Indian Enterprise Market Sucks

So far, India’s IT industry has primarily catered to the US market, and secondarily to European and Asian markets. In other words, India builds technology largely in a back-office mode.

Of course, as the market matures, investors get over their fear factor, and the pendulum swings to the other extreme with over enthusiastic investors flocking to Bangalore, Mumbai, Chennai, Hyederabad, Delhi, Pune, and now even Kolkata.

The sentiment, still, is largely focused on opportunities with India as a low-cost production center, less so with India as the end-market.

This will most likely change in the next 5-10 years. However, as it changes, the VCs may very well make the mistake of thinking that the Indian market would mimic the evolution of the US market:

* a) The large enterprises will become the biggest consumers of leading edge, expensive technology.
* b) Small-Medium Enterprises will lag.
* c) Consumers are the trickiest to market / sell to.

Indian enterprise customers are cheap. Very cheap. A direct sales force selling to the enterprise customers will wear out the soles of their shoes before they close a deal, and when they do, the deal will most likely be unprofitable.

If you look at history, one of the most successful “product” companies to have been built in India was Vedika software, a small-medium business accounting tool.

On the consumer side, however, are India’s most exciting opportunities. Education is an obsession for all Indians, especially the middle class. Humongous technology companies have been built in India by serving this obsessive desire to be educated and marketable. NIIT is one of the best examples in IT training.

Other sectors that are just getting organized in India are:

* a) The ready-to-wear garments segment
* b) The media industry
* c) The tourism sector
* d) The packaged food sector

If you are looking at an India strategy — latch on to some of these trends. Don’t try to apply the proven American wisdom, because it is likely to prove that America is not very wise when it comes to investing in India.