'Application as a service akin to car rentals'

BANGALORE: Dr. Sri Jagannathan, senior vice president, Robust Designs, belongs to the old school-he believes in the virtue of providing the perspective before responding to a query. He met up with Latha Chandradeep of CIOL on his visit to India to confer with customers and potential customers. In a free wheeling discussion, he spoke of everything, from the buoyant optimism of Clinton years to Alan Greenspan's low interest rate to kick start the $13 trillion US economy to the role of Business Intelligence tools for revenue optimization and bringing costs down. Excerpts from the interview.

You have mentioned no software license fees. Does it mean that when you install the solution, you do not charge based on the number of licenses/users?

Our model for Cubox is for software to be paid for as a utility. In other words, as the value of the BI application is realized, then the user pays for the usage. When they do not have a need, it can be turned off. This is to be contrasted to the traditional software model where the user is expected to pay first for the full cost of the software and then hope to realize the value of the software application over the next several years. Such a traditional model is advantageous to the software developer but is typically adverse to the buyer. The software developer passes on the prior cost of software development and future costs associated with maintenance and upgrades to the user and realizes the benefit of the cash flow. At Robust Designs, we realize that there are buyers who might prefer the traditional model or the new "pay as you go" model. Our Cubot offering is the traditional license + implementation + maintenance model, whereas our new Cubox is a "pay as you go" model with no upfront license, implementation or maintenance costs. In both cases, there is a limit on the number of licensed users.

All software companies have the same cost structures: invest in software development, incur marketing and sales costs, maintain the software and provide new features and functionality. However, the revenue model for the traditional software license model is different versus the software service model. In the software service model, our obligations are similar to that of a car rental company. We need to make sure that the software "runs" as required at the client premises and the client finds value every month that the software is rented. The pricing model is to reflect the value provided and is based on an assessment of the alternate methods that the client could have used to derive a part of the benefit that our solution provides. For example, one metric of our pricing is based on the number of IT personnel required to deliver the business reports that can now be seamlessly done with Cubox. In reality, the value of Cubox is considerably more as it enables drill-down, saved reports, dashboards and business alerts.

There are no visible global players providing business intelligence software on a service model that we know of. There are certainly such players in the CRM industry such as Salesforce.com. CRM is easier to enable on a software service model as the inputs are dominantly external and accrue as utilization occurs. In contrast, BI requires the absorption of relevant enterprise data encapsulated inside a suitably custom-designed data warehouse from which relevant reports can be constructed. As part of the Cubox service model, we create such data warehouses in a simple and effective way for the customer, whose environment is not highly complex and whose needs can be readily comprehended. We do not charge for the implementation and the customer pays on a monthly basis only upon proof that the implementation is successful and usable by the customer.

We believe that Cubox provides an incredible value to the customers. The proposition is fundamentally simple: Would you like your business to perform better? Let us give you a risk-free system that allows you to validate that you have better insight and therefore better decision-making ability. If you are convinced, subscribe to the Cubox solution. In contrast, traditional software expects the customer to take value on faith and pay for it up front with no money-back guarantee. With the numerous failures of IT implementations, it is no wonder that corporate executives are loath to purchase expensive software from developed countries that have little relevance to the needs of a mid-market Indian enterprise.

In the software license Cubox model, we typically charge Rs 20 to 50 lakhs plus 18% annual maintenance fees, depending on number of users, data complexity, integration issues, data warehouse dimensions and customization of user interfaces.






In the software service Cubox model, we charge from Rs 50,000 to Rs 1 lakh per month, depending on number of licensed user and system complexity. Cubox is reserved for customers whose requirements are tangibly less complex and no customization is required.

The biggest challenge is that corporate executives are too reluctant to demand that software, much like any other company asset, be clearly beneficial to the needs of the company. It is critical for decision makers to insist on useful tangible benefits from investing in IT. Unfortunately, far too many executives rely on their IT department to define what will be made available to them for use. As a consequence, most companies acquire software, which has little relevance to the business needs and compulsions of the corporation. Decisions on IT purchases need to be made jointly with the business managers who are the "customers" and have the needs and IT departments should fulfill these needs rather than frustrate them with needless complexity, which is unfortunately common.

Inc. is coming of age. Increasingly, Indian companies are facing real-time pressures: internal and external competitors, large domestic market and growing international demand. There is a requirement from all stakeholders (partners, customers, vendors, and distributors) to be more responsive and react with agility. Thus Indian business velocity has increased tremendously over the last ten years. This increase in business velocity requires corresponding agility in decision-making. But decision-making should not occur without insight of the dynamic business factors that underline the momentum of business. Business intelligence is the perfect tool for understanding the business factors, by allowing historical, analytical and contrasting perspectives. Indian executives do not lack the ability to take decisions; unfortunately the tools provided to them to understand their business have been woefully inadequate. Business Intelligence is a key enabler of performance for Indian businesses, particularly at this stage of their evolution.