The software industry has traditionally been divided between product companies building one or more products generally focused on one industry vertical and services companies providing product development services to clients in varied industries. The local software industry has seen multiple sizable successes among services companies. Very few product companies have achieved the same scale, with MillenniumIT being one of the few exceptions.
Thus, despite the buzz about startups, most services companies seem to have made a conscious choice to focus on services rather than build their own products. Many established local software services companies command considerable software product engineering expertise and have built highly scalable products for their clients. Their clients are typically software product companies in Western markets. Despite successful track records of delivering great products, these services companies have been reluctant to get into the game themselves. But, the last few years have seen some crossing the chasm, and the trend seems to be gathering pace. Virtusa launched Akura, a school management platform, a few years ago. More recently, Creative Solutions have launched several products including Gift Smart, a gift card that can be redeemed at multiple retail chains, and Layup, a corporate learning platform. Vesess was an early mover in the SaaS market and has been working on its highly successful product Hiveage, an online billing solution, since 2008. They recently launched a new product, Vgo, targeting the logistics sector. Omak Technologies launched Reztguru, a restaurant management platform that quickly captured the local market and is now spreading elsewhere in Asia. Calcey Technologies also entered the fray recently, launching their own SaaS product Thrively.io, an agency management tool.
[pullquote]Despite the buzz about startups, most services companies seem to have made a conscious choice to focus on services rather than build their own products. Many established local software services companies command considerable software product engineering expertise and have built highly scalable products for their clients[/pullquote]
To an outsider, some of these products may seem like fun projects rather than business ventures. But for the service businesses concerned, they may actually bring other benefits besides direct revenue. These internal products may be used to train new engineers or get teams acquainted with new technologies. Internal products sometimes serve as low-risk pilot projects to familiarise teams with new technologies. These projects can be used later as samples when pitching for new projects utilising the same technologies, essentially opening up new markets for the services business. It’s a win-win deal for services companies to allocate resources to work on such projects during idle times from client work.
The success of some of these startups, like Hiveage, Reztguru and Layup, shows the potential of what may, at first, appear to be a side project. One of the hardest problems for a local tech startup to crack is hiring. Talented engineers get plenty of offers from established IT companies, many of whom are software development services providers. To date, there’s very few examples of local tech startups going big and early employees reaping huge pay days from their equity share. Hence, a struggling startup is unlikely to attract top technical talent even by offering generous equity options. Services companies incubating startups who can offer the best of both worlds – the security of an established company with secure cash flow, as well as the fast-paced and exciting possibilities of a startup – are likely to fare a lot better.
Access to top tech talent with experience in building products for the global market is likely to provide startups incubated bydevelopment services companies an advantage over their local counterparts. Of course they will face their own set of challenges, particularly when it comes to marketing. Most services companies have grown slowly and steadily, with a handful of overseas clients whose trust they have won over the years. Marketing products requires a somewhat different mindset to build quick traction, scale fast and reach lots of buyers. Hence, services companies dabbling in startups would do well to play to their strengths, by focusing on their core expertise – software development – and partnering with outsiders who can bring distribution and marketing capability. And this is what most opt to do. They are, after all, relatively mature playersin the local startup scene, having worked with overseas startups and products companies.