Photo: iStockphoto
Photo: iStockphoto

Software policy 2.0: the new paradigm

India desperately needs a national policy on software products to retain the software powerhouse tag

India’s first software policy of 1986 resulted in the Software Technology Park (STP) scheme in 1991. Undoubtedly, the policy was highly successful, with the information technology (IT) industry today accounting for more than 9% of the country’s gross domestic product (GDP). However, the past few years have seen a serious decline in IT sector growth, owing to the rapid, global transformation in the technology and software industries.

Despite diminishing growth, even after 25 years, the old software policy (1.0) of 1986 still prevails, with its focus on IT services. India’s IT sector is strong enough to face changing technology challenges. But failure to capitalize on the capability built in last quarter century can have serious consequences.

In order to address the relevant global strategic paradigm shifts, a Software 2.0 policy is needed, with a ‘product’ focus.

After fairly long deliberations, the ministry of electronics and information technology (MeitY) has released a draft National Policy on Software Products (NPSP) for public consultation. At this stage, the draft is a macro-level policy statement, with the rightly stated vision of building a ‘software product nation’. The mission is to achieve 10-15% of the global market, which is estimated to be $1.2 trillion by 2025. On the home front, India needs to create approximately 3.5 million jobs by 2025.

The 10 proactive strategic action areas identified in the draft are important for the development of the product ecosystem. The main ones among them are ease of business, funding, research and development, domestic demand boosters and frictionless trade and tax regimes.

Action plans (schemes, programs, incentives and institutional set-ups) are supposed to follow as needed in a phased manner after the policy is finally launched. This flexible approach is the right one. This is how it happened in Software 1.0 policy as well.

Let us understand why Software 2.0 in the form of NPSP is needed. And also, what action should follow from it, in the near future, at MeitY.

It is important to understand here that the genesis of today’s IT industry was software. Empirical evidence highlights the real horsepower coming from software. IT enabled services (ITeS) is a derivative sector based on the core software sector. This is true even when we cut through the industry’s maturity stages. The ‘core’ has to be energized for the new paradigm.

The big sector-level transformative shift is a ‘standardized product’ taking centre stage. This cuts across the ready software packages (small, modular or enterprise grade), software as a service (SaaS), platform as a service (PaaS) and mobile apps.

The only subtle difference which remains is whether a product is sold to the end-user or a product is hosted by a SaaS or PaaS producer to provision the productized service. Even the IT services business now hinges on standardized ‘products’ for revenue.

Software product power is key to retaining the global software power tag in the next quarter century.

Many SaaS companies like Zoho and Freshdesk are already global marketplace names, pitching for leadership in their own segments. It proves the power of SaaS to give an edge to exports.

Many of India’s more than 200 SaaS companies have been incorporated outside, owing to the friction in doing global business from India. Software 1.0 policy doesn’t care about their issues. This loss can be plugged with Software 2.0.

India did not rise to be a software powerhouse just because of the Y2K problem. Software is an inherent national competitive advantage, well-established by research.

In recent years, there is a shift in competitive advantage towards innovation. One can easily map here the conditions before the launch of Startup India Policy 2015. A mass of new age software product start-ups has emerged, touching a wide array of industries.

Advanced and specialized factor resources are emerging from software product development in the captive offshore centres, R&D centres of multinational companies or outsourced product development vendors, across all major IT clusters in the country.

The final policy should be swiftly announced. Further, it is important to leverage policy through multiple threads focused on defined actionables. It could be: a) immediate action item list; b) ecosystem building programs; c) segment-specific packages; and lastly d) incentive schemes. For example, the SaaS-based product segment needs early support in the form of a booster package that solves their multiple problems.

The product industry has different generic needs. Hence, a new institutional set-up is required. A National Software Product Mission (NSPM) should be set up urgently as a nucleus of activity to cater to the emerging software product industry. NSPM can operate under an inter-ministry group, drawing legitimacy to understand and solve problems of this emerging industry across government departments at a single point.

“Mere incremental progress is not enough. A metamorphosis is needed. That is why my vision for India is rapid transformation, not gradual evolution," Prime Minister said at a Niti Aayog meeting recently.

We hope the long-pending NPSP will be announced soon. Only then will the Prime Minister’s dream of rapid transformation become a reality to catalyze an Indian Software 2.0 industry.

Sudhir Singh, former additional director STPI Jaipur, is a fellow at iSPIRT, running Policy Hacks.

Close