Software products: Indian IT's next destination? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Software products: Indian IT's next destination?

Aug 22, 2008

The Indian technology sector has grown by leaps and bounds in the last two decades. The factor that has contributed to this growth has been export of software services. But there is another area of software product business which has not yet been exploited and which can emerge as major growth driver for companies in the future. What is 'Software product' business?
Software product business refers to business concerning software that is developed and maintained by the companies themselves and in which the customer-oriented application work is limited. Software product companies own the software IP (intellectual property) which includes software IP owned through acquisitions and undertakes the packaging or selling of the software itself or through channel partners.

Is software product industry poised to grow?
Indian software companies have already made a foray into software product development but have been able to capture a very small percentage of global product industry till now. Indian software product industry size stood at around US$ 1.4 bn in FY08, accounting for just 0.2% of the global pie.

Although Indian software product industry is young, this segment is growing at a fast rate and has carved a significant position in the national economy. The industry has grown at 44% over the past 3 years and is expected to reach a size of US$ 11 bn by 2015 (as per Nasscom Survey)

The software product industry in India is expected to grow on the back of cutting edge end-to-end design and development services provided to global ISVs (Independent software vendors, which specialise in making or selling software products usually for niche markets) by captive and third party units in India.

The software product industry in India has reached an inflection point with superior quality IP being created. India's R&D and innovation endeavor are also helping in developing software product landscape. At present there are 38 incubation centres spread across the country that are actively focused on assisting technology start-ups with funding and mentorship. Furthermore changing VC (venture capital) environment and support ecosystem is also contributing to the growth.

In the last two decades, there have been a few focused Indian product development companies because there was limited market reach and low acceptability of a 'Made in India' brand. However, the strong domain knowledge and global exposure in service offshoring has provided the industry with a good stepping stone to look at developing software products.

There has been a substantial growth in the number of Indian companies engaged in software product development. As of now, there are approximately 400 companies operating in this space. At present the top 10 companies (including Infosys, i-flex, Subex and TCS) account for around 85% of the product industry revenue (FY08). They have been around in this business for a very long time and possess the required expertise in this field, which is the key to success in this business. However, there are over 200 mid-sized companies and start-ups that have started generating revenues and are contributing to the growth. These mid sized companies have carved niche for themselves and are expected to grow exponentially going forward.

Equitymaster requests your view! Post a comment on "Software products: Indian IT's next destination?". Click here!


More Views on News

ZENSAR TECHNOLOGIES Share Price Down by 6%; BSE IT Index Up 1.0% (Market Updates)

Mar 8, 2021 | Updated on Mar 8, 2021

ZENSAR TECHNOLOGIES share price is trading down by 6% and its current market price is Rs 297. The BSE IT is up by 1.0%. The top gainers in the BSE IT Index are CYIENT (up 3.7%) and HCL TECHNOLOGIES (up 2.2%). The top losers is ZENSAR TECHNOLOGIES (down 5.5%).

KPIT TECHNOLOGIES Share Price Up by 7%; BSE IT Index Up 1.5% (Market Updates)

Mar 8, 2021 | Updated on Mar 8, 2021

KPIT TECHNOLOGIES share price is trading up by 7% and its current market price is Rs 148. The BSE IT is up by 1.5%. The top gainers in the BSE IT Index is KPIT TECHNOLOGIES (up 6.8%). The top losers are COFORGE (down 0.3%) and WIPRO (down 0.3%).

More Views on News

Most Popular

What is EBITDA & EPS?

Here's a breakdown of what EBITDA margin means and why it is important as a valuation metric for investors.

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

The Hidden Tesla in My Great Indian Wealth Project (Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

Gold 65,000 and Silver 84,000 in 2022

Feb 26, 2021

In this episode of the Investor Hour, India's #1 trader, Vijay Bhambwani, talks to us about the stock market, his new targets for gold and silver, the best long-term investment opportunity, and a lot more.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Mar 8, 2021 (Close)