Indian techies changing the Internet Industry

Over two-and-a-half million people worldwide, half of them in the US, are using word processors, creating slide-shows and doing their sums with the help from an online suite of software products built by Chennai-based technology start-up Zoho. In Bangalore, InMobi — a company that builds technology for mobile internet advertising — is helping global advertisers and publishers reach 175 million customers every month across Asia, Africa, the UK and the US.

 

In Kolkata, FusionCharts, a graphic data visualisation tool created by start-up Infosoft Global, is used by 1,500 organisations across the globe, including the US government. Across India, a slew of such start-up companies are creating and selling proprietary products as they script a new saga in the country's technology industry.

 

Software products are designed to be used by multiple customers, either businesses or consumers. They typically carry intellectual property that creates higher value compared to software services for a limited clientele that forms the bulk of India's $ 50-billion software industry.

 

So, while it took Infosys Technologies 18 years to record its first $100 million in revenue, product start-ups such as InMobi expect to do so within five years. "In the next 18 months we will have revenues of $100 million," said Naveen Tewari, CEO and founder, InMobi. The company, which was set up in 2007, has already built a direct sales force in seven cities across the world.

 

It is this ability to scale into very large companies quickly that is making the technology product space attractive to both entrepreneurs and investors. "Of the 11 investments we have made since 2007, seven are in technology product companies," said Sudhir Sethi, founder & CMD, IDG Ventures India, which has backed software product companies such as Perfint Healthcare, a medical devices start-up, and Apalya Technologies, which streams live television to mobile phones. Another IDG Ventures investee company, 3D Solid Compression, builds three-dimensional visualisation tools that can also be used on mobile phones.

 

"In the next five years, $3-5 billion of private equity and venture capital will be invested in start-ups building technology products out of India," said Mr Sethi. Technology entrepreneurs are riding on a host of advantages that the Indian market offers for product companies. These include the availability of technically-trained people and the low cost of selling technology products online.

 

Zoho's revenues of $50 million come from selling its suite of software that offers 21 applications to customers on the net. "We will have 20 million users over the next few years as online application suites overtake and become more powerful than desktop-based applications," said Sridhar Vembu, founder & chief executive officer of Zoho, which competes with Microsoft and Google.

 

The ability to test products in the domestic market, especially in areas such as mobile telephony and medical devices, has also worked well for start-ups such as Mumbai-based Webaroo Technologies and Perfint Healthcare. Webaroo's SMSGupShup, a Twitter-like closed group messaging product for cellphone subscribers, has 27 million users in India. In three months, GupShup will be available to mobile users in nearly two dozen countries. By the end of 2010, Webaroo expects the launch of pay-to-use services such as email-like-SMS products and the global rollout to help it generate $10 million in revenues from $3 million now, said chief executive Beerud Sheth.

 

"When you design for India, you end up with a very cost-effective solution that can be marketed very effectively globally," said Sandeep Murthy, a partner at Sherpalo Ventures, who also evaluates deals for global technology investor Kleiner, Perkins, Caufield and Byers in India and has invested in InMobi and travel portal Cleartrip.

 

The return of highly-skilled professionals with experience of working in some of the world's largest technology companies too is fuelling the development of product start-ups. Perfint Healthcare was founded by five managers with work experience in GE Healthcare. The Chennai-based start-up makes image guided tools that help radiologists use minimal invasive procedures for cancer detection and treatment. The two-year-old company has sold 50 units of the interventional oncological tool in India and will begin sales in the US in 2011, its CEO S Nandakumar said.

 

Apalya Technologies' CEO Vamshi Krishna Reddy returned to India after a stint at Cisco in the US. He says it would have been simpler to set up a software services firm but knew that the future lay in building a company with a clear differentiation and that had to be products for the mobility space. Apalya now has one million customers for its product MiMobiTV that streams live television onto mobiles starting at a subscription price of Rs 150 a month.

 

For investors there is already proof that it pays to back product companies in India. In 2007, the Mumbai Angels network was one of the investors when InMobi raised $500,000 in angel funding. Its returns were 25 times the investment when InMobi subsequently raised venture capital. "This was the highest value for an angel exit in India and also the quickest," said Sasha Mirchandani, a Mumbai Angels member, who has also invested in Apalya Technologies. Other angel investors, who back technology product companies, include Silicon Valley entrepreneur Rakesh Mathur, who has invested in Webaroo as well as Vegayan, which is building software that increases the bandwidth of telecommunication networks.

 

"There are very promising signs, with technology product companies making the right choices in markets they are addressing," said Rishikesha T Krishnan, professor of corporate strategy and Jamuna Raghavan, chair professor of Entrepreneurship at IIM-Bangalore. He is the author of the book 'Jugaad to Systematic Innovation,' that discusses the challenges Indian companies will face in building products for global markets.

 

The network of start-up incubators within India's premier colleges too is playing a part in driving the surge of product companies. Earlier this year, Mango Technologies, that was incubated at the NSRCEL centre in IIM-Bangalore, sold two of its proprietary telecom solutions to handset maker, Qualcomm. "Building products for the Indian market is proving to be a commercial success," said its CEO & co-founder Sunil Maheshwari.

 

SINE at IIT-Bombay, where Webaroo was first incubated, has on its roster other product start-ups such as Zeus Numerix, which is working with European aerospace company EADS on technology to reduce noise from aircraft wings. In Bangalore, 3D Solid Compression provides three dimensional visualisation technology for Nokia phones. "As more smart phones hit the market, including those on Google's Android platform, the timing is proving to be great for us," said Krishnan Ramaswami, co-founder & managing director, whose team worked with IISc professor B Gurumoorthy to build the product.

 

"The talent pool created by premier institutions has played a significant role in start-up activity. One can say that the institutions have been a source of innovators and thus the crux of innovation," said P Anandan, managing director, Microsoft Research India. While the signs are promising, many also counsel the need for caution.

 

And this summer, if the launch of Adam, the tablet computing device being built by Hyderabad-based start-up outfit Notion Ink, remains on schedule, it will provide a big boost to product development across India's technology industry.

 

On the ground, the momentum is gathering pace. Zoho is adding 1 lakh users every month and growing faster by the day. InfoSoft, the maker of FusionCharts, sees itself becoming a Rs 100-crore company by 2014, CTO and co-founder Pallav Nadhani said.

 

Based out of the campus of BVR Institute of Technology in Hyderabad, Adam is being put together by a team of student engineers led by 23-year-old Rohan Shravan, an IIT Kharagpur graduate, who has worked on the prototype of Adam since his third year in college. Powered by the Android operating system from Google, Adam will allow users to read books, check mail and run regular computing applications. "If we get this right, Notion Ink can be a $300 million-$ 400 million company in the first year of operations," said Mr Shravan, director & chief executive officer, of NotionInk. Clearly, for Indian technology products, the road ahead is long but the journey promises to be exciting.

 

29 Mar 2010 / ET Bureau