What is a viable business model for an Indian software company that wants to sell products instead of services? Since he was 19 years old in 1999, Apurva Roy Choudhury had been wrestling with this problem, and by late 2007, he was forced to look for a new answer.
Getting contract programming assignments had always been easy, but developing a killer application that could be supported by charging end users had proven much tougher. Choudhury’s ten-year entrepreneurial journey exemplified the challenges and opportunities faced by Indian software companies as they try to make a living by selling products instead of programming services, and he wondered how an upgraded version of his firm’s flagship collaborative application could finally move beyond building specific applications for specific customers.
Born in Jamshedpur in 1979, Choudhury grew up in Mumbai as a mechanically gifted boy who wasn’t especially good at school. “I have always been more visual, better at building and inventing stuff; academics is not my cup of tea,” he reveals. In his fourth standard, Choudhury’s father offered to buy his son a computer if he fared well in examinations, so for once, the boy learned everything by heart, fell in love with computers, and taught himself how to use them.
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| We realized that our business is building enterprise software, and that is a hard sector to penetrate because there are some huge gorillas out there. Selling software is not about owning the intellectual property. It is about owning a successful product built around continuous innovation. The only way we can compete with giants is to create an ecosystem of individuals and businesses that depend on our product to do their business Apurva Roy Choudhury |
Enrolling in a technology institute at the age of 17, Choudhury built his first website and gained a reputation as a hacker. He stopped out of school for a year to build websites for clients, then learned how to build internet and extranet applications. During the dotcom boom, he took on a large project to build an online movie ticketing service. Once that was running, Choudhury started a company called Cynapse consisting of the key talent who had worked on the ticketing project. “We hadn’t thought about how to make money, we were just thinking about how to make great technology,” Choudhury recalls. He rented a residence that his father had purchased near the family home, and used his savings to furnish it as an office and buy computers.
The core programming team thought of themselves as a research organization, “positioned between an open source geek company and a corporate software company,” Choudhury says. “We started with no idea how to get revenue. The first year, we made every mistake we could have by doing a little bit of everything—shareware, web sites, vertical applications, you name it. It was difficult for us to find a focus that would position Cynapse.”
What motivated the team and glued it together was a shared commitment to inventing new products with which they could identify. Like many topnotch programmers, they wanted to build something that would be widely used and would excite the admiration of their professional peers. Choudhury explains:
We have never counted success monetarily. Money has always been the last thing—what drives us is popularity, fame, the limelight and the joy of creation. Our intention was to invent whole products, something you can use without depending on another system, not modules or processes. We want to write applications for end users meant to benefit mankind. We identify with the kind of products Microsoft does, end user productivity applications like Office, Outlook, or Internet Explorer. We’re not from a financial or manufacturing background, so we won’t write financial or ERP software.
The partners agreed from the start to bootstrap Cynapse itself instead of seeking outside investment. Choudhury clarifies:
We had a lot of offers from venture capitalists and smaller investors, but we wanted to own the company ourselves and fund it through organic growth. In the Indian environment, the investor who puts in 100 rupees today wants 150 rupees the next month. Research work is not appreciated. However, the gestation period for end user applications is very long; competition is high; and cracking the market is difficult. Selling applications and making money requires a business plan, which takes a lot of time. So we had to find a way to make money in order to fuel our product development.
Cynapse set up one R&D team to build products while a separate team built solutions to earn the cash needed to sustain product development. “That really slowed us down, and at times even broke our morale when we had difficulty sustaining ourselves via solutions,” Choudhury says. “We would get money and say ‘Let’s do a product.’ Then we ran out of money, and said ‘We must do a solution now.’ We shifted people back and forth, and while we easily kept ourselves from starving, we weren’t getting ourselves out of the solutions rat race.
The Cynapse team always viewed building custom solutions as a means to an end, not an end in itself. The goal was to create great products for large numbers of end users. Although solutions financed product development, Choudhury believed that in many ways, building solutions undermined Cynapse’s product development capability. He explains:
We got into an expensive cycle: we train people to build high-end solutions, and after six months, they have enough expertise that a contract programming company such as Wipro will pay them six times as much. I lose expensive resources because key engineers constantly have to train new people. Solutions also require follow-ups with clients; if we keep doing solutions, I’ll have to hire enough people for a whole new company. The development processes are different: in solutions, you spend more time on documenting and on formal test cycles, not on using the newest technologies. Even the technical mindset is different. On the product side, you come up with a concept, build a marketing plan around it, and find the best technical architecture to use. On the solution side, you don’t invent; you execute the specification that you are given.
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written by Arun Agrawal - Ebizindia, July 20, 2009
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