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Insights into Editorial: Boosting Indian software products

 

 


Insights into Editorial: Boosting Indian software products


 

Summary:

The government recently issued the draft of first ever National Software Policy with an aim to increase share of Indian software products in global market by 10 fold to estimated $148 billion and create employment opportunity for 3.5 million people by 2025.

  • The National Policy on Software Products visualizes the country’s rise of India as a leading global player in creation, production and supply of innovative software.
 Indian software products
Indian software products

Background:

The software product industry is estimated to be $411 billion globally today and is expected to reach around $1 trillion by 2025. However, in India the software product industry is still in its infancy stage. As per the estimates, the Indian software product industry accounts for 1.48% of global market. The total revenue of software product industry in India is $6.1 billion, out of which $2 billion is from exports.

 

Why a new policy in this regard was necessary?

India’s first software policy of 1986 resulted in the Software Technology Park (STP) scheme in 1991. Undoubtedly, the policy was highly successful, with the information technology (IT) industry today accounting for more than 9% of the country’s gross domestic product (GDP). However, the past few years have seen a serious decline in IT sector growth, owing to the rapid, global transformation in the technology and software industries.

  • Despite diminishing growth, even after 25 years, the old software policy (1.0) of 1986 still prevails, with its focus on IT services. India’s IT sector is strong enough to face changing technology challenges. But failure to capitalize on the capability built in last quarter century can have serious consequences.
  • In order to address the relevant global strategic paradigm shifts, a new Software policy is needed, with a ‘product’ focus.

 

Highlights of the new policy:

The new policy aims to strive for a tenfold increase in share of the global software product market by 2025 by promoting easy access to local domestic/international market for software product.

  • The policy aims to create conducive environment for creation of 10,000 technology start-ups to develop software products that are globally competitive and thereby generating a direct and in-direct employment for 3.5 million persons.
  • The policy targets to achieve a goal of creation of 1,000,000 jobs by 2017, and additional 2,500,000 by 2025.
  • According to the draft policy, the government has promised that it will create an “enabling framework for inclusion of Indian software product in government procurement” and promote their usage “in strategic sectors like defence, atomic energy, space, railways, telecommunication, power and healthcare etc”.
  • Among various measures, the government aims to leverage the start-up India initiative under the proposed policy to ensure ease of business and to address concerns that may be specific to the software product industry through an Inter-Ministerial Coordination Group.
  • The policy identifies 10 proactive strategic action areas for the development of the product ecosystem. The main ones among them are ease of business, funding, research and development, domestic demand boosters and frictionless trade and tax regimes.

 

Concerns raised over the new draft policy:

The policy does not clearly define software products as goods or services and does little to give clarity on Intellectual Property Rights and also does not specify the incentives that the software startups will get for government procurement.

The government however says the policy is only a statement of intent and too much specification can hurt future innovation in the industry.

 

What else needs to be done to boost the software sector in the country?

  • Ease of doing business is essential. Numerous regulatory compliances can lead to unintended oversights. A single repository of all applicable laws, compliances and their associated processes would serve better.
  • A support framework for product development is required, as products upgrade or even relaunch for long-term sustainability.
  • For undergoing testing and evaluation, investments in test beds is critical. In-house investments can be steep, and shared resources supported by the government should be the favoured approach.
  • The principles guiding tech transfer and licensing have undergone major shifts because of the Internet, and Indian companies should be prepared to enter into contracts under these new paradigms.
  • New technologies have led to standards and patent rules which are still nebulous to many ecosystem players, and it requires a high degree of sensitization. Hence, platforms need to be created to facilitate such discussions to also include interoperability, integration, scalability, cybersecurity, and provide assistance in building global partnerships and access to global best practices.
  • The talent requirement of product companies is unique. Future-ready products are expected to be developed based on the mere articulation of needs and specifications. Talent accelerator programmes in partnership with industry will help create industry-ready professionals from a wide-ranging resource pool of engineers and other graduates.
  • In addition to the ubiquitous need for tech skills in high-end technologies, the need for country-specific language skills must also be emphasized. Strong business communication is an essential prerequisite and its deficit has an adverse impact on growth.
  • The software products policy should amplify the government’s start-up initiatives, not just replicate them for software product start-ups. For instance, a registry of software product start-ups being supported under various programs can be created (voluntarily); they can then be mentored in a targeted manner. Furthermore, incubators and accelerators need to be set up in other geographies to provide greater market accessibility to start-ups.
  • Also, the support schemes should not be restricted to product start-ups alone, but structured to benefit the product segment as a whole. Products require upgrades, new releases and technology changes almost every other year, as a rule. Heavy investment in R&D creates a dire need for a targeted scheme that will incentivize companies to develop new products.
  • Emerging Indian products require new geographies to build scale to get brand positioning right. An organization which will function like an export promotion council, but exclusively for products and innovative technologies, is a must. And it would be beneficial to set up helpdesks in Indian embassies/high commissions which would function as advisers on local laws and market information.

 

Way ahead:

In recent years, there is a shift in competitive advantage towards innovation. One can easily map here the conditions before the launch of Startup India Policy 2015. A mass of new age software product start-ups has emerged, touching a wide array of industries.

  • Advanced and specialized factor resources are emerging from software product development in the captive offshore centres, R&D centres of multinational companies or outsourced product development vendors, across all major IT clusters in the country.
  • The final policy should be swiftly announced. Further, it is important to leverage policy through multiple threads focused on defined actionables. It could be: a) immediate action item list; b) ecosystem building programs; c) segment-specific packages; and lastly d) incentive schemes. For example, the SaaS-based product segment needs early support in the form of a booster package that solves their multiple problems.

 

Conclusion:

India is third in terms of the number of tech start-ups. We have more than a 50% share in outsourcing, but in software product exports, we feature among the also-rans. Mobile penetration, demographic dividend and our mastery of the offshore development model can catapult the nation forward—if we harness the next wave of growth.