Why don’t Indian software services
companies develop products? Companies like TCS, Infosys and Wipro may be very
profitable, but why is there no Indian equivalent of Microsoft, Google or
Oracle? Such questions have dogged the Indian software services industry for
many years (Krishnan and Prabhu, 2003).
What services do these Indian
companies offer? One service is developing new software systems for clients,
starting from a set of requirements and a choice of platform: a programming
language, an operating system and a database system. However, most of their
business (perhaps 70-80 per cent) comes from upgrading and supporting large
operational software systems, removing software bugs as they appear and adding
features to meet new requirements. A major function of software services
companies is to reduce the inherent risk of developing and maintaining software
systems for its clients.
There are excellent reasons for
software services companies to do R&D:
First, large software systems are
extremely complex and hard to manage with just manual programming effort. A
variety of software tools can be used to automate functions.
However, the platforms on which
software systems run can differ in numerous major or minor ways and the
analysis tools must be available for use on any required platform. Such tools
are not available in the market and developing new tools can take years.
R&D has been used in some software companies in India to find ways of
producing such tools automatically and making them available in time for use in
time-bound projects. The goal is always to speed up software construction,
reduce cost and remove defects.
Second, with many software service
companies offering what may seem to be similar services, a company has a major
advantage if it can offer a unique differentiator. The main distinction between
companies is often just the skills and experience of their staff; these can be
augmented by a wide set of software tools. Use of such tools results in both
improving the quality of the final software and reducing the development time
Finally, corporate Information
Officers (CIOs) of clients provide computing services to other divisions in the
company; their focus is on improving quality and reliability, and reducing
cost. They deal with problems as they arise and rarely have time to look beyond
this; IT outsourcing has been a boon to them.
Service companies, by contrast, can
use their own R&D to identify future trends. This can give them the means
of solving anticipated problems before these impact a client’s business,
perhaps also adding new capabilities to increase competitiveness.
Important as these R&D
directions are, they are far removed from what a software product company does.
Software services companies differ from software product companies in
everything from size, marketing, sales and customer support to R&D and
strategy.
Services and products are not
usually offered within one company. It would no more suit TCS or Wipro to
masquerade as a product company than it would Microsoft to pose as a services
company; Hewlett Packard is a rare exception. What are often referred to as
‘products’ from Indian companies are in fact branded offerings for financial
services, like TCS’s BaNCS and Infosys’s Finacle: almost-ready software systems
that can be configured and customised to a client’s requirements in a fraction
of the time it would take to develop, say, a full banking or insurance system.
As a rule, software products have
been developed by small, agile companies. The idea behind PowerPoint originated
with a small company called Forethought; Word and Excel were created by
Microsoft in the early 1980s when it was a small company. Product development
is typically funded by venture capital companies, which filter out 90 per cent
of new products that will fail to survive the risky route to market success and
guide the remaining 10 per cent to an eventual IPO and sale.
Though services companies and
product companies belong to different business species, R&D can provide a
link from one to the other. Tools developed by a services company must be
robust and effective if they are to be used by project teams.
Such tools will inevitably have a
much wider market (not just among other service companies) if they are spun off
and managed in an independent company. Done with care, this need not deprive
the creating company of its advantages and can help to realize the full value
of the innovation in the tools.
That is a route no Indian services
company has yet ventured to take.
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