The paper is an attempt to identify factors for the success of a software product business in an Indian context. The findings of this study have been based on the case study of a single organization, i-flex, the most successful Indian software product company. The study suggests that the success of a software product business depends highly on domain expertise, amount invested in R&D as well as marketing. However, it may not be possible for a small start-up company to invest heavily in R&D right from day one, unless it has the requisite financial muscle. It also studies the product based business model. The product based model is a high risk, high return model. So, the management must be able to invest in R&D for a considerable period of time in order to reap maximum benefits.

The phenomenal success of the Indian IT industry has been primarily attributed to software services. Indian companies leveraging on their high quality, low-cost proposition have created a competitive advantage for themselves. However, this scenario is changing due to emerging low-cost competition from countries like China. As IT services are getting commoditized, more and more Indian companies are exploring the option of product development. A recent report by PricewaterhouseCoopers Pvt. Ltd., states that India's legacy as a high quality, low-cost IT services powerhouse is steadily supporting the growth of the sector into a more recent phenomenon, that of, sourcing software products from India. The prepackaged software is considered to be the most dynamic segment today.

It was estimated to be US$220 mn in 2002 and was expected to reach US$350 mn in 2007. India has been able to capture only 0.2% of the US$180 bn market. The NASSCOM-McKinsey report of 2005 also emphasized the need for Indian companies to tap product-centric opportunities in areas such as embedded software, development and delivery of specialized components and delivery of shrink-wrapped products. The report further added that software products as a business segment have the potential to generate revenues to the tune of US$7 bn and creating one million plus jobs by 2010. According to an independent study done by Madanmohan (Associate Professor, Technology and Operations, IIM, Bangalore), titled "Indian Product Software: Challenges and Roadmap", there are at least 346 indigenous companies involved in product development in India.

The latest NASSCOM report "NASSCOM Software Product Study: Outlook for Indian Software Product Businesses" on the Indian product business says, "the next decade will play a crucial role in bringing about disruptive growth for the Indian software product segment, and the annual revenue aggregate of this segment was forecasted to grow from US$1.4 bn in FY2008 to US$9.5 bn - US$12 bn by FY2015. Enterprise application software will present the largest opportunities with Business Intelligence (BI) and Enterprise Risk Management (ERM), with storage and security being the key priorities."

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