Sramana: Selling to small businesses in India is a lot different than selling to Indian corporations or MNCs. How did you adjust your strategy?
Girish Rowjee: When you approach a small business in India, the first thing they do is start to compare you to the cheapest solution available. They want to engage you on price point. The actual support and software capabilities are evaluated after addressing the price point.
We had to develop a strategy to let us move forward with this market mentality, so we developed a pricing strategy to accommodate Indian small businesses. We established a monthly price based on the number of employees in the system. Once we had the pricing set, then we were able to focus on scaling the business.
In 2008 the application was not a cloud-ready application. We had to completely rewrite the product around the cloud-based infrastructure. We already had 250 employee payments processing every month on a prototype system, which gave us a steady revenue stream.
We had to develop our new platform on a LAMP stack using Java just to keep the product affordable for our customers. A large number of small solutions in the market had created a very fragmented market with wide price variations. The only common element of competition for payroll systems was price and this was very negative for the ecosystem. Nobody could do any significant ecosystem in building something really good and investors were not interested in hearing the whole story. Even today when investors come to us, they ask us if we have a U.S. story or a European story. They don’t believe in our Indian story.
Sramana: Selling software to Indian customers is generally a very long process. It gives rise to slow-growth businesses. The kinds of investors you are talking about are looking for high growth companies. It has been very difficult for Indian VCs to find high growth companies that cater to the Indian market. That is the reaction you encountered.
Girish Rowjee: We definitely experienced that.
Sramana: There is no harm in building a slower growing business as long as you don’t have to deal with investors.
Girish Rowjee: We were certainly debt free and running on our own. We had good clients and a comfortable revenue rate. It was difficult to build a sales team because the sales cycle was so long, and as a consequence, our sales happened by referral and word of mouth.
Sramana: How long did it take you to bring your cloud solution to the marketplace?
Girish Rowjee: We spent a year and a half building that solution. As a result we had a down year in 2008. We did keep a steady stream of existing payroll customers. We reinvested the money from our legacy business into our new SaaS business.
Sramana: Did you position your SaaS business to cater to the IT companies that made up the core of your customer base?
Girish Rowjee: We build the SaaS business model for small Indian businesses. We did not specifically focus on Indian IT.
Sramana: It seems that your early adopters of the SaaS model would come from the IT space. Was that the case?
Girish Rowjee: Yes, you are correct on that. They had access to Internet that was more reliable.
Sramana: How much new revenue did you do from SaaS in 2009?
Girish Rowjee: We had a minimal level of revenue. I think we did 30 lakhs.