10 Reasons Why Services Companies Are An Ignored Opportunity In The Startup Ecosystem [And They Shouldn’t Be]

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.

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

  1. 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.
  2. Quality of technology output is better than young out of college developers
  3. They know how to run a business
  4. They know how to make a TOUGH sell, If there was a ever a competitive market it is selling bespoke software!
  5. They are usually focused on and VERY knowledgeable in a particular industry segment
  6. They know how to make a profit
  7. No one understands the value of customer service better than a software development company
  8. 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.
  9. Most of these companies have very smart leaders, who are either great developers, great businessmen /visionaries or great architects (usually a combination of these)
  10. 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]

7 comments
  1. Hi PC Chitalkar –

    Great article. Running a services company ourselves – I echo similar sentiments. Would be great to connect maybe over a quick call to discuss synergies. We are working with a few startups in the Indian eco-system as well.

    My email is rahil@tailoredtech.in

  2. Its a big fish what you are trying to fish for. The service industry has seen the good and bad times and sustained. The precarious condition of startups in now not a hidden fact, that you trying on to start up a service delivery company and compete The names you have mentioned.

  3. Maybe I need to clarify the point here. I am not saying shut down product startups and build service companies. That is stupid. What I’m saying is that there are excellent service companies that can build good products as well. We have done it and it works. Those excellent companies need to be looked into, I’m laying out points in their favor.

  4. Thank you sir. My point is that there are some great ones out there in our industry, some can help starups BUT we also need to consider that some can build Awesome startups themselves maybe better than some young inexperienced 21 year old founder.

  5. Great article. You pinned it.

    Btw, I’m launching a product company very soon which will have service in its core. Will keep u updated. Thanks!

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