Up in the cloud towards the middle of the pyramid
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The recent NASSCOM EMERGEOUT conclave themed around Cloud Computing was revelatory in several ways. One, it brought to the fore companies from India that were staking their business models around the cloud. Second, it became progressively clear that, for reasons springing from the business context of these companies, the domestic mid-market is now clearly in the spotlight.
Crowd in the Cloud
While the star of the day was undoubtedly ZOHO – whose founder Sridhar Vembu delivered the opening keynote – the event brought together many companies with cloud based models. These included companies like ImpelCRM, NetMagic Solutions, Novatium and HRMantra. Several of these companies play in the CRM space, a segment where the road to adoption has been paved by the success of Salesforce.com. Others like Zoho offer business utilities. Another space that has seen SaaS plays is Human Resources Management and here companies like HR Mantra and EmployWise offer complete employee lifecycle management.
A question that most of these companies found themselves answering was (predictably!) whether corporate concerns over security could be over-ridden by the prospect of more efficient and inexpensive software. The best answer for this came from Sridhar Vembu who was quick to repartee saying that data in the cloud was much safer than in an employee’s laptop – given the latter’s propensity to get lost/left behind.
In terms of other areas where cloud computing models would work well, Sharad Sanghi, Founder CEO NetMagic opined that the efficiencies of the cloud would work well for companies requiring dynamic scaling of development/testing infrastructure. Another area to watch for would be disaster planning/cloud-based recovery system infrastructure.
Domestic Market Spotlight
A lot of the companies at EMERGEOUT were training their sights on the domestic market. Possibly for the first time in the evolution of the industry here, there is sustained focus on the Indian domestic market – not as an ‘also-ran’ but as the primary centre of business. Given the very nature of the cloud, this is an anomaly – Zoho, for instance, leverages the India-US cost arbitrage to good effect to give Salesforce.com a run for their money – but these new companies are home bound for several reasons.
As Sumeet Singh, CEO, EmployWise pointed out in a conversation on the sidelines, while the business and delivery models are new, the challenges of old – such as market understanding, a local go-to-market – still remain. These cost money, something that may be tight at boot-strapped start-ups
Even within the domestic market, several of these companies are targeting the mid-market. This is a fragmented, disparate and cost conscious segment that high profile services plays avoid due to poor margins. But by leveraging the cloud, these companies are able to offer high quality software at prices that a mid- market user can afford. In addition to the pricing factor, adoption is low risk – in case of poor fitment, a SaaS contract can be terminated after a few months. Plus, the very nature of the technology allows the cloud software companies to offer a ‘Try and Buy’ model.
The availability of a domestic market with active users who could sustain growth for these cloud-based companies may finally be the catalyst for broad-based product development work in India. Finally, it would seem, a lot of factors have come together – a domestic market with high traction potential whose context the companies understand well and a business model that makes the software affordable to a large number of users. The importance of context understanding cannot be under-played – it was a key reason why so few companies were able to build successful products for the US market.
Making up the Numbers
While the prospect is exciting, it is clear from some of the metrics shared by companies at the event – several reported under 3-5000 users for their services – that the industry is at a very nascent stage. So, what’s the critical threshold to make operations sustainable ? At a million users, Zoho is already clocking in the profits, but according to at least one cloud co. CEO his operation would be self sustaining at 10,000 users.
10,000 or 1,000,000 – the debate is still wide open for some blue sky thinking– but the thing to look at is that with the cloud, the debate is now actually possible.
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