The Great Indian Market

One of the questions I keep getting asked when I travel overseas is about the market potential for Technology and Services in India. "Hey its a country of 1 Billion, must be a huge market", they say to me. Well yes we are a country of 1 Billion and we are a large potential market (note the word potential here). This might be true to a certain extent for consumer goods but we have a long long way to go before India translates into a good market for technology and service companies.

When I visit countries like Korea, Japan, Australia, and Taiwan, I am amazed at the maturity of the local market. Companies can sustain and prosper by just focussing on the local market. Not in India though. The first thing a technology (especially Software and Services) company does is scout for overseas projects. Why is this? Why can't companies thrive on the local market? Is it price? Is it opportunity? Is it attitude? What is it that prevents Indian companies from looking at India?

The problem probably has its roots in the way computers and technology proliferated India in the first place. Software has always been seen as something thats given away with hardware. Though that perception is changing now, software and services are not something that Indian companies are willing to pay big buck for (unless you are an SAP or IBM).

Next, the software revolution in India started mainly with services (Y2K etc etc). Since there was practically zero market in India for software services, most companies were outward facing servicing markets like the USA. Even today all the big players get over 90% of their revenues from the overseas market.

All this has resulted in virtually no product of any substance being developed for the Indian market (the only notable exception being the accounting package Tally). Its just not possible for a startup to think up a product for the Indian market, get it funded and then market it here in India. No surprise then that all Indian companies wan't to get into services.

The other party to blame is the end customer in India. In most cases they are rude to vendors, dont pay on time and want to squeeze companies on pricing so much that its just not worth it to service them. To top it all, we love the "Made Overseas" sticker (must be a hangover from the British Raj). Companies here don't mind paying a foreign company list price and a premium for services (if its foreign it must be good). However they will extract every ounce of discount from the poor Indian company. Until this reverse racism goes and there is a good eco system to fund small product companies, India will always be a back office and will never make its mark as a country worthy of producing technology products. Even Infosys was not successful with its product thrust and thats saying something.

So next time one of our VC friends comes into India and gives us an expansive discourse on how we need to "develop products", I think they should walk the talk instead of theorizing and fund a few companies from the ground up. There is too much CO2 these days and its time for the theoriticians (read VCs and analysts) to put up or shut up !!