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Software Ecosystem: Make In India Narrative And Challenges For Startups

Software Ecosystem: Make In India Narrative And Challenges For Startups

Std. 6 — according to the New Education Policy, that’s when the next generation of kids will start to learn to code. India is definitely getting ready to create technology that runs the world. Time is just right for the thriving software ecosystem that attracted over US$10 billion investment between 2016 and 2018. The number of unicorns is rising every single year.  

Creating a prosperous software ecosystem needs multiple elements working at their optimum. Some of the critical factors that can make India a leader in the field of technology include, but aren’t limited to, a robust government policy which encourages startups by providing tax rebates, SEZs for setting up of offices, an education policy centred around nurturing talent for innovation, multi-departmental job-generating enterprises, venture capitalists that believe in profit-making abilities of companies, unique solutions and last, but not the least, unicorns that are born out of specific demographic challenges. 

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India’s national policy on software products – 2019 aims to develop India as a global software product hub, providing the much-needed focus on innovation, simplifying filing for patents and creating Intellectual Property. It is creating a roadmap for improved commercialization by promoting technology start­ups and specialized skill sets. India’s SaaS revenue has reached $3.5 billion as of March 2020, growing at 30% CAGR, with 75% of it coming from global sales, according to a new collaborative report by Nasscom in partnership with SaaSBOOMi.

The Digital India initiative by the Indian government lists the following to create a Software Products Business Ecosystem:

– Creating an Indian Software product registry through industry ownership. To act as a common pool of Indian Software Products to provide a trusted trade environment.

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– Creating a conducive environment to facilitate the active participation of software companies in Capital Market.

– Establish a Single Window platform to facilitate the Indian software product industry in fast-tracking legal and regulatory issues regarding (i) import and export and (ii) opening and closure of software product enterprises.

– Evolving a model of a classification system for Indian software products through a model HS code. The classification will facilitate tracking and easing of export of software products and also help in by providing statistical data for further promotion of specific sectoral software products.

– The Indian Software Product Companies will be allowed to set off tax payable, if any, on the investments made (on an accrued basis) in R&D of indigenous software products.

So, what are the challenges for startups?

Lack of Geographical spread: The software companies in India are concentrated in the metros. The other cities in India lose out because of lack of infrastructure – availability of round the clock power, uninterrupted internet and bureaucratic hindrance. It is impossible to imagine a software company in tier-2 cities. A lot of talent available in these geographies miss out because they are unable to migrate to bigger cities.

The inability to start a company in smaller cities poses problems for startups that need to be present in the respective localities. For example, a tech startup that wants to work with tea-gardens will need to be in a place like Darjeeling but will lack the essential infrastructure as well as people required to work with them in tea-gardens. 

Hiring the right employees: Most people in India are not in an economic condition to take financial risks voluntarily by working in a startup. The best talent finds itself stuck in jobs that are safe and boring. Government jobs still attract people as they provide a safety net not available in private sectors. India has unique challenges in this accord. For example, among other things, people working in a startup are considered high-risk. The lack of financial stability makes it difficult for them to find partners through conventional marriage channels which in turn only strengthens the negative perception surrounding startups. 

Infrastructure: Startups in metros have to work with high rentals for office spaces. Employees often find cheaper accommodations far from where they work. Indians spend around 3 hours commuting to the office, which accounts to about 7% of a day. Bangalore, the startup hub of India, doesn’t have a reliable public transport system that can empower its 24×7 work hours. 

Indians are known for their resolve and finding their way out despite the challenges. As of 2020, there are 21 unicorns in India, collectively valued at $73.2 billion according to Hurun Global Unicorn List 2020. Start-up founders have been coming up with innovative business ideas to flourish in a diverse country like India and also been able to cater to the world. The future for startups in India looks promising. 

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