Thread by @Finstor85

In next series of tweets, I will try to present a few key highlights on Indian Tech companies. Often I hear that people want to invest in US cuz India does not offer many product companies. It is mere illusion! Let's see where we go with this series

India started as IT outsourcing hub, grew in size, made lives of many. Remained predominantly services provider. It still is, but it is transforming too. Indian IT is no longer pure services provider.

IT companies usually build reusable software components that can be wrapped to make an accelerator - something that can accelerate a functionality implemented for a new customer. All major IT companies used to have high regards for accelerator building in the past.

Over the period of time, both, domain expertise & accelerator maturity grew and companies realized that accelerators can be monetized if positioned well. And that the dawn of transition from pure services to Service + Products offerings.

Companies took accelerator building seriously, and product teams were formed to create a product, position it within the market, sell to existing customers, stabilize, and then open for the world. Result? here it is -

Top IT Companies & their product portfolio. Still think IT is only about services? You are mistaken!

#TCS Ignio/Jile (10 more products + 5 platforms)
#LTI Canvas/Mosaic
#TATAELXSI FalconEye
#LTTS iBMS
#Infosys NIA/EdgeVerve/Finace/Panaya/Skava
#HCL Optimus/eDAT/ISE

#TCS' Ignio is already crossed $100mn in revenue. These are early days of the product offerings in India. Pureplay product companies have a lot of other challenges can impact profitability, reduce visibility of revenue over longer periods of time.

The services segment will grow, but the alpha will come from the product segment. Because most of the products are built internally at very tiny cost, profitability or IRR for a given product can be reached very fast.

Services segment provides stability, Product will provide growth. Pureplay product tech companies in US mostly rely on PE/VC valuations, go for fundraising continuously to delay the profitability. India cannot afford such companies.

#TATAELXSI & #TCS have already launched separate LoB for positioning their products. The services flavor is no longer there, these new-age solutions are offered just like any other US Tech product. Check out positioning of FalconEye or Ignio

#intellectdesignarena is example of how heavy R&D expense can suppress stock for years. Expenses are always frontloaded, revenues deferred. Product companies are not always rosy & shiny. They too have their challenges.

Expenses into CD/CI, realtime upgrade, constant product featuring etc take away a significant part of the revenue. ROI realization is delayed.

Further, slice/dice consume model has thrown new challenges in front of product companies. Large bulky software are moving to cloud on subscription basis. This affects topline significantly because of low revenue ticket size & lack of visibility

And pay as you consume is now set to challenge such companies even further. Nobody wants a subscription for the entire year. I will pay for what I consume. How will companies forecast topline/sales and provide guidance to investors? Think!

In sum, product companies sound exciting, yet they have their own set of challenges that can impact your investments. Services companies sound obsolete, yet can provide stability. Combine both, and you have a setup that is prepared for next decade!

I am extremely bullish on Indian IT/Tech space for the same reason. We will witness exponential grown even from these elevated levels! The winds have changed the direction, stop thinking everything US is good, and everything India is old.

I hope this provides a perspective! Tweets are only for educational purpose, no recommendation of buying/selling