India boasts an ITES sector with $147 Billion in revenues, a double-digit growth rate and a 40% contribution to GDP. Apart from all that anyone connected to the sector will affirm that it is alive and kicking, salaries are rising, jobs are available & things are good.
There seems to be a big gap between this mature growing behemoth and cacophony of startup activity in the country & maybe we are missing a trick here.
When you look at IT services companies in India there is a broad spectrum, there is the giants (TCS, Wipro, Infosys, TechM etc) and then there is your 3 developer buddies on Elance.com.
Right it between there is a sea of 50-500 person shops that are a backbone of this tech economy. These companies generate employment en-masse, provide a platform for people in smaller towns to build careers in technology and most often bring in foreign currency revenue.
The startup eco-system needs to look this gold mine for the next big idea. Here is 10 reasons why Services companies can create great startups
- Most IT services companies have a suite of products, mostly B2B but can easily adapt to B2C. While you see explosive exponential growth in B2C startups, B2B is where the revenues (therefore profits) are at & Investors need to acknowledge that.
- Quality of technology output is better than young out of college developers
- They know how to run a business
- They know how to make a TOUGH sell, If there was a ever a competitive market it is selling bespoke software!
- They are usually focused on and VERY knowledgeable in a particular industry segment
- They know how to make a profit
- No one understands the value of customer service better than a software development company
- They know the exact amount to build to launch a solution because that’s what drives their profits, build too much & you lose margins, build too little and customer doesn’t sign off.
- Most of these companies have very smart leaders, who are either great developers, great businessmen /visionaries or great architects (usually a combination of these)
- They are diffidently entrepreneurial which may lead investors to believe that there is a lack of focus. We have heard the “what if someone paid you $50million tomorrow” many times & I think out of all the reasons a startup can fail the founder getting a 100X better opportunity is one of the better ones
What may work against them is their inability to build a product or lack of skills in targeted marketing etc, but again those are all coachable issues you will run into with any founder / startup.
Overall, the pro’s outweigh the cons & there is an opportunity here for smart investors to strike some interesting deals and launch concepts quickly.
What are your thoughts?
[Guest article by PC Chitalkar of 6degreesit]