Welcome to Recession 2.0! Like Atul Chitnis predicted about 9 months ago:
I guess we can say it now: The Bubble has burst, welcome to the year 2000. Tighten your belts, and get real. Revenues are back in fashion.
What qualifies me to write about this
I am not a business or management guru with names of IIM, Stanford, Harvard or Princeton on my Resume. I have also not built any multi-million dollar company by myself. However, in the past few years I have earned some experiences that have allowed me to develop opinions, which for me are like the commandments for starting a new business during the current recession. What kind of experience I am referring to?
1. I started a web hosting/development business a little before Recession 1.0 hit in 2000. I had to sell it within a year incurring a loss. Lessons learnt.
2. I built India’s first full-service online printing shop and an online photo-printing kiosk in 2003, which died away due to the lack of funds for sustaining and marketing the business. Lessons learnt.
3. I revived a nearly dead studio photography division of our family businesses and raised the revenues by 400% within a year, turning it into highly profitable with income from the studio photography division having a noticeable portion in the entire group’s income.
4. Started a B2B photo-printing business which was moderately successful. It could have been enormously successful. Reasons identified – Lessons learnt.
5. I worked with the team at Zimbra, who have been extremely successful entrepreneurs themselves and learnt how mainstream IT product businesses are created and run. Zimbra was eventually acquired by Yahoo! for US $ 350 million.
6. I have been a part of the team that established One Point Consulting in India and have been a witness to the change in the business situation in the past few months.
Yes, that’s it! 
OK, so here come the commandments:
1. Technology is a means to an end and not an end by itself (unless you are a geek)
It’s not bad to be a geek. But if you planning to do business, you need to be a businessman, irrespective of whether or not you are a geek.
Re-iterate, you cannot eat, drink, wear and live in technology. You can eat food made from technology, you can drink water processed by a technology, You can wear clothes stitched by technology or live in a house built by technology.
2. People have real problems and they will pay you reasonable money if you help them solve those problems
It doesn’t matter whether you use high-technology or simple hacks. What matters is that the problem should be correctly understood and solved completely. You as a geek may not be happy with the solution. What matters is, the customer should feel happy and satisfied.
3. India is where the customers are! Opportunities within the SME
• The small scale industry sector provides direct employment to 18 million persons in around 3.2 million registered SSI units in India. (1)
• The micro, small and medium enterprises sector comprises 50% of India’s total manufactured exports, 45% of India’s industrial employment, and 95% of all industrial units in the country. (2)
• Nearly 1,000 Personal Computers (PCs) were shipped every hour during January-March 2008, according to an IDC survey. In the first quarter of 2008, computer shipments stood at more than 2.1 million against 1.9 million PCs in the corresponding period last year. (3)
• The India domestic IT and ITeS market is expected to cross the Rs. 2, 00,000 Crore (US$ 50 Billion) mark in 2012 compared to Rs. 90,014 Crore recorded in 2007. This translates into a CAGR of 18.4% in the five year period. Together with IT and ITeS exports revenue of Rs. 3,20,278 Crore, the total IT and ITeS industry size will grow to Rs. 5,29,976 Crore (US$ 132 Billion) by 2012, representing a CAGR of 16.5%. (3)
• Indian PC market bounces back to record an impressive y-o-y growth of 24% in 3Q 2006 – SMB segment drives up overall PC shipments, Higher Education segment pushes up buoyant notebook PC market. (3)
• The Indian retail segment contributes 20 percent to the country’s GDP but remains one of the most unorganised sectors in the country with less than 3 percent IT penetration. This offers huge opportunities for Indian software companies. (4)
• SAP India, a subsidiary of SAP AG, has reported software revenue growth of 43 percent in the first quarter of 2008. According to a recent validated industry data, SAP India has reported highest growth rates in small and medium enterprise (SME) software revenues of a single region for SAP worldwide. (5)
• Nearly 60% of IBM India’s revenue comes from SMBs with 15-20% of IBM India’s workforce dedicated to the SMB market (6)
• The share of Indian Small and Medium Enterprises, in total IT spend has been growing rapidly over the past few years, and now there is evidence that growth in SMB IT spend is set to continue at a robust 24 percent. This growth rate is the fastest amongst all BRIC countries, with Russia, China and Brazil following at 22.9 percent, 20.4 percent and 19.4 percent respectively. (7)
(1) According to smeindia.com
(2) According to Institute for Financial Management and Research
(3) According to IDC India
(4) Source: http://www.expresscomputeronline.com/20031027/sme03.shtml
(5) Source: http://www.ciol.com/SMB/News-Reports/SAP-India-catalyses-nations-SME-boom/10608106903/0/
(6) Source: http://www.nextbillion.net/newsroom/2007/12/06/ibm-extends-presence-to-serve-smes-in-india
(7) According to Microsoft
5. Indians love mobile
India Ready to Take Second Position in Mobile Subscription
6. The role of CIO/CTO in an SME in India is played by their local hardware vendor
This, by far, is the best way to channelize any service/product successfully within the Indian SME.
7. Focus on local languages, in addition to English
See: English Literacy in India
8. India has all types of customers
Cost-sensitive: Better cost; Quality-sensitive: Better Quality of Product; Service-sensitive: Better Customer Service. No-one is perfect but you need to be exceptional in at least one of these and competitive in the other two.
9. Plan how you will be marketing / selling
Nothing sells by itself. Days of monopoly are gone.
10. 1000-days!
This is how much it takes for any business to settle-down properly. If your business matures faster, it’s great! If it doesn’t, remember not to withdraw before 3 years. I don’t mean to discourage or disillusion anyone, but do have a contingency plan for sustaining yourself for 3 years.
Repeat: It takes 3 years of hard-work and smart-work with a single-focus on your business for it to start giving you good returns.
Got comments / questions? Fire away!
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Nice post. I couldn't agree more with points 1 and 2.
Really interesting insights in points 3 and 6. Hadn't thought about the local vendor model of approach.
Would you have an example which you could share with respect to point 6?
Thanks again for a terrific post!
I agree with point #10 … it takes time to learn and build. If one went to a swimming class … u won't aim for the deep end of the pool on day one … why wouldn't the same hold for starting up a new business.
Sridhar, Thank-you for reading and commenting on this post! We have a Gujarati saying that says, "It takes 1000 days for any business".
Hey thanks for the reply. I completely agree with your views on asking the Computer-wala about whats in – even though I am computer literate. I haven't found myself doing that for software, but I guess lots of people running non IT businesses would be doing it.
Thanks again for the terrific insights
Another figure to reiterate the fact that SME./SMB is big. Red Hat in India had a Sales YOY growth of 50% in the SME/SMB segment.
Thanks for reading and commenting, Amit! This is an interesting figure – would be interesting to understand how Redhat defines an SME and what verticals within SME have what kind of distribution (of this figure).
Saurabh, Thank-you for commenting! W.R.T. Point 6, my observations have been:
1) The proprietor/partners/directors of an SME have a very strong relationship with their hardware vendor.
2) Generally, they have AMCs in place for computer servicing, network maintenance, etc., which allows them to meet face-to-face quite a few times in a year.
3) Obviously, whenever there is a need for adding more computers, replacing some computers, they look towards their hardware vendor for their advice. (This is true even if the owner of the business is computer-literate).
4) Due to their strong relationship, every time, there is a need for introducing new software or replacing existing software, the local hardware vendor is first to receive a call.
5) Over a period of time, the vendors start understanding the typical software requirements and sign-up as dealers with companies such as, Tally, Microsoft, etc.
6) Thus, these hardware vendors provide a range of products and services like computer hardware, setting-up of networks, software for most common requirements, etc.
7) Only in very rare situations, will you notice more than one vendor catering to one customer. Thus, the relationship is one-to-one. That is, One technically sound agency serving all hardware, software, networking and advisory.
Because in India, the typical phrase used for these vendors is the “Computer wallah” who provides everything pertaining to hardware and software to the small businesses. People generally tend to ask, “How is your computer wallah? Is he good?”, meaning to say, "Is he technically efficient?".