indian software product sce-nario? It surely is conflicting and confusing, if the issues pertaining to it are not under-stood and further a clear strategic focus is absent. So what are challenges faced in making a successful product?
• R&D : The development of software involves broadly the following stages: requirement specification, prototyping, designing, coding, test-ing and maintenance. While the first few stages call for highly skilled manpower, skill requirement is rela-tively low in the later stages and that is where Indian companies are oper-ating. The challenges and opportuni-ties lie in the higher skills levels of requirement analysis and designing which call for domain expertise to be clubbed with the leading edge tech-nologies through the research and development investments. Thus its moving from low skills based main-tenance jobs to high knowledge based development. The product development is also leads to earning intellectual property rights and hence offers long term earning potential.
• Marketing & distribution : The nemesis of Indian companies has been their inability to go beyond ‘contract rate’ based competition. Today companies are finding it in-creasingly important that billing rates are under continuous pressure and it is expected to get more severe in the days to come. It is a natural busi-ness phase of maturity that Indian software industry is entering into. This is the time for the companies to recognize and reorganize their strengths and invest in sales and marketing strategies. The bottomline is that the transition has to take from provider of commoditised contract labor services to product / brand led solutions consultants.
• IPR protection & Licensing : Of the various options by which the interna-tional product market can be cap-tured, licensing has emerged as the most preferred way. This is because it offers small but continuous returns for a long term, protects the Intellec-tual Property Rights (IPR) and quicker to sell for the small/new company. The other options of joint ventures and FDI are difficult in the initial stages of business because of the risks and investments involved.
• Domain expertise: Flexcube traces its history back to another Citibank product, to which i-flex gave a com-plete facelift. The Citibank leagacy helped i-flex gain immense knowl-edge. The industry domain knowl-edge can make or break the product. Here the business analyst play a critical role in guiding the develop-ment directions for the software cod-ers. Apart from the business knowl-edge of the industry or functions the ability to analyze exceptions and scenarios is very important. This is required to bring in scalability and flexibility in the system without losing the rigor.
• Technological prowess: Ultimately it’s the software product and hence the technological prowess is indis-pensable. The relationship between the front-end ease and back-end complexity is directly proportional, i.e. as the user-friendliness in-creases the complexities at the back-end also increases. Also the functionality has to be balanced against back-end complexities and front-end ease. This brings creates a scenario of finding the optimum mix of functionality, ease and techno-logical prowess.

The above discussed challenges have fol-lowing strategic options given as a frame-work:
• Develop predictability of business
This is the ability to manage paradox. Technology is highly evolving and hence finding the business predictability for a software product is a challenge. Also if the business opportunity is highly predictable than the number of competitors both exist-ing and new will make the situation highly competitive. But the business predictability is a risk management strategy. For exam-ple the latest buzzword for Indian IT com-panies is BPO-Business Process Outsourcing. Now how is product related to BPO? It makes a highly profitable and pre-dictable opportunity, by simply processing on one’s own product. This is precisely what is done by Kale Consultants, which processes airlines revenue accounting on its own product RevERA. Here the Busi-ness profitability has to be linked with the technology management, forecasting and risk assessment. A detailed analysis is re-quired of various scenarios and its impact because of technology and business dy-namism has to be conducted.
• Productising Services
This strategy is more about moving up the value chain by climbing the learning curve. As most of the software companies are providing the maintenance and develop-ment services, which give them a consid-erable knowledge about the industry proc-esses. They can leverage on these experi-ences to create a product. Here the flexibil-ity of the product is important and hence the client relationships allow for a cushion to learn, test and implement new ideas. A successful product this way establishes a ‘champion account’ and hence a strong reference to new prospects. It works as a waterfall effect where one reference client gives opportunity to win new clients.
Basically it’s a win-win situation of joint de-velopmental efforts. The existing services clients serve as a risk mitigation strategy in two ways. One by generating certain mini-mum sales volume and secondly it reduces some developmental costs/investments which are lost in experiments. The result is a most optimum product which is high quality, low cost and quick to market.
• Leveraging external resources
The product success is dependent on the company’s ability to invest in R&D and marketing, while controlling the costs. Thus the ability to leverage external resources for reduced time to market and lower cost structure becomes an important strategic decision. This can be done by going for al-liances or outsourcing. Company can go for outsourcing of development work etc. when it is confident of making a high deci-bel sales and marketing. This will allow the company to focus on its core strength and get quality work from the outsourcing serv-ice providers in a cost efficient manner. For example, if today Reliance develops a product for the petroleum industry, its abil-ity to market the product is unquestionable, while it can get the product developed by third party. On the other hand alliances can be build on the other end of capability spectrum to find the best fit for the part-ners. Here a Indian company might lack the sales & marketing prowess, but has superior software development capabili-ties, then a international alliance can be the best option. For example, a company like Visualsoft should have worked upon building marketing network through part-nerships.
With the above understanding of chal-lenges faced and the subsequent strategic moves, the India Inc. can make a mark on the global software products market. But, still the real test is the most basic business principle i.e. ability to take ‘calculated risks’.

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