Building a software product company in India: A Perspective – Sridhar Vembu

January 12, 2011 § Leave a comment

One of the challenges of being a software product company in India is that professional services companies dominate the IT landscape. This manifests itself in many ways; indeed it is fair to say that the very word ‘software’ in India has come to be associated with providing professional services. This services-oriented industry mindset means that a product company has to cross several hurdles, starting from recruiting people to creating efficient internal processes. What we have learned from over a decade of operating as a ‘different’ kind of company in India is to be patient and pave our own path.

Let’s consider recruitment first: it is hard for a company that is so different from the mainstream to stand out and attract the required talent pool. The prevailing mindset is that a product company is ‘risky’, while a services company has a safe predictable business model. Prospective candidates generally prefer companies that, from their perspective, have proven models and shy away from companies with perceived risky models. This has forced us to be very creative in our recruitment, something that I have written about extensively in our blogs. Indeed, the sheer necessity of finding good people to work for us forced us to explore alternative paths, and our entire culture has changed as a result. For instance, we tend not to focus much on academic credentials; instead we prefer to hire people who can get stuff done in the real world. It is amazing to see how well this principle works in practice, yet how hard it is to convince people, who haven’t experienced it, about this. People seem to be so overawed by fancy credentials that they just don’t bother to look at the data supporting their real world relevance. This is even truer in India than, for example, in the U.S.

Scond, we also noticed that most of college education really doesn’t add value; so we created our own alternative program and hired students directly out of high schools. This has worked significantly well for us. We would likely never have done these if the hiring environment weren’t difficult for us. Even after hiring, until new recruits get familiar with the company and become comfortable about our business, the lingering question is always there in their mind. Every new hire-orientation I attend will have at least a couple of people asking the questions ‘Why don’t we do services? Wouldn’t that be an easier business’. So often have I answered that question that I can now answer that question even in my sleep!

The challenges continue even when employees become experienced. The prevailing social norms in India value a (perceived) stable job in a prestigious company in matters like marriage. I have heard the lamentation (half in jest, often) numerous times from our eligible bachelors that being employed in a new kind of company like ours isn’t great for their marriage prospects – we have even considered going into the match-making business to counter this!

Let’s come to the more serious issue of internal processes. Professional services companies work on fairly rigorous processes that are tuned to their business model of ensuring absolute predictability and certainty in their schedules. Their clients are typically large corporations who value exactly that. But such predictability and certainty come at a cost: the system necessarily has to slow down the pace of development. I have written about this issue in detail elsewhere, but suffice it to say that software development schedules are inherently and intrinsically unpredictable. Any fairly complex software project has exploratory elements (‘cutting the path through an unknown jungle’ is the analogy I often use) and anything exploratory in nature just eludes precise scheduling. The practical way to religiously adhere to a schedule is to slow down the system sufficiently that the probability of a miss is kept low- even then, the schedule miss probability can never be reduced to zero. There are all manners of buffers built into a schedule. In a product company, such a mindset can be wasteful, and even prove fatal. It is telling that while professional services companies tout their process certifications such as CMM Level 5 and so on, product companies world wide do not rely on such certifications, but let their products do the talking. This is not to argue that all process is necessarily bad. A certain amount of discipline in development is mandatory in order to achieve anything productive. But in a product company, there is a real danger of going too far and adopt overly rigid processes. The prevailing services oriented mindset in India makes that danger all too real. A product development environment has to foster a certain amount of creative chaos or controlled anarchy. We have to combine creative freedom while having sufficient discipline so that we actually ship a quality product on a schedule and budget that allow us to be profitable. This balance is a lot harder to strike than it appears. Embracing uncertainty and risk is intrinsic to a product company so, in a sense, people who seek perfectly safe and predictable environments are right to stay away from it. There are numerous rewards to balance that risk, there is nothing more satisfying professionally than to ship a product that gets widespread customer acceptance.

Finally, product companies have another dimension that is usually not a big concern for services companies: marketing. In fact, marketing can be as important in the success of many products as the quality of R&D. The reason is that even the largest services companies do business with a fairly small number of global corporations (typically a few hundred) so that their sales teams can reach them easily. Product companies have to reach a much broader audience, so marketing is crucial. Yet, this is easy to overlook, particularly for people with an engineering background. I certainly have made my share of mistakes in this area, so I can speak from personal experience here. One of the hardest things about marketing is that it is so hard to measure its effectiveness. Internet traffic is easy enough to measure, but how do you measure brand perception or market credibility, which can be very important in understanding whether a product is successful or not? This lack of measurability trips up a person coming from a typical services project management background, where precise measurability is the gospel. Finally, it has taken us over 12 years at Zoho to get to where we are today. I am not very patient by nature, but we had no choice but to be patient as a company, as we figured out a lot of these things over time. We certainly didn’t have an appreciation of all this when we started. Over the years, we have matured as an organization, our products have evolved, and more than just execution of an idea it has been a voyage of adventure.  

Does an Entrepreneur Need an MBA?

November 21, 2010 § 1 Comment

I started my career as an entrepreneur at twenty-four years old, right out of college. I ultimately built and sold a $250 million global scrap metal company, an experience I wrote about in my book Starting from Scrap. HBR wrote about my experiences in the December issue. After my book came out, I visited several U.S. business schools and met with MBA students to talk about my experiences launching a company in emerging markets. Many of the students who came to hear me speak were aspiring entrepreneurs in the process of getting MBAs. Many of them asked similar questions: “You didn’t get an MBA, nor did many other successful entrepreneurs, so if I want to start my own company, is business school a worthwhile experience? Is it worth paying all this tuition — or will my degree just be a resume-builder?”

 

I once had a conversation about this topic with Dr. John Yang, the dean of the Beijing International MBA program at Beijing University. Here’s what he had to say: “In my opinion, entrepreneurship is a matter of the heart, and education is a matter of the brain. It is difficult to teach a heart.” I share his perspective.

By definition, an entrepreneur is one who takes risk. It’s an attitude and an appetite, one which may be hardwired into one’s personality. Education can influence one’s attitude toward risk: for instance, understanding the principle of diversification or the long-term returns of equities versus bonds may make an investor more willing to create a “riskier” stock portfolio. But ultimately, can you teach someone to really enjoy taking risks? I don’t think you can.

When I think about the value of an MBA for aspiring entrepreneurs, I see a parallel with the military. Countries spend billions of dollars training soldiers so they’ll be ready for combat — they’re taught to fire rifles and operate in simulated high-pressure situations. But that training only goes so far. A Marine colonel once told me that he never knows how a soldier will respond — whether he’ll hide in his foxhole, run in the other direction, or stand and fight as he’s been trained #8212; until the bullets start flying. How someone reacts in times of great stress relies largely in instincts and the makeup of his or her personality — and training only takes you so far. The same is true with entrepreneurship. Understanding strategy, finance and marketing can be very helpful. But it’s also important to possess self-confidence, a need for independence, energy and passion, curiosity, and an ability to communicate ideas.

If you don’t have these natural assets, you’ll struggle as an entrepreneur. I’m lucky, because those are personal attributes that I have. I don’t have an MBA, but I’ve picked up many of the business skills I needed during more than 15 years running a company. (My grandfather referred to me as having an MBA from the School of Hard Knocks, whose official colors are black and blue — an expensive education that makes Harvard Business School appear inexpensive by comparison).

Many of the lessons I learned from those tough and painful experiences I might have learned in an MBA program — and if I’d learned them earlier, my company might have been even more successful. As the HBR article makes clear, if I’d understood the use and importance of financial and inventory controls, I could have prevented millions of dollars in fraud. Perhaps studying cases about companies that had grown too fast and lost control of both their finances and the quality of their products would have encouraged me to expand at a more sober pace.

We wasted years trying to re-organize after over-expanding and perhaps missed countless opportunities in the process. I could have saved or made a lot more money had I taken some courses in business law or venture capital financing. (We ended up getting strong armed by our investors, and they got away with it due to our early-stage naiveté.) I also would have benefited if I’d known more about human resources and the need for well-designed compensation and incentive systems.

These are just a few of the tools you can get in business school — and they’re all tools I wished I’d had. So I believe MBA programs do give future entrepreneurs valuable tools to help them mitigate risk and increase the probabilities of success.

But even with those tools, only you know whether or not you have the heart to execute on the opportunities we all recognize to launch a compelling new business.

That is when the real bullets start flying.

Greer is a senior advisor at Oaktree Capital and author of Starting from Scrap.

Market Research – Startup validation

November 19, 2010 § Leave a comment

Like to share an interesting article by Siddi in idea validation.

Here is one quick & easy way to do market research that I recently
did. Its useful when you don’t have direct access to the target market
(selling to the US for example):

- Create a landing page for the product, even before product
development starts
– Describe the vision for the product and have a form saying something
like “Enter your email for updates”
– When someone adds their email, an autoresponder sends out a reply
with a link to an online survey. I say “the product is in development,
but here is your chance to shape it”
– I have a few questions relating to what their biggest problems are,
which features they would be most interested in etc
– Promote the landing page: social media, mailing lists, google
adwords

If you do this right at the beginning, you’ll be able to collect some
data before and during development which you can use to shape the
product.

The advantages are:

- The group is self-filtered. Only those interested in the landing
page vision will sign up and take the survey
– When you are ready to launch you already have some leads who are
interested in the product

What we learned:

- We gave them a list of business problems and asked them to choose
which one was the biggest problem in their organization (they can only
choose one). A huge majority selected one particular problem. We made
solving that the focus of release 1
– We had a really cool feature in mind, which we thought would solve a
really irritating problem. But in the survey, not even one person
selected it as a big problem. So we dropped the feature.

He blog at http://siddhi.blogspot.com/

Startups – Recruitment

November 16, 2010 § Leave a comment

Here is an interesting article from Onstartups / Hubspot on Recruitment for Startups. I too share their thought and ideas.

In my experience I had offered my services to MNCs and Startups.  I had very good success with Cisco – Chennai, (previously Scientific Atlanta), because they know very clearly what they want and how to evaluate candidates.

  • What kind of people I want to recruit? – A tech geek or a specialist or a generalist?

If you are not funded then the best thing will be “start with something minimal”, so recruit an ordinary person with some common skill. I always hear I want a wonderful person to recruit from my clients. If you are an extraordinary person you should recruit an ordinary person.

I would like to share an interesting experience when I was working with Future Software now called Aricent. A candidate to be  interviewed and my PM who agreed to interview him could not spare his time.  So I checked with all the PMs, Managers but only my GM – Engineering could spare time to interview him.

After he interviewed the candidate he told me that technically he has to learn but he is very passionate about telecom domain.  The  GM informed the candidate to prepare technically and come after 2 weeks. Like this he interviewed him 3 or 4 times, asking him to prepare again and again before taking him onboard.  After 2 years that person was selected as best employee among 60+ members department.

The human mind is like a seed or rather like a volcano.  No one really knows what it is inside or when it will be ignited!

Based on comments on feedback will be continued ;-)

Startups – Realities

November 15, 2010 § Leave a comment

Here is an interesting article from Paul Graham. It is true in my experience.

1. Be Careful with Cofounders

2. Startups Take Over Your Life

3. It’s an Emotional Roller-coaster

4. Persistence Is the Key

6. Think Long-Term – You need persistence because everything takes longer than you expect.

7. Start with Something Minimal

8. Engage Users

9. Change Your Idea

10. Don’t Worry about Competitors

11. It’s Hard to Get Users

12. Expect the Worst with

13. Luck Is a Big Factor – didn’t realize how much of a role luck plays and how much is outside of our control.

Click me for Full article

Amazing Amazon Story

November 13, 2010 § Leave a comment

The Internet was originally created by the Defense Department to keep its computer networks connected during an emergency, such as natural catastrophe or enemy attack. Over the years, it was adopted by government and academic researchers to exchange data and messages, but as late as 1994, there was still no Internet commerce to speak of. One day that spring, Jeffrey Bezos observed that Internet usage was increasing by 2,300 percent a year. He saw an opportunity for a new sphere of business, and immediately began considering the possibilities.
In typically methodical fashion, Bezos reviewed the top 20 mail order businesses, and asked himself which could be conducted more efficiently over the Internet than by traditional means. Books were the commodity for which no comprehensive mail order catalogue existed, because any such catalogue would be too big to mail — perfect for the Internet, which could share a vast database with a virtually limitless number of people.

He flew to Los Angeles the very next day to attend the American Booksellers’ Convention and learn everything he could about the book business. He found that the major book wholesalers had already compiled electronic lists of their inventory. All that was needed was a single location on the Internet, where the book-buying public could search the available stock and place orders directly. Bezos’s employers weren’t prepared to proceed with such a venture, and Bezos knew the only way to seize the opportunity was to go into business for himself. It would mean sacrificing a secure position in New York, but he and his wife, Mackenzie, decided to make the leap.
Jeff and Mackenize flew to Texas on Independence Day weekend and picked up a 1988 Chevy Blazer (a gift from Mike Bezos) to make the drive to Seattle, where they would have ready access to the book wholesaler Ingram, and to the pool of computer talent Jeff would need for his enterprise. Mackenzie drove while Jeff typed a business plan. The company would be called Amazon, for the seemingly endless South American river with its numberless branches.
They set up shop in a two-bedroom house, with extension cords running to the garage. Jeff set up three Sun microstations on tables he’d made out of doors from Home Depot for less than $60 each. When the test site was up and running, Jeff asked 300 friends and acquaintances to test it. The code worked seamlessly across different computer platforms. On July 16, 1995, Bezos opened his site to the world, and told his 300 beta testers to spread the word. In 30 days, with no press, Amazon had sold books in all 50 states and 45 foreign countries. By September, it had sales of $20,000 a week. Bezos and his team continued improving the site, introducing such unheard-of features as one-click shopping, customer reviews, and e-mail order verification.

Full article at

http://www.achievement.org/autodoc/page/bez0bio-1

Hot Bread – Mahadevan

November 2, 2010 § Leave a comment

I feel what attracted me to the hotel industry was people; I love meeting people.

My parents (Doctors) also met people, but only those who were in pain and misery, and I want to meet people who are happy. Those who come to a bakery or restaurant are always in a joyous mood.

I was a professor during day time and a bell boy in the evening.

My advice to budding entrepreneurs is, innovate and think different. Don’t follow anyone’s footsteps; leave your own footprints for others to follow. Try to be lean and mean. Don’t take your customers for granted.

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