How to build successful IT products and platforms
The majority of the world’s top companies by market capitalisation are software products and platforms companies. Here in Sri Lanka, the first IT company to be listed on the Colombo Stock Exchange (CSE), hSenid Business Solutions is also a products and platforms company, while a few more are planning their IPO. One month after its IPO, hSenid is outperforming some established conglomerates on the CSE.
There is no doubt this is a rewarding space to encourage startups to look at, therefore a topical conversation. This article seeks to provide some guidelines for those embarking on a startup venture in a technology product or platform and highlight a few world-class Sri Lankan products that show great growth potential.
We spoke to the well-known IT entrepreneur Lakmini Wijesundera, the force behind BoardPAC and ATrad and the achiever of many business and leadership awards, as well as Dilendra Wimalasekere, serial entrepreneur, CEO, co-founder of Alavi.ai, and Chairman of 24/7 Techies and Eureka to provide insights and guidance to entrepreneurs to navigate an IT products and platforms startup. Lakmini and Dilendra collectively account for 50 years of industry experience and are mentors and advisory to the Products and Platform Council (PPC) of Sri Lanka Association for Software Services Companies (SLASSCOM). While Lakmini started with an Engineering background, Dilendra’s stepping stone was in business economics.
To start with, let us clarify what can be construed as a product, platform and service in the world of IT,at least for the benefit of the commoners like this writer!
IT services, products and platforms defined
This new age of IT has turned most things opsy turvy. We start proper nouns with simple letters- iPad, hSenid, and spell common nouns with a capital in the middle of a sentence, for example, the Internet. The latter, perhaps, is just to hail the great enabler of everything.
A product conventionally is something a consumer could touch, feel and see.
In come the digital companies, and market products that defy this notion. With the advent and popularisation of the Internet, another word is now thrown into this confusing hodgepodge of jargon- platforms!
We found the easiest to comprehend definitions in a Q&A, on Quora. Where an IT service is defined as using IT professionals to do something, be it making IT strategies, building IT products, or customising them. Product is one which people use- for instance, Microsoft Word, a word processing application, or Quickbooks, an accounting software.
Then comes the question, are products and platforms the same, as they are both things used by people. The answer lies in the scale of its asset base as shown by Mindtree, an Indian multinational consulting company. They define a platform, as an ecosystem with a monetizable core asset. A product works on the platform and helps in monetizing the platform’s core assets which are its features. Consider the complex PickMe platform. Rides, Food, Flash etc, are all products that work on it and enable riders to meet customers or producers of things to make their ware available for the buyers. Some of the features on PickMe Food will be the ability for a seller to showcase his products, a consumer to buy, choose to have the food delivered or picked up, rate, review purchases and pay online.
Services versus products
More companies in Sri Lanka start as software services providers with a billing client in the bag. This business model is appealing as it can bring in revenue from inception, therefore relatively risk-free. If these companies have foreign clients they can bill in dollars. However, a critical success factor for their exponential growth depends on having access to a large number of knowledge workers. Most countries do not have that kind of talent base, except for India, which has a mature IT industry and access to a population of over a billion people, offering its players a vast resource pool to draw from. Eight out of the top ten IT Companies in India by Market capitalisation listed in the stock markets (BSE / NSE) are IT Services companies, flipping the global situation mentioned here earlier. India today is the world’s largest exporter of IT. Virtusa, a software services company with Sri Lankan origins, set up operations in India to tap into this large resource base, to fuel its growth before it surpassed the billion-dollar valuation mark and earned the coveted title of Unicorn.
On the contrary, IT product companies are investments heavy, and rarely generate revenue from inception. However, they offer much higher growth multipliers than services companies. While Sri Lanka lacks in quantity, it makes up for it with the quality of its IT professionals, making it an ideal breeding ground for products and platforms companies.
The global and regional potential for IT products and platforms
Mindtree estimates the Digital Experience Platforms or IT platforms market to grow from USD 7.9 billion in 2019 to USD 13.9 billion by 2024, at a compound annual growth rate of 12.0% during the forecast period.
While an astounding 74% of the top 100 IT companies by market capitalization belong to the USA, two Chinese (Yonyou and Lufax), one Australian (Atlassian) and one New Zealand company (Xero) have found their way into the mix, proving that other geographies can break the barrier.
Closer to home, the South East Asian Region is a hot spot for IT Startups. According to NikkeiAsia, South East Asia has produced 27 venture capital-backed unicorns in 2021, excluding India. India now has a total of 50 + unicorns and had only 19 in 2019.
So time is ripe for Sri Lanka to ride the wave! To support that drive, here are some useful tips from experts who have built world-class products right here in Sri Lanka.
Start a product company if you are passionate about creating things
It is as easy and final as don’t start if you don’t have the passion to create things. Creating products and platforms need, more than anything else, perseverance and grit. Profits aren’t immediate and the wait and hard work are guaranteed, way before profits and even revenue. It is the passion for creating and vision to fill a market gap that will keep an entrepreneur going through hat difficult journey. Those who lack it will not persevere.
Looking back, Lakmini feels, it was her engineers’ mindset that drove her to create products very early “We became engineers to create things. I was a hardware engineer. But when I switched to software, it was still my passion to create things. There was always pride associated with making something innovative and creative.”
Do not go looking for ideas, they should be staring you in the face
Dilendra speaks of the wrong reasons to start a product company:
“Start a business because you have a burning desire to solve a very specific problem and want to help those people who face the problem overcome it. Don’t try to come up with an idea for a product just because you want to start a business and be an entrepreneur”.
ChakraSuthra is a Lankan startup that has identified a need that is felt daily by most of the citizens in the country- waste management. Their Trash 2 Cash smart machine accepts empty plastic bottles for recycling and provides incentives to those who deposit bottles.
Lakmini suggests that the new entrepreneurs be tuned to global acquisition trends to get a feel for what is in demand. For example, Internet of Things (IoT), Blockchain, Artificial Intelligence and Environmental, Social, and Governance (ESG) startups are current favourites in the acquisition market.
For example, promising Lankan startup Niftron is a blockchain based service platform, that allows businesses to integrate blockchain technology with their products or projects easily and efficiently.
Both Dilendra and Lakmini point out, however, that the best product or platform ideas have originated from those who have personally experienced a void in the available solutions. These ideas should have the potential to grow overseas.
Look at global platforms like Uber, Facebook, Airbnb. A personal experience sparked those product ideas, Lakmini prompts the would-be entrepreneurs to explore. Two friends, Travis Kalanick and Garrett Camp, after attending a tech conference in Paris in 2008, were unable to get a cab to get back. A thought that crossed their minds at that time sparked the idea for Uber: “What if you could request a ride from your phone?”
In-depth experience in a given industry will shed light on its market gaps leading to product ideas. It may be a direct experience or a pain point of a client operating in that domain.
Dilendra emphasises that “you have to have the domain expertise” referring to the industry the product or platform is going to cater to. “If you have the technical knowledge to build that product, it will be a bonus, if you don’t have it, bring in a co-founder who has that”
After working closely with a team of clients to build a solution for the Boston Stock Exchange, Lakmini soon lost all those contracts, with the onset of the dot-com crash of the late 90s. However, behind ATrad, is the knowledge and experience gained by Lakmini’s team, working on those projects that didn’t bring in revenue. She laughingly recalls how in the early days it took 15 minutes to log into the system they built!
“Today we have 80% of market share. We are looking at becoming a globally emerging company.” She proudly states.
Boardpac was birthed as a result of Nations Trust bank asking her to build a document management system for their board meetings. Bank of Ceylon saw the product and soon became a committed client.
“We are within the top 5 in the Enterprise Board Meeting Solution ranking and we also are the no 1 Board Meeting Solution in APAC” Lakmini states the global recognition Boardpac now enjoys.
Once you find an idea, test the concept and build an MVP quickly
An entrepreneur with a product concept in hand must test the market acceptance for it. In the end, if no one is interested in the idea, chances are no one will buy it. If there are no buyers, the company cannot exist! One way for an entrepreneur to have a product or platform concept verified is to gauge prospective user demand for it on a crowdfunding platform. Lankan platform Magicbit used this method not just to have a feel for the global acceptance of their product but also to create awareness for it in a short time. In an extremely fast-paced industry, where the ways things are done change constantly, mulling over an idea for too long, will be an opportunity lost.
As soon as there is an indication for market acceptance, Dilendra’s advice is, “Build your MVP (minimum viable product) quickly. “Build super easy user interfaces. Put effort into its user experience design. Your customers may be tech experts, but even they will appreciate it”.
Don’t move too far without a paying client!
Both these entrepreneurs point out not to overdevelop a product without any client input, involving customers’ feedback in the development journey of the product or platform is imperative for its success.
“Get people to try it out, think of short (development) iterations.” Dilendra, remarked.
“Don’t ask someone, could you use it? Ask them will you use it? And get them to use it and give feedback. You might spend money developing something no one will buy. Grow with the customers. The client will tell you what to build. Take the engineer’s cap off and think like a businessman” Are Lakmini’s words of wisdom.
Don’t bootstrap for too long, look at other funding options!
The obvious aim of every entrepreneur is to make money and grow the business, even capture a sizable portion of the global market. However, without capital, aspiring for global reach is being delusional. Most companies starting up today desire to be a billion-dollar operation, overnight, encouraged by the rise of tech unicorns in the region.
Lakmini who has bootstrapped her venture for the longest time advocates entrepreneurs raise capital as soon as an MVP is ready.
She says “It’s OK to struggle in the beginning, but you can’t grow exponentially, without money to back it. So, it is OK to want to be a billion-dollar company, but then your immediate thought should be- I need to raise $ 200,000 now. To grow exponentially, you need to reach hundreds of thousands of customers, you need money to scale and have marketing and sales reach. Today, there are many options available for startups to raise funds like Spiralation, LAN…there is funding outside the country. When I started there wasn’t much here or I didn’t know of any”
Dilendra echoes the same sentiments. He shows that a products and platforms company needs investment ahead of sales unlike its services counterparts, and adds “once you secure funding, be frugal with it till you get your product-market fit.”
Software products and platforms companies, Niftron and Chakrasutra mentioned earlier, are both raising funds and receiving mentoring through Lankan Angel Network (LAN) for expanding their customer outreach.
More details on the options available for startups to raise funds are available in the articles by the same author, “Funding startups in the tech industry-A much-needed boost for economic growth” in the Sept/Oct edition and “Crowdfunding: To raise capital and to test the markets for startups” in the Nov/Dec edition of this magazine.
Don’t be afraid to let go. Get expert advice and showcase your product!
The other valuable by-product of raising funds is the input of the investors. They will provide contacts, connect entrepreneurs with experts who can help close the gaps in the running of the business, whether financial, sales and marketing, legal or even technical knowhow, or knowledge in any other discipline that will be needed for expansion. One reason entrepreneurs shy away from raising funds through unconventional methods is also this intervention by investors. However, both Lakmini and Dilendra see this involvement as a positive thing.
Diandra says it was an investor in the company that led them to create Alavi by nudging them to formulate a product out of the services their company was offering.
The Lankan startups Mintpayand Magicbit, have enrolled themselves with the PPC mentoring programme of SLASSCOM, mentioned earlier, to get industry experts’ support on navigating their startup journey.
“I became an entrepreneur for freedom, but to grow, I had to let go of that. We now have a Chairman and a Board. Their checks are good and necessary for growth. As entrepreneurs, we think we know better, we don’t listen to experts. But now I am different. I listen more.” says Lakmini, a proponent of getting expert advice, showing it reduces costly mistakes and quickens the pace of growth.
Letting go applies to showcasing the product as well. Dilendra mentioned that the largest market for Alavi.ai is in India at present. Answering the question- if he thought that the tech-savvy Indian IT companies might replicate the idea of Alavi, He replied: “If you think that, you can never be an entrepreneur. Your product should always be ahead of the curve. Recently we had someone ask for a demo, and we knew it was a competitor, but we gave it (the demo). You should be aware, the competition is around the corner, and never be complacent. We have domain expertise so we always try to be a few steps ahead”.
Have a dedicated sales team
Both entrepreneurs are unanimous on the importance of maintaining a sales focus from the get-go of a business. A great product without sales is as good as a tree that bears no fruit and is purely ornamental.
Lakmini feels dedicating at least one person to sales from the beginning is crucial for success. “Like in most cases, I was the salesperson in addition to running the business in the beginning. But you cannot scale like that. Have at least one dedicated salesperson. She says it is not easy to find the skills “I have never had a problem with the technological skills of our people. But sales and finance yes”
A dedicated salesperson or a team should look at the entire sales strategy- delivery, payment methods, distribution model etc, and not just deal with adhoc sales Using cloud-based architecture, subscription-based sales methods and developing solutions that can be distributed using large third-party platforms, are good strategies to make a product more accessible and gain market reach fast.
Dilendra suggests, “Once a user finds your product make sure you remove all the friction around trying, buying, paying and using your product. Break each of these into granular steps and optimise to deliver an outstanding experience.”:
Choosing a geography to focus on helps to optimise one’s sales and marketing resources. When most companies focus on the USA and Europe for sales, the short to the medium-term focus of Alavi is primarily on India and Pakistan, followed by APAC. The region produces a large number of e-commerce companies that are growing rapidly, offering high growth potential for Alavi.
The time is now
The global Digital Experience Platforms or IT platforms market promises steady growth potential, and Sri Lanka has the right resources for Startups to venture into this domain. These companies do not need a large number of IT professionals, unlike the software services companies. The country offers high quality IT graduates, enabling entrepreneurs to develop world-class products.
Ticking yet another box for the entrepreneurs, the startup ecosystem offers more support than ever before, providing access to top-notch co-working spaces and funding. The country has a resource pool of entrepreneurs who have made the journey to international markets and now graciously contribute their time and effort to mentor startups. We tapped into the experience of two in this article, to provide 7 tips for entrepreneurs to follow to steer their startups to success. We hope these insights will inspire many more creative IT products and platforms ventures and enable them to contribute to a robust industry!
Jinashri Samarakoon Wijesundara