Business Model Report

The Business Model Report

Indo-Soft Pvt Ltd

By CVMark Consulting
Dec 2008

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 Business Model Report

Keywords: business model, business model innovation, software development, startups,

logic of business, entrepreneurship, innovation, elevator pitch, business plan, business
idea, business model description, design of business, business model canvas

There are not hundreds, but thousands of startups, who offer software development skills
and solution. Alas ! most of them have same way of doing business. So no wonder, all
look alike and fall into the same set of problems that undifferentiated companies in
rapidly becoming commoditized market place fall into. It is not that there is not enough
space for large number of companies and skills; but there is definitely not enough space
for all these companies who have the same business model. By definition, for a company
to sustain and grow today as well as tomorrow, it is important that it offers benefits of an
order of magnitude to its clients. Only then clients will continue to come to give business.

Once you have decided upon the product, service or solution that you want to offer, it is
important to look at the logic of creating, delivering and capturing value from the
offering. Business model is the approach that allows to uniquely standing out in a
crowdie market place.

This paper presents an abstraction of business model innovation. For details, please
contact lolla@cvmark.com or call +91 94480 70081.

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 Business Model Report

Content

1. ABOUT THE REPORT ........................................................................................... 4

2. DEFINITION: ........................................................................................................... 5
3. CURRENT BUSINESS MODEL ............................................................................ 6
4. BUSINESS MODEL DESCRIPTION .................................................................... 6
5. DIAGNOSIS .............................................................................................................. 7
6. DIRECTION TO BM INNOVATION.................................................................... 8
7. RECOMMENDATIONS.......................................................................................... 9
8. KEY REFERENCE MODELS................................................................................ 9
9. AN ALTERNATIVE BUSINESS MODEL .......................................................... 10
10. AN ALTERNATIVE BUSINESS MODEL- DESCRIPTION:...................... 10
11. NEXT STEPS ...................................................................................................... 12

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 Business Model Report

1. About the report

This report is prepared at the instance of Indo-Soft Private Ltd, to have a blue print for
its business. The blueprint is called here onwards, as Business Model. The report is
structured in the following way:

1. Business Model of the Business as on today

a. Business Model Canvas
b. Business Model description
2. Diagnosis & Recommendations
3. An Alternative Business Model
a. Business Model Canvas
b. Business Model description

The report has following utility:

1. Precisely defining the business model (the logic of doing business)

2. Understanding the interaction between different components of business
3. Analyzing cause&effect between components; hence in strategic taking decisions
4. Devising strategy in dealing with internal or external change
5. Identifying the strength and weakness of the business model
6. Designing alternative business models
7. Innovating business models
8. Preparing business plan
9. Building execution strategy
10. Making Elevator Pitch

Actually, for a business that is on its way to innovate itself, business model is the first
tangible asset that allows its leaders in visualizing the main logic of their business !

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 Business Model Report

2. Definition:
A business model is a conceptual tool that contains a set of elements and
their relationships and allows expressing the business logic of a specific
firm.

Business model is therefore, the blue print of the organization and is represented through
a business model template (canvas), as proposed by Alex Osterwalder[1]. It is based on 9
building blocks to help us describe a business model:

1. The target customer segments and their specific need;

2. The value proposition of what is offered to the target customer segment;
3. The communication and distribution channels to reach customers and offer the
value proposition;
4. The key activities to implement the business model;
5. The core capacities(resources) needed to make the business model possible;
6. The key partners and their motivations of coming together to make a business
model happen;
7. The revenue streams generated by the business model constituting the revenue
model;
8. The cost structure resulting of the business model;
9. The relationships established with customers, the basis of long term viability of
the business.

The Business Model is presented in a visual format followed by a textual description for
clear articulation of the big picture.

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 Business Model Report

3. Current Business Model

Fig.1: Business Model Canvas : Indo-Soft Pvt Ltd
Key Partners Key Activities ValueProposition CustomerRelationship Customer Segment
Freelancers 9 1
moonlighters S/w development Account management
5 Software Enterprises
development
Product development
Product upgradation

2
Key Resources Channels
7 Business Analyst Media, Direct calls
Marketing 6 Tradeshows
Developers, PMs
Onsite/ offsite
SDLC and PMS 3

Key Costs Revenue

Salary Hourly per resource
S/w license, Infra Project based fee 4
Rent
8
Travel & marketing

4. Business Model Description

• Indo-Soft offers software development service to enterprise customers from onsite
and off site locations. Its offerings include product realization, solution
development and testing services.
• It employs well skilled developers and PMI certified project managers. Its team
also includes domain specific business analysts who interface with clients in
discovering requirements.
• Often the organization utilizes services of freelancers and moonlighters to fill the
capacity gap.
• The organization practices a well oiled SDLC and Project management
methodology.
• Most of its clients are overseas based (mainly in the US) and it obtains
engagements based on its network and contacts there.
• The revenues are based on time_&_material basis and on project based.
• Most of its costs are towards salary, travel, commission, IT infra and office
building related.
• Information Technology still continues to be a promising area of growth and it
has been doing well, but for the recent uncertainty in the economy, dollar
fluctuation and loss of some key employees. With the economy looking up, it is
hopeful to achieve double digit growth.

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 Business Model Report

5. Diagnosis
The following are the key observations (diagnosis).

1. The company is in a quite generic space of software service.

2. Its value proposition, revenue model and competencies are pretty much similar to
several other organizations.
3. The company has some unstructured contacts in the US which have been able to
provide it with some orders.
4. It has been doing so far good, primarily for two reasons 1. There has been a
demand for IT skills that have so far been in short supply. 2. The company has
been leveraging cost arbitrage of its India centric operation.
5. The company as such does not have a decisive differentiator, that will allow its
customers to continuously prefer it over others. The ongoing slide in its billing
rate and low percentage of repeat orders, is an indication that customers have
other supplier options in the market.
6. Since the company is in international space, it is subject to a high degree of
volatility in the market and external space, plus unexpected challenges from
competitors.
7. Without having a competitive edge, not withstanding the recent economic
depression, company’s revenues dipped significantly and it is currently, at a
depressingly low level of billing activities. The situation has actually forced the
management to involuntarily reduce its talented staff that it had hired and
nurtured with great care. What ever may be the initial intent of having the
business, it seems that it has over exploited the opportunity of booming sentiment
in IT industry than fulfilling a significant role and creating a niche in the market
place.

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 Business Model Report

6. Direction to BM Innovation
1. Now, the company has two main options
a. to wait for a major demand to build in, that will lead to an upswing in its
business fortune ,
b. proactively, identify at least one area, where it can have a huge
competitive advantage, so that its current and future clients will give it a
preferential treatment, even when there is any external disruption
2. While the first, is the continuation of current status and procrastination of key
decisions to revitalize the strategic intent of the organization; the second option is
addressed here.
3. Since the organization is in a generic space of software development, it is
important that the organization not only looks at its own problem but also at the
industry problem; and then devises a way to standout in the marketplace.
4. The software industry in India, is plagued with following generic problems:
1. It is too much US focused
2. A majority of Activities rank low in the value chain
3. Project scope change too often during the implementation stage
4. Most of development projects are too late too often, leading to client
discontent and project failure
5. Clients continue to demand low pricing with every new order
6. High staff attrition
7. Clients often ask to do small projects that do not fit into the existing
project execution framework

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 Business Model Report

7. Recommendations
1. Narrow down the funnel: Although market for s/w development is huge, the
capacity of a midsize company is limited. The capacity means capacity across the
value chain. i.e. sales, development, testing, deployment and support. When a
company attempts to address too wide a market, it takes too many projects on its
plate that are not best suited for it and its key resources in sales, proposal making
and project management waste a large part of their time (capacity) chasing the
enquiries that are too remote to current capability of the organization to negotiate
and implement. The company, therefore, must define its skills very well and have
its sales targeted on well segmented market. This will have following impact:
• It will increase focus and effectiveness of sales staff
• Order conversion will improve since company pitches for projects
that are well within its capabilities
• The company’s productivity will improve since the development
team will work largely on known projects
2. The company must proactively try to ensure that its projects are completed in time
(as per first agreed due date). The company needs to develop a competency to
contain the scope creep and educate the clients of such dangers. This calls for a
regular effort for the sales and business analyst and develop a level of maturity in
handling the clients in this respect. This will have following impact:
• The project does not see too many change requests from clients
• The projects completes with high due date performance
• The client obtains quick ROI on the first delivery

8. Key reference
1. The Business Model Generation, Book, Alex Osterwalder

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 Business Model Report

9. An Alternative Business Model

Fig.2 An Alternative Business Model : Indo-Soft Pvt Ltd.
Partners Key Skills Value Proposition CustmerRelationship Customer Segment
UI designer 9 1
Mobile app devlpr Requirement disc Skype call, email
Software dev 5 Fast delivery of small Account management SMEs in US seeking
Fast learning s/w solutions innovative solution

Key Resources
2 Channel
7 Access : online
s/w developer 6 profiling, trade shows
Dev tools Sale: Proposal
submission 3
On-time delivery Delivery: Over internet

Cost Revenue
Salary Project based fee + DDP bonus
rent 4
8

10. An Alternative Business Model- Description:

• SMEs are backbone of the US economy. Being in the forefront of their business,
they have an ongoing need of customized software to enhance their business
effectiveness These companies are characterized by their innovation and a close
relationship environment. Indian s/w development companies have often targeted
large companies and intentionally and unintentionally, have faced difficulty in
penetrating deep into US market of SMEs.

• Info-Soft is a small boutique s/w development company and has identified SMEs
as the segment with very specific needs. Realizing this Info-Soft started offering
niche solutions to this market.

• It has a group of native techno-market resources in the US, who understand the
local culture and language, and who spend time with SMEs in understanding their
needs and proposing small but effective solutions. Additionally, Info-Soft
advertises itself in online sites and participates in tradeshows. It delivers, installs
and deploys the solutions over internet.

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 Business Model Report

• To meet the new technology hungry clients, Info-Soft needs to be at the top of
software development skills. It has a small team of well experienced and trained
developers in India, who continuously learn and employ new open source tools.
Further, since its SME clients demand strict adherence to timelines, Info-Soft
employs an innovative project management approach , that avoids bad
multitasking of its resources and manages the project variability better than its
competitors.

• To deal with rapidly changing technologies, Info-Soft manages a pool of well

qualified and reliable external developers.

• Its prime cost is staff salary and space rent. By design Info-Soft is focused on
delivering small projects with short delivery time. This approach reduces its risk
of being small company and gives it a healthy cash flow.

• For the service that it provides to its clients, it receives project based fee. Owing
to its reliable and high due date performance, it has now been able to include a
bonus component into its proposals, that improves its yield per project
significantly.
• While the development center is accessible to its clients just on a skype call, its
resources in the US continuously keep engagement with the clients,.

• During past 2 years, it has retained all of its clients and received repeat orders.
Info-Soft foresees its future in growing with the clients, as their demand for
software solution grows with their business.

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 Business Model Report

11. Next Steps

The management of Indo-Soft has a work in hand, to describe the logic more precisely
and unambiguously by focusing on the logic of creating, delivering and capturing value.
It needs to challenge each component of the business model and scrutinize position of
the company with respect to each one of these components. But once it has modified or
innovated an element, it needs to take care of the effect of such changes on other
elements and on the business outcome.

The management could choose to use one or more of analytical tools to challenge the
existing business model. Upon doing such an analysis, it is expected that the management
will be able to come out with more than one way of innovating its business.

At the strategic level, the management will know where the company is positioned in the
market, uniquely or amongst the crowd. It will also know why the company is
positioned so, and may feel, a need to proactively innovate the business model that will
give it a significant lever to be ahead of the competition.

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 Business Model Report

Disclaimer:
CVMark Consulting is an independent business-innovation research agency based in Bangalore, INDIA.

CVMark Consulting intends to serve business community through advisory, consulting and coaching
engagements. As a part of its engagements, it regularly brings out insights, perspectives, research reports,
newsletters, issue-oriented reports and other products.

This caselet captures description and direction of solution to generic problems faced by business owners.
It is intended to share experience of CVMark with a wider business community. This document in part or
full can be reproduced subject to a reference to CVMark Consulting and to this document.

Factual material contained herein is obtained from sources believed to be reliable, but the publisher is not
responsible for any errors or omissions contained herein. Opinions are those of CVMark and are based on
research conducted for this report. CVMark holds no responsibility for decisions made on the basis of
content of this report.

CVMark Consulting
Bangalore, INDIA

Clet:10-10

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 Business Model Report

_______________________________________________________________________
CVMark handholds entrepreneurs in navigating through the dynamics of business.

For developing, innovating and executing your business model, call Tel: +91 94480 70081 or Email details to : lolla@cvmark.com .
CVMark Consulting, #2304, Nandi Park, Gottegere, Bannergatta Road, Bangalore 560083, INDIA Web: http://www.cvmark.com

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