1Mby1M Incubation Radar 2010: InnovizeTech

By guest author Praveen Kumar

InnovizeTech is the creator of Sapience, a patent-pending software product to measure and analyze the effort and productivity of an enterprise. The product helps organizations that use computers to deliver their services and products by measuring the exact effort needed, improves estimates of effort needed for future products, and identifies areas of under- or overcapacity utilization. These benefits can be of use to IT services companies that have fixed price and time and materials–style contracts, software product firms, and also certain non-IT T&M based businesses.

The Pune, India–based company was founded in 2009 by four serial entrepreneurs. CEO Shirish Deodhar  has over 25 years of software industry experience in the U.S. and India. His two previous companies, In Reality Software and Frontier Software, merged with Symphony Services and VERITAS Software (now Symantec), respectively. He has also written a book titled “From Entrepreneurs to Leaders” published by McGraw-Hill.

Madhukar Bhatia has also helped to build two startups. He was VP at Symphony Services and senior manager at VERITAS, and prior to that he was a partner at one of India’s earliest product startups in the CAD/graphics space. Hemant Joshi has over 22 years of domain knowledge of building software products. As VP at Symphony Services Inc., he helped to incubate and mentor client teams. Finally, Swati Deodhar has over 20 years of software industry experience. She has held positions ranging from VP to business unit head at Symphony Services, Ruksun Software, Mafatlal Consulting, and PricewaterhouseCoopers. She has built medium to large offshore teams for several global clients.

While working at various companies, Deodhar found that, not surprisingly, software companies face various challenges while managing large teams. Often, projects and product releases do not meet deadlines, and a large percentage fall significantly behind schedule. Also, there is little insight into the time spent on activities and applications to realize assigned tasks and the revenue and profit are under pressure, both at product companies and services firms. Studies show that 20% of employees are working at less than 50% capacity, either because they have not been assigned sufficient tasks or because they are spending time on personal work. On the other hand, more than 1/3 of the teams at a typical company are significantly overworked for long stretches, pointing to poor estimation of effort. Even as employee time is hard to get a grip on, employee compensation is greater than 60% of a business’s total cost and has been rising rapidly. Deodhar says that companies want to measure people’s productivity and are mandating time sheets; however, these are not always useful since the data is subjective and inaccurate, and bad data leads only to poor decisions.

The team aims to address the challenge through software that relies on the highly automated capture of time use on the PC and off. Sapience works by measuring the work activity of every employee’s computer, while ignoring use for private purposes. It sources time use on applications and offline meetings and phone calls for each individual and maps this use to activities (nature of work) and purposes (projects, functions, and initiatives), which it achieves through a combination of organization rules, pattern matching intelligence, and usage- based learning. The software aggregates individual employee data across the organization structure and generates rich reports related to proper use of time, capacity utilization, and effort classification for both employees and management. Sapience users have demonstrated a gain of eight to twelve productive hours per person in the first month of deployment at several pilots. At $100 per person for a permanent license, this ensures return on investment (ROI) within the first 30 days.

When InnovizeTech entered the market, there was no competition in the enterprise space. There were players with limited functionality for small workgroups. Deodhar says that while there are many spyware programs (keystrokes, screen shots, and so forth), these collect low-level data that enterprises don’t care about. There were no players with a product that captured automated time use and effort analytics (time rolled up) across the entire organization.

The total addressable market for the company is estimated at $2.5 billion–$3 billion and is expected to rise to $4 billion–$5 billion by 2015 based on the increasing number of people around the world using computers at work. InnovizeTech’s target market is defined by type of business and geography. Companies targeted include software companies (ISVs and services), engineering services, KPOs, and IT departments in any vertical. In terms of region, they are planning to target Pune and Mumbai, then other Indian cities (Bangalore, Hyderabad, Chennai, and New Delhi), then the United States and the UK, and finally the rest of the world. Sapience could benefit any business whose staff uses computers to deliver their products and services. IT Services and software product companies (ISVs) had immediate potential because the founders had good contacts in that space. Deodhar says that since there are many such companies in Pune and Mumbai, InnovizeTech’s cost of sales and support will be low initially as they are going to concentrate on these cities for first year.

Sapience is available on-premise or in the cloud (SaaS). The per-user price for a permanent license is $100, and the subscription price is around $19 per user per quarter. AMC for permanent licenses will be at 22% from the second year. At present, with the limited customer version that was released in August 2010, InnovizeTech is adopting a seeding strategy in which they are signing up clients with a starter pack that covers 25 users for two months at $500. In June and July, they signed eight to nine free three-month trials with a beta release, and these participants will be converted to clients after the pilot ends. In total, there are 15 pilot installations, five of which are paid, covering from five to 50 employees. These range from large IT services firms to subsidiaries of U.S. product companies to Indian product companies to engineering services firms.

Sapience has not yet been tested for scalability beyond 200 employees. They will have a proper general availability release on January 1, 2011. Until then, the company will generate revenue from paid pilots and small deployments (fewer than 200 employees). Their revenue target for 2010 is around $20,000.

The founders spent $180,000 of their personal funds in 2009 and early 2010. In addition, all four founders worked without salary. In July 2010, they signed a funding agreement with Indian Angel Network, which put in $175,000 in July with a second tranche of $175,000 is scheduled for January 2011, subject to the company’s meeting certain targets.

InnovizeTech’s growth strategy is an expanding Web model. The right time to think more about an exit will be when they hit the $1 million revenue run rate. At that time, the team will consider both Series A funding and an exit.

InnovizeTech presented at Sramana’s 1M/1M roundtable on September 9, 2010. The recording of the session is here. You can also find Sramana’s recap here. Sramana encouraged Deodhar to stay focused on the Indian market, generate 20–30 pilots of 50–200 employee test cases at companies with more than 5,000 employees over the next six months, and close full-on enterprise deals with at least a dozen of them over the next twelve months. Also, she advised him to avoid spending money to sell to the U.S. and UK markets for the next year.

This segment is a part in the series : 1Mby1M Incubation Radar 2010