India still an underserved market for software products: Tally Solutions MD

Interview with Bharat Goenka

Tally is synonymous with going digital for small and medium businesses in India. The company, among country's first software product firms has retained its focus building solutions to for local needs, even as firms moved towards services to tap into the opportunity over two decades ago. The firm, which has made its enterprise resource planning (ERP) software compatible to the Goods and Services Tax (GST) regime that the country will transition this year.

"India as a country is waiting for good product companies who have cracked the right business model. But that isn't getting cracked yet, though I feel some are on the right path," says Bharat Goenka, Managing Director, Tally Solutions in an interview with Alnoor Peermohamed and Raghu Krishnan. Edited excerpts:

Tally is among the first product companies in the country and you continue to evolve, how has the ecosystem changed in the last few years?
If you take the journey of the country, the first few years of IT, until late 90s was product, then the Y2K opportunity came and enough people shifted overnight. We were among the very few who did not and I think we handled that situation very well. If you ask me, I can't even visualise how to run an organisation of 100,000 people - how do you recruit them, how do you train them, how do you make them productive? So some fabulous people have done some fabulous work in that area and later that became the fashion.

In more recent times, in the last five to eight years, people have started thinking about products again with some seriousness. The problem is that when you think about products, there are broadly three categories of markets - the large enterprise, which is always a difficult market to crack; the small enterprise and the consumer. The way you reach the consumer is through marketing and demand, you don't really go to the consumer, they come to you. Large enterprises you have to always go to them. The SME is the strange animal in the middle - he wants something, but he will not come to you. In the US, the SME works like the consumer. In India the SME works like the large enterprise, he wants you to come to him. But it's too large a base for anyone to know hot to crack properly.

Is that why Indian product companies are today only looking at foreign markets?
So most product companies have attempted to say somehow we will make the SME come to us, but they will not come and enough of them will not come. Your cost of servicing them and still making money is very low. So many people have become successful by looking at the markets abroad than by looking at the markets in India. India continues to be an underserved market, partly because of its sheer spread, the diversity of people and the affordability of people. By now at least five or six companies should have made India into a successful market, unfortunately it has not yet happened. 

How many local product companies would be serving the Indian market?
All put together, local product companies serving the Indian market would be around 600-650. But most of their turnover is under Rs 10 crore, so they're not big. But India as a country is waiting for good product companies who have cracked the right business model. But that isn't getting cracked yet, though I feel some are on the right path.

What's holding them back? Everyone talks about servicing SMEs on smartphones, so why hasn't anyone cracked the model?
See, smartphones are very good consumption devices, they are not very good interaction devices. And this is not just in India, worldwide I think people have not been able to make smartphones as a premier interaction device. Making an invoice on a smartphone is happening when your volume of invoices is not high. For example, the individual plumber who will make one or two invoices in the one or two visits he makes will find a smartphone very convenient so that he doesn't have to carry a system when he goes to a house, but if you take a plumbing organisation who has 40 plumbers and they make 60-80 visits a day, it's unlikely that they will say let's not use computers and make invoices on smartphones.

These are so far exotic statements to make. It's not that these things will not happen, because I have a bias when I say some of the work we are doing to bring mobility to businesses is far better than things that have been happening in this space at a global scale. I'm making an arrogant statement and time will tell if we get it right.

How will Tally's SaaS platform work?
It starts with believing that something that can be done on the desktop, taking it and putting it on the cloud is not going to help anyone. So you should do those things on the cloud that you cannot do on the desktop and vice versa. Now the key is how do you make all these things interoperate to bring about a new way of working. Unfortunately most people think that it's either on premise or cloud and not a combination of the device and the cloud. Because they are solving it with the zero or one approach none of them are gaining any major traction.

Now systems like email and SMS lend themselves to being done on the system as well as the cloud, so if you lose your device and get a new one you have a backup. But if you take transactional systems, databases which are transactional doing it both on the device as well as the cloud simultaneously are technologies that have not been solved. This is something we're solving and since we make our own database we're able to solve that problem in discreteness.

Will this help Tally move over to the pay-as-you-use model?
We already have the pay-as-you-use model but less than two per cent of our customers opt for it. In business, you'll be surprised how difficult it is to pay. As consumers it's very easy. Very few businesses use business credit cards, so when you don't have any simple way of making regular payments, all of this is a nightmare. You just want to get it over and done with, otherwise I have to make another Rs 500 cheque. To make a single cheque of Rs 500, how much does it cost a person? So it'll be costing a person Rs 800-900 to make a single cheque because you have to track it, which takes human time and energy and machine time and energy.

Presently most organisations want to go for buying licenses, and this will be there until we bring in a behavioural change. That will only happen when we make it ridiculously convenient for a business to pay on a subscription model. With some of these advances that are happening in payments with UPI it becomes possible for me as a business to set up a recurring payment. Now hopefully with NPCI some of these technologies will get more mature with the banks by next year, then it is up to companies like us to take it to the consumer and solve it for them for existing recurring payments such as rents, electricity bills, etc. Once the start doing it, I can ride on the back of that behaviour and tell them, you know what why don't you opt to pay small monthly amounts for using my service as well.

Has Tally broken into large enterprises?
No, we only serve mid-size enterprises and we have no intent to serve large enterprises as of yet. Serving mid-size guys is a huge problem in itself and defocusing is not going to help right now. Because the diversity and complexity of the small enterprise is enormous.