More and more western Retail IT product vendors are eyeing the Indian market for their IT products but what they do not understand is that they would never get the premium license payments which they are used to in the west. Since retail IT products are typically niche products they command a premium pricing in the west. This pricing is typically in the range of 1.5-2 million USD per mid size implementation for a tier 1 retail ERP.
In the US where a mid sized retailer is typically 50-150 store retailers this amount is accepted (this is also changing) but in India or even the APAC this is completely out of the line. No retailer in India/APAC is going to shell out 1.5/2 mill USD for an IT implementation. So the vendors who believe in the “premium” pricing strategy are going to just bleed in India.
Recently I had the opportunity to work with a leading ERP vendor. This ERP is now rated 3-4th after the SAP’s and Oracle’s of the world. Their strategy was to appoint “re-sellers” in India for the sales of the retail/CPG ERP product and they expected the re-seller to find leads, train consultants, create marketing awareness and even take product liability !! Their investment – just a small office with 2-3 persons in India for support. The re-seller was also expected to pay for the training of the personnel. The ERP vendor promised no support but expected “sales targets” to be met from the reseller. The price of the ERP – 1 mill+ USD ! Such short sighted strategies for selling IT products in India are 100% bound to fail.
So what is the solution?
A partner focused strategy is the only way to go. This is the strategy which has led to SAP and Oracle ERP products being the de facto standards in India. A partner eco-system which is well supported by the principal brings down the TCO for the ERP implementation. An India specific licensing policy with minimal upfront payment would bring down the initial investment needed to procure the ERP. Since India is still relatively immature in organized retail processes, base or stripped down versions of the ERP products with an option to enable the more advanced functionality at a later stage would work with similar options in licensing. The ERP vendor needs to invest in nurturing the partner and look for long term partnership with the local vendor. Flexible licensing payments, investments in having a established office in India to prove to the prospective customer in India that they are serious of the Indian market.
The most important aspect of selling a retail ERP product in India is the localization. India has one of the most complex tax structures with multiple tax rates, VAT, multiple MRP requirements etc. A product vendor who is serious about the Indian market has to invest in adding the localization or at least collaborating with a local vendor to enable their product for the Indian market. Absence of such localization means the product would never sell. No Indian local company is going to touch the product if it does not handle statutory localization.
Last but not least the vendor needs to have patience and have a long term plan to stay in India to succeed. Only then will the vendor succeed in the Indian market. The IT tech spend in India is bound to go skyward but its not a easy pie, you need to work hard for earning it.
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