Thoughts on software product entrepreneurship

The top thought on Sekar Vembu’s mind, when we meet for an early morning interaction in Nageswara Rao park, is the selection of his firm by Microsoft BizSpark One Programme. This initiative is designed to accelerate the growth of high potential start-ups through a one-to-one relationship with Microsoft and a global community of advisors, investors, and peers, informs Sekar, Founder and CEO of Vembu Technologies (

Holding a bachelor’s degree in Mechanical Engineering and a masters degree in Operations Research – both from IIT-Madras – Sekar has been an entrepreneur in the IT products space, through AdventNet and SwissSQL. And Vembu Technologies, founded in 2004 and headquartered in Chennai, provides network-based disk-to-disk backup software solutions.

Our conversation, therefore, moves on to the online backup software business model, pricing on subscription basis, storage needs of small businesses, bandwidth constraint in online backup, and the evolution of storage technology. And a subsequent email exchange helps us explore a host of other topics.

Excerpts from the interview.

Why is it that India has very few software product companies?

There are number of reasons for this. The first and foremost, in my opinion, is the relative lack of domestic market when it comes to hi-tech software. A big domestic market is essential for enterprising young individuals to feel comfortable to take the risk and invest their time and energy into a software product business. It is not possible for lots of young people to gain experience in an international market.

The second reason could be that when it is relatively easier to make money by doing outsourced software services it takes some guts and will power to get into software products where there is more risk and also where more investment in terms of time and money required.

Things will change eventually but it will be a slow process. One counterintuitive thing that can happen is that if the US and Europe become more protectionist making it difficult for software services companies to target those markets they might then turn their focus on the India market out of sheer survival instinct.

When that happens it is possible that the domestic hi-tech market could become more vibrant thus encouraging more and more entrepreneurs to come up with innovative ideas for the domestic industries.

What are the typical difficulties that software product entrepreneurs face?

In the Indian context, as I said before, the rate of adoption of hi-tech products in the domestic market is one major challenge. So it is a lot more hard work to market a hi-tech product in the Indian market than it is to market in a much more developed and mature market. Going after a more mature developed market like the US needs some experience and possibly some upfront capital.

The other challenge is to attract good, talented and experienced people for the product management role. Since most Indian software companies focus on services it is difficult if not impossible to find people with experience working for other product companies. You are then forced to hire people without experience and train them or get them to learn on the job. Though this process can be made to work it will be a time-consuming process.

Finally, in terms of raising professional investment, venture capital investors usually want to invest in ideas or companies which have big potential. Though the Indian opportunity is big on paper it is either very fragmented or the business model required to consolidate and grow big appears daunting. This discourages investors from taking more risks. So even if you have an idea that can be potentially big business, raising capital is not as easy as it would in, say, the Silicon Valley.

How different is the Indian software product in the international market?

When it comes to software product or solutions for the large enterprises it is a very big challenge for an Indian software product company to be successful.

Selling to enterprises for their mission-critical deployments is not just about the product. There are so many other variables that are evaluated and Indian product companies may be at a disadvantage there.

But when it comes to software products for small and medium businesses in the international market then it should not really matter whether you are based out of India or the Silicon Valley. It is possible to leverage the Internet for marketing and sell directly into the small and medium businesses internationally.

This is what we do reasonably successfully at Vembu with respect to our online backup software StoreGrid. I am not qualified to comment whether it is possible to be a market leader or be hugely successful for an Indian software company focusing internationally. We are trying to be hugely successful but until we succeed big one never knows. My instinct says it is possible and that is the reason I am still trying hard.

Is enough of software product innovation happening to serve the needs of the Indian SMEs?

Unfortunately I do not think it is happening to the extent it is necessary. I may be wrong. For example, we are not actively positioning StoreGrid for Indian SMEs because selling to Indian SMEs does not fit into our low-cost Internet-based and telesales-based business model.

Indian SMEs expect one-on-one meeting even for small deal sizes and the support requirements are also much more compared to a more mature market like the US. I am sure many companies face these challenges when it comes to Indian SMEs.

The Indian SMEs also do not have the capacity to pay as much for a software solution as a similar-sized US SME. That pushes the margins down for a software product company; and innovation can get stifled, serving the demanding needs of Indian SMEs.

I am not sure when all these will change. May be a deep recession in the US and Europe will force companies like us to focus inward and deliver compelling and cost-effective solutions to Indian SMEs. Currently, I personally think that selling hi-tech product to Indian SMEs is extremely challenging and the rewards are also not compelling enough.

In what ways can changes to our education system facilitate the strengthening of software product capabilities in the country?

This is a hard question where I am not sure there is one way we could change our education system to encourage entrepreneurs to work on creating software products for the Indian market.

But in general I believe that our education system is too structured to the point that it actually kills creativity and curiosity. That is my personal experience too wherein I am a much more curious person now than when I was in high school where even interesting things looked like a drudgery.

So if there is one thing I would change in our education system it would be to make it much more unstructured with training to work on completely open-ended problems where there is no right or wrong answer.

The reason is that most problems in real life are open-ended where you come up with practical solutions within the constraints of the resources at your disposal. We are never trained in our schools to work on open-ended problems.

In my opinion this one change will kindle the natural curiosity amongst students and will result in their creating much more innovative solutions when they face the real world.

Any views on how we can encourage software product entrepreneurship?

I am not a believer in using external means especially government-based programmes to encourage software product entrepreneurship or for that matter anything.

The reason is that there is nothing sacrosanct about software product companies that we need to encourage it as a society. If there is a need there will be enough people who will want to address it.

The situation today may be that, in the global context and with respect to the unlimited supply of labour pool in India, the value derived from using hi-tech software may not be compelling enough for the Indian SMEs. That may change over a period of time and when it does you will see more and more people jumping in and capitalising on the opportunity.

May be, one thing I will reluctantly say is that the government should simply scrap the tax benefits to the software exporters and give the same tax benefits to the software companies selling into the domestic market. But as I said I am not for government-driven initiatives and hence this idea is only relevant in the context of Indian software exporters enjoying huge tax breaks and other government doles.

Your take on the recipe for success in the software product space.

I can only talk about small success as I myself am yet to achieve big success – the billion dollar global company etc. etc. The most important thing about building a sustainable software product company is to come up with a product which really has a need in the market.

Also, almost always the original ideas we start with may not be something which the market wants. So we need to continuously adapt and fine-tune the product to what the market really wants.

This initial adaptation process of developing a product and then fine-tuning it to a market segment to find the initial customers is the most challenging aspect of creating a sustainable software product company. Once this initial hurdle is crossed then it would be just patience and perseverance to grow the company to be profitable etc.

But it may be a completely different ball game to scale a company to a hugely successful one. I am not yet qualified to comment on that.


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Printable version | Jul 9, 2020 8:38:24 AM |

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