The Business Focus- Productizing Manufactures or Services
By: Amit Bhushan Date: 27th May 2016
We may still have much ink is being spent on the select push areas where the government may want to record its achievements. The key areas of focus remains on ‘'Make in India'' to push up manufactures, Clean India et al. Defence, mobile phones and shipping might be some of the areas where some progress may be underway given the investment commitments in new projects.
The other areas may be infrastructure wherein focus on roadways may allow for an upswing with same being predicted for Railroads. Some activity may be at state level in setting up of new industrial zones being notified and where foreign developers are being invited to developing necessary facilities. With this India wants to tout that it can compete with China to attract manufacturing investments. Of course on governance side there has been some claims on improving the ease of doing business and greater opening up to Foreign Direct Investments on this front. The overall ecosystem to evolve some of these sectors may require many more adjustments to make them competitive.
There seems to be a dearth of reports that what has it done to overall competitiveness of the industry to compete within the domestic markets as well as to compete in foreign markets. While the government is seen to be committing itself to create a level playing field in steel, fertilizers, electrical and electronic manufactures in the domestic markets (where many players may be a drag rather than in shape to build global competitiveness), it is simultaneously encouraging some other industries to explore exports markets where some of the wares can be competitively offered so that domestic jobs in manufacturing can get a boost. There seems to be a lack of connect from what may be reported in public domain from a common man's perspective.
What may be more easily possible is productizing services and push the exports. Given India's ecosystem around IT and levels of development, that a number of countries can benefit from this experience is no secret. India has done well in Information Technology front and most Banking, Financial Services & Insurance (BFSI) around the developed world have responded by importing these services from India. Lately there has been some movement in E-commerce and internet based service offerings which have been able to capture domestic audience which again may be successfully matching the advances in the developed world in this regards as per public perception. What these developments entail is that there may be a growing gap in terms of understanding and processing technology between BFSI entities in the developed world and their counterparts in the emerging markets.
The same may also be true in terms of business process maturity levels in corporates where again the sophisticated developed world entities may have been able streamline processes using IT tools but emerging markets entities may have been left behind. The public perception in these countries about domestic internet based services might also not be very good since many may be relying on global services providers.Now the Indian IT industry may have the opportunity to move from services selling to their productization. This would allow many of these players to reap the benefit of the domain competencies in the relevant areas by codification of many common processes (across industry/ies) to evolve suitable products that may be relevant to emerging market players. It helps that much of India's own domestic industry may be nearly at same level of evolution as in most other emerging markets facing the set of challenges which may be similar to other emerging markets. So the skills and experience gained in the domestic arena may be utilized in a better way by also working with the enterprises in other emerging markets as well, who may be in similar situation. These products may be solving the same process related and communication & connect issues faced by enterprises/industry sectors in other emerging markets. It makes sense for Indian start-ups to reach out to these enterprises in emerging markets and share new ideas, methods and processes especially tech based processes that have already been tried and tested in India to help them in reaching out to consumers/users.
The play of E-commerce or Fintech might allow for a quantum jump streamlining processes in financial and internet based service sectors for various business enterprises in these emerging markets. The Indian IT product enterprises so far have been very limited in reaching out to possible partners in other emerging markets. This might be partly on account of the nature of promoters who want to remain in tight control of operations rather than evolve a participatory management process whereby professionals can participate in decision making. There also has been very limited communications in identifying those successes where they may have partnered their customers in a meaningful way and highlighting these achievements. This is because many enterprises are focussed towards pushing their own products rather than experience of user enterprises, their business growth or focus to solve their consumer related issues. Most efforts have rather been concentrated towards selling services to the developed market enterprises where the revenues per seat is much higher and product license values or business through-puts with corresponding fees, still is not a major factor to be measured by equity investors.
The focus of product companies have been accordingly towards creating products that somehow meet client's immediate or primary requirements and subsequently milk the client to meet his enhanced business needs. With newer entities coming out with multi-tenant cloud based products with their low deployment cost for customer and promise of continuous up-gradation, the model is likely to change for many a businesses.While off late India's E-commerce and Fintech sector has grabbed international attention. Stories have mostly revolved around the valuations or the Gross Merchandise Value achieved by these ventures in a short span of time. What may have been left out is the positive impact they may have had on customer and the benefits delivered to various enterprises.
Since such value delivery by these companies have been left out while concentration has been on valuations, so obviously other emerging markets may not have shown much interest. This is because the players in these markets may be interested in value gained by them by evolving/incorporating these new business processes and not on the investment value enhancement of promoters which the developed world investors focus upon. While the nascent sector may still be in search of these stories, we may have started to witness its rummaging (by media) amidst falling valuations at the behest of global investors. This may have been on account of low value added by the ventures which operate in challenging conditions and in a tight-fisted market/s where early adopters of idea may have very small transaction sizes. The consideration for breaking language barriers as well as perceived high cost of access, which may also be unreliable; may not be have been weighed by the new entities. Many of these entities may be grappling with these challenges after initial skimming of the upper end of the market. What may be missed is the potential of the ventures to compete in other countries basis their experience gain since the situation in most emerging markets may be much more similar to India, rather than in the developed world.
The hyper competitive nature of competition here has potential to brew many a businesses which may be very competitive in other emerging markets basis strength of product as well as overall experience/expertise. The globalized IT products from India is still not the idea that may have caught market's fancy, even though much of the world's BFSI segment might already be getting accustomed to increased used of Indian IT services. This remains so even as most the IT players in E-commerce and Fintech segment are venture promoted and many might actually love the opportunity to globalize. This not only allows opportunity to unlock technology related investments but also to reap an early mover benefit in many an emerging market.
The low cost base set up in India with mature technologist allows perfect setting for a tech based venture in E-commerce of FinTech arena. By launching services in other emerging markets (many of which may be similar to India), the promoters/ventures gain an early foothold in the market subject to readiness to sponsor initial investments for the purpose. For most such ventures it might be a case for leveraging their India experience in other similar markets to penetrate and gain in market share. Many such ventures/promoters/management might already be feeling that there might be lesser competition but increased regulatory hurdles as well as a lack of supportive eco-system in other emerging markets as compared to India.
The Indian ventures on their part may not have explored collaborating with interested players in such markets which would have allowed them to leverage their technological expertise and experience in a better way. Most may have concentrated on fast growing domestic market even though the values of transactions here might be rather small. In different markets like Russia, Japan, Spain, Italy, Persia or most of the Arab world, sites offering services in local languages are growing.
Many of these countries may also be hard-pressed to create domestic jobs as well. Rising local language content in websites signals a readiness for wider adoption of internet based services and thus opportunities for Indian tech entrepreneurs to share their expertise.
However these markets are not exactly known to buy high cost software services and so a product model where product development cost are shared widely is what might suit most of these nascent ventures. This allows a low cost entry in the beginning where software product becomes a basis for launch of a defined set of service products. As the international trend pick up, the software products companies in India may benefit by starting early on rather than delay their expansion plans.