Challenges

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Challenges in Software Products Business Subash
Menon President CEO Subex Systems Limited India
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Subject of Discussion

• Products with a developmental effort
• of
• 50 to 80 man years

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The Indian Challenges

• Country equity
• People development, product management, sales,
  marketing
• Funds

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Other Challenges

• Long gestation period
• Substantial funding requirements
• Considerable techno-commercial risks

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Challenges during Gestation

• Difficulties in conceiving a product which is
  ahead of the market by a few years
• Technical issues
• Who will bell the cat syndrome Beta stage

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Gestation Period

• Typical period - 4 years
• 1st year Conception Dev.
• 2nd year Dev. Launch - Ver.1
• 3rd year Beta - Ver.2
• 4th year Comml. Installation
• - Ver.3
• 5th year Considerable Profits

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Funding Sample Cases

• Company 1 US. 51 mln. 3rd yr.
• (US) - Loss making
• Company 2 US. 35 mln. 4th yr.
• (US) - Break even
• Company 3 US. 60 mln. 5th yr.
• (UK) - Substantial profits

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Funding Options

• Equity - Angel or VC Investor
• Strategic Investor
• Public Offer
• Debt - Banks
• Term Lending Institutions
• Cross Subsidisation

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Angel/VC Investor

• Merits
• 1. Funding through the gestation period
• 2. Reasonably patient investor
• 3. Will assist in management
• 4. Might assist in obtaining business

• Demerits
• Expects extremely high RoI
• Close day to day monitoring
• Might take over management control
• M A issues
• Superior voting rights

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Strategic Investor

• Merits
• 1. Will assist in obtaining business
• 2. Funding through the gestation period
• 3. Very patient investor
• 4. Might assist in management

• Demerits
• Double edged sword with regard to other potential
  customers.
• 2. Potential change in management.
• 3. Business direction may be changed by the
  investor.

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Public Offer

• Merits
• No loss of control
• 2. Access to reasonable amounts of funds
• 3. Stock as currency for future transactions

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Public Offer

• Demerits
• Very high expectations
• Quarterly reporting lumpy business
• Investing public does not understand the nuances
  of this business leading to a quick loss of
  confidence
• Regulatory issues
• Pricing issues in the future with regard to
  private placement etc.
• No management and business assistance

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The Subex Experience Phase 1

• Incremental Approach vs. Big Bang Approach
• Started with one product and focused on that
• Beta site in India
• Reference sites in India before venturing out
• Developing markets addressed first
• Created many reference customers along the way
• Participated in several tradeshows spreading
  the word
• Set up new depts (pdt. management, marketing) in
  a step manner
• Achieved presence in many telcos in many
  countries

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The Subex Experience Phase 2

• Dominating the Indian market
• More products in the same space expanding
  portfolio
• Acquisition to enter tough markets in a big way
  positioning, recognition, number of customers
• High end local professionals in each market
• Organisation structure fully evolved to support
  large number of big telcos across several
  geographies
• Gunning for leadership breadth of product
  portfolio, customers and revenue

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Scorecard

• First product Ranger market leader by number of
  installations and customers
• Second product INcharge gaining significant
  traction through cross selling and addressing a
  larger market
• Almost 70 customers spread across 33 countries
• FY04 revenue of Rs. 40 crores with Rs. 14 crores
  of profits
• Target set for FY06 about Rs. 75 crores of
  revenue with Rs. 32 crores of profits
• Phase 3 of our growth planned to commence in 2006

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What it Takes to Succeed

• Read IF
• and
• LIVE IT !!!

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Thank You For Your Time Attention

• Subash Menon
• subash_at_subexsystems.com
• www.subexsystems.com