Bytes from Tally Solutions founder Bharat Goenka

On the challenge of creating a mass market software product

The challenge is mindset. When Microsoft looked at the engineering of Word, they wanted to do it in such a way that no Microsoft person would be required to train you how to use it. It had to be made simple to use, intuitive. Similarly, we were clear we wanted to sell our product to thousands of people, and that became the objective of our engineering. Which is why today we can sell 5,000 Tally units a day. A Lamborghini or a Porsche may be faster than a Formula 1 car, but they won't win in F1 because they are not designed to. They can't do a pit stop in 8 seconds.

On offering his solution on the cloud (SAP, Ramco are experimenting with this)

People say cloud computing reduces cost. But I say cost depends on your business model. There is as much technology in Windows 7 as there is in SAP ERP. But SAP is priced far higher because it sells to only a few customers. We are targeting millions of customers, and that business model keeps our costs down. Besides, core business applications have to be amazingly responsive. Most of us still use Word, not Google Docs, because we want instant response. Bandwidth will never be enough to ensure instantaneous response for cloud offerings. And even if it were, switching will always create a lag.

On Tally's challenges in India

Piracy is our challenge. There is no software buying market in India. The trouble is, organizations like Nasscom are not very interested in taking up the issue because apart from us, no Indian company is really impacted. It does not impact an Infosys, nor does it impact other software product companies like Subex because they are not in the mass market.

INDIA INNOVATES

TALLYING WELL

Tally is unrivalled in accounting software for small enterprises in India. It is now trying to replicate that phenomenon in ERP for larger enterprises

Sujit John TNN

In some ways, Tally Solutions is India's Microsoft. Its accounting software is as ubiquitous amongst India's micro, small and medium enterprises as Microsoft's Windows is amongst...just about everybody. In both cases, most users in India use pirated versions. Tally is as easy to set up and simple to use as Windows or Word is; which explains why you find firms advertising for "receptionists with Tally knowledge".
But there the similarities end. Though Tally says it has users in over 100 countries, the bulk of its estimated 2-3 million users are in India. So Tally is a long way from becoming the global success that Indian software service exporters have been, let alone the success that Microsoft has been in software products. Yet, at the moment, Tally looks to be the one Indian software product company that has the best chance of becoming truly India's Microsoft.
Over the past few years, it has transformed the simple book keeping system that it started off with 24 years ago, and has now entered a realm that has been the forte of the likes of SAP and Oracle -- ERP targeted at larger enterprises. And it says it has applied the same basic principles of ease of use and implementation that made its early accounting software such a rage among small businesses.
Unlike traditional ERP solutions that could take more than one-and-a-half years to implement and become operational, Tally says its ERP can become operational in a month. "It's plug-and-play ERP. Customization can happen as you go along. Our software is flexible, so it takes the shape you want it to, just like our first software did," says Shoaib Ahmed, one of the five presidents in Tally Solutions and who came into Tally six years ago when Tally bought out his accounting software company.
Bharat Goenka, who co-founded the company along with his father Shyam Sunder Goenka in 1986, says only about 10,000 of India's 200,000 large enterprises today use ERP. "Nobody, including those like SAP, is designing ERP to get the entire 200,000 as customers. All ERP vendors together may be planning for another 10,000. We, on the contrary, are designing and engineering our product to get the entire market," he says. Ahmed says Goenka has mandated his team to get 150,000 large enterprises as customers in five years. His expression suggests that's an impossible order. It's a pace that SAP or Oracle cannot even dream of. But Goenka has done it before in a different market segment, so maybe it's not so impossible after all.

The vision

From inception, Tally's driving force has been ease of use. It started in the mid-80s when the Goenkas tried to run some accounting software that the likes of Wipro and TCS were selling then. For the simplest of applications, it required them to know numerous commands, making the senior Goenka to remark: "When I buy a car, I want to drive it, not be a mechanic." And since his son was interested in programming, he was asked to work on a better solution.
"After four months, we showed our first demos to my father. There was a payment for travelling expenses with the entry code 'T001'. My father couldn't understand the need for codes, and we told him the computer does not understand English, it only understands codes, and it's easier to write programmes with codes. To that my father asked: are you writing programmes to make the life of the programmer easier or the life of the user easier?" They went back to the drawing board, and eventually came out with what was the first 'codeless accounting' software.
"That became our benchmark. My father would try something, and if he couldn't do it without me standing behind him, it had to be redone. That put a different discipline into us," says Bharat Goenka.
It also meant that the software was highly customized to the way India's businesses did accounting, which was far less disciplined than in developed markets. If a store was to issue a purchase order for 100 shirts, but only 75 were delivered, software solutions designed for developed markets could not handle it. "You would have to send the delivery back saying my system cannot handle it. But Tally could handle such exceptions, and businesses liked that because they would want to take the delivery and start selling the shirts that had come," says Ahmed.
Similarly, any wrong entry made that affected many other entries could be corrected in traditional software only by making an additional entry. Tally allowed you to correct the original, which was the way accountants functioned. Dates could be entered any which way, books of accounts could be presented the way you wanted. "Traditional softwares were straitjacketed, they could not handle exceptions. But life is about exceptions, especially for unorganized business," says Ahmed.
That same philosophy, Tally says, informed all later applications, like for inventory accounting and management, multi-location/multi-currency/multi-unit handling, payroll accounting, budgets and controls, taxes.

A comprehensive solution

Today, Tally has a comprehensive, integrated solution, covering multiple aspects of an enterprise. And over the past two years, it has also built the capability to deploy the solution in multiple locations, consolidate data and access data from remote locations or on the move. It allows your chartered accountant to audit your accounts from his office, it allows you to deal with your bank and your dealers through the system. And it can handle hundreds, even thousands of users, unlike the early ones that worked best with no more than ten. In the coming months, newer, more powerful, versions are expected.
The early indication from enterprises is that they like what they are seeing. "The simplicity and usability of Tally. ERP 9 won our hearts. Considering that most of our staff members were not technology experts, the simplicity of Tally ERP gave it an edge over competitors like SAP," says Sanjeev Nigam, finance manager in home appliance company Maharaja Whiteline Industries. A big recent win for Tally has been Tata DoCo-Mo, which is using the solution to track its product movement at its distributor and retail locations. "Such tracking was key to the success of our business. A big differentiator for Tally was that it is ubiquitously used and hence, there was a greater acceptance to it from our distributor community," says Shirish Munj, VP for IT in Tata Teleservices.
Asheesh Raina, principal research analyst in Gartner, says Tally is today recognized around the world. "People overseas looking to enter India have often asked me about Tally. It's a brand to reckon with. But there will be stiff challenges from the mega vendors when Tally tries to serve large enterprises. They will need a highly comprehensive offering, and I'm not sure they have it fully yet," Raina says.

MANUFACTURING BOOM
The growth in the machine tools business in India is spawning start ups, encouraging big investments by traditional players, and attracting the who's who of the global industry

Sujit John TNN

Bangalore: K S Prasanna, Ramchandra Hegde and Keshava Murthy quit Ace Designers in Bangalore about a year ago, pooled in all their savings and founded a company called Pride Machine Tools. They received support in the form of a bank guarantee from Ramesh Kumar, a machine tool components maker. All three are hardware engineers, with little business and financial management experience. So they take the guidance of their company secretary.
In the one year since they started, they have assembled and sold about 50 machines. Big players in the machine tools business today boast profit margins as high as 25%, but Prasanna says Pride has to make do with much less -- "because input costs are high on account of our low volumes, and because customers expect lower prices from new players like us". Still, Prasanna & Co are happy with their start-up's progress and are working to indigenise products faster to lower costs.
So phenomenal has been the machine tool industry's growth in India in the past three years that it is now spawning a number of start ups, encouraging big new capacity creation by traditional players, and attracting the who's who of the global industry. At the on-going machine tools exhibition IMTEX 2007 in Bangalore, there is literally a sea of foreign and domestic players displaying their wares -- CNC (computer numerical controlled) lathes, complex robotic arms, grinding technologies, slotting machines, drilling machines.
C P Rangachar, president of the Indian Machine Tool Manufacturers' Association (IMTMA), says the 40% growth in the industry in the first half of this fiscal and the over 30% per annum growth in the preceding few years explains the excitement. Figures like these and more, rivalling the growth of the IT industry, are echoed by just about everybody in the business.
Bharat Fritz Werner (BFW) chief finance officer Nabonita Baruah says the company will see a 48% growth in revenues to about Rs 300 crore this fiscal. Ace Micromatic Group director S G Shirgurkar says the group has seen a 30% CAGR in the past four years, with turnover expected to be over Rs 650 crore this year. The Tata Group's TAL Manufacturing Solutions MD Lalit Kumar Pahwa expects a 40% growth in 2006-07.
The adjoining graph shows that the kind of growth India has seen in machine tools consumption since 2001-02 is unprecedented. While some worry that the industry is hitting a peak, others argue that the trend indicates the beginning of a China-like sustained boom in manufacturing. Machine tools are the base of all manufacturing. Typically, a machine tool generates demand for ten times its worth of capital goods, which in turn generates ten times its value in final goods. So, the boom in machine tools is an indicator of a boom in manufacturing. While the auto industry remains the leading demand generator, others like capital goods, textiles, aeronautical, railways are all making significant claims on the sector.
Consequently, most Indian players are making fresh investments. BFW, for instance, has already built capacity for Rs 1,000 crore worth of machines, three times its revenues for this year, and is looking at a new facility to produce its own sub-components (high precision parts).
But domestic consumption at Rs 6,000 crore remains far above what Indian firms can produce (Rs 2,000 crore). Which explains foreign firms' excitement about India. Imports today cater to two-thirds of consumption. Many new foreign players are entering the sector. Rosa Ermando of Italy is forming a 49:51 joint venture with Bangalore-based Ucam to manufacture machine tools in India. Spain's Pinacho is said to be setting up a lathe making facility in Coimbatore. Liebherr of Germany, Nagel of Switzerland are others who have set up joint ventures in India.
Many, including major domestic firms, are establishing tech centres. DMG India, part of the Gildemeister Group, Germany, on Friday announced it is setting up a 15,000 sq ft technology centre in Bangalore, to develop customised solutions and application support in areas like tooling and fixtures.
All of this action is also raising the interest among foreign players to use India as a sourcing base for machine tools. The cost of manufacturing in India is 20-40% lower than in the US and Europe. Ace's Shirgurkar says foreign machine tool brands have approached the company to do private label business for them. Indradev Babu, MD of Ucam, says about 30% of the production from its JV with Rosa will be for overseas markets. TAL's Pahwa is confident India can deliver products that are much better than China's at equivalent cost: "They are not as good as us in engineered products."
But this progress is still slow. For, the domestic market is so, so attractive.

Journalist
The Times of India, Bangalore