Tejas : A Product Company
Business models of Indian IT services companies (like Infosys, Wipro) are :
Provide IT services to western market. Services that can be done at less cost in India compared to western market. Internet and communication infrastructure makes it possible to provide reasonable quality services from India.
Because of this cost difference between western countries and India, IT services companies have majority of its clients in western countries.
Tejas Networks is a products (combination of hardware + firmware + software) company. Products are developed for telecommunication market, India and outside. Tejas does not actually manufacture hardware, it outsources manufacturing to Electronics Manufacturing Services providers. Tejas designs the hardware and get it manufactured from suitable EMS provider in India or outside India.
India : Emerging Market
In the past, innovative products (New cars for example) are first launched in western markets for high price. Once a product becomes commodity, it is re-launched in third world countries for less price.
However India in 2010 is different and changing fast:
1. New products are being launched first in India.
2. The growth is stalled in western world and happening is in India. Third world countries are now emerging markets.
3. Coming years lot of money to be spend (huge market for telecom equipment) in India and for many other products.
4. Mobile service provider earn profit even for low ARPV in India. Therefore lot of innovation, not on technology front, but business model front, to reduce cost, must have happened.
Following are observation about India for developing products and as a market.
1. Cost of innovation in India is low. So it is possible to develop new products with relatively less investment in R & D. Blended cost (mix of experienced and fresh engineers).
2. Indian customers are demanding. They want world class quality at low cost. This drives you crazy and forces you to provide best at least cost.
3. Consider India as sandbox for your products, before launching in global market.
4. Indian customers comfortable spending on hardware but reluctant to pay for software.
5. There are infrastructure problems in India (24 X 7 electricity supply etc.)
Advice For Start Ups
For start up companies interesting in developing innovative products, following is the advice :
1. Funding : Early stage VC funding is one option. In case Tejas, it was not possible to boot strap. Because of nature of the product they had start with big team of engineers.
2. Focus : Focus on one product area and clear direction.
3. Execute one step at a time :
- get product working.
- get 1 customer/user.
- get 10 customer.
- think about & beat competition.
4. Team : Strong team with variety of background needed. Complementary skills (Finance, Marketing & Sales) needed.
5. Customer : Anticipate technology trends, understand customer needs before defining the product.
6. Global market : Big companies looking at India for product development. In some cases, Indian companies develop product and is branded by big companies in western market using existing marketing and sales network.
7. Tejas Advantage : Investment in R & D, convert hardware functionality into software. Less time to develop the product.
8. Funding : Take money whenever available. You will need it. Investors in Tejas include Desh Deshpande, Mayfield, Battery, Intel, Goldman Sachs.
9. CSIR : Look at Govt. of India initiatives like CSIR for funding. Be patient.
It was really inspirational keynote.