ReadWriteWeb recently ran a post about the state of India‘s innovation engine. I’ve posted a clip here, but click through to read the whole thing:
That Big Wide-Open SaaS Opportunity
Indian start-ups that dreamed of creating the next SAP or Oracle faced massive hurdles on the sales and marketing front. Sure, they could invest five times more in R&D with the same budget. But the reality was that R&D was a tiny portion of the budget. The big money went into sales and marketing. The R&D budget arbitrage was not enough to move the needle.
This is totally and utterly different today. We have written about the SaaS opportunity many times. This opportunity is totally location-agnostic. But it is also totally price- and cost- sensitive, and R&D is the biggest cost. Success stories such as 37 signals, Automattic, and Zoho did not win by hiring an enterprise sales force or buying advertising. They “let the software do the talking.”
This is not just an opportunity for a few big winners. This is an opportunity for thousands of small companies to go after niche markets. The interesting thing about niche markets today is that they are inherently global and can be a lot bigger than people think. These small niche start-ups won’t make headlines and probably won’t get VC financing. But they won’t need VC financing. What is fascinating about SaaS globally is how few start-ups have been VC financed. Most have gotten to profitability on tiny seed rounds or even with revenue financing from clients.
As this portion of the post highlights, there are two important pieces of the puzzle that will enable Indian developers to thrive, a focus on building excellent software (DimDim being a good example) and the rise of SaaS and cloud computing delivery models. Excellent software, along with a strong social media strategy, enables a natural sales process, and cloud computing allows development and delivery of software on a global scale. Rather than focusing in on the struggling IT conglomerates, India’s near term innovation future may well rely on a group of agile cloud-based companies.