Tally sets sights on local users

If you’ve never heard of Tally Solutions, you’re part of a fast-diminishing minority. The business solutions vendor, which is already a household name across India, is now turning its attention to international expansion. The strength of Tally’s product portfolio has already seen some 1.5 million users across a staggering 88 countries snap up the vendor’s software. Bharat Goenka, managing director at Tally Solutions, explains the strategy that will propel this fast-growing vendor past the US$1 billion sales barrier by 2008.

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By  the Gitex Times Staff Published  September 27, 2005

|~|tally2.jpg|~|A company buys Tally software, not an individual user, says Bharat Goenka.|~|Gitex Times: Tally is now an established name in the business solutions space. What is the history of the company? Bharat Goenka: The company was established by my father, my wife and myself in 1986 and was formed as a partnership. By 1988 Tally had become a Limited company and has operated as such since then. Before we started Tally, we actually ran a company supplying the textile industry focused on raw materials and machinery for textile mills. We were a pretty typical small enterprise in India involved in both manufacturing and also trading. We had attempted to become one of the first companies in India to introduce computerised systems into our business and we actually had real trouble finding an appropriate solution. That is when we realised that if we — with all the resources at our disposal — were having problems getting on the IT bandwagon and computerising our systems, then masses of companies across India would also be facing similar issues. That is when we decided to devote our attention to the IT software sector and approach this space with a unique philosophy. We realised that when people buy a car they do so because they want to be a driver and not a mechanic. At the time all the software solutions on offer required the user to learn a great deal about using computers. What if the user wants to focus on running his business and not on running a computer and information technology system? This was the seed of our thought process that determined how we felt that a solution should be developed that could really be used by small businesses that were owner operated. GT: Is this approach to technology the reason why Tally Solutions’ tag line is ‘The Power of Simplicity’? BG: Exactly, although I do want to distinguish one point here. Simplicity itself is fairly easy to achieve, while creating the power of simplicity is not. The point is that most small businesses require software that is simple but also powerful — that is the challenge. This was the key part for us to crack and it still remains at the very heart of the software development that Tally undertakes. One of the first things we really looked at was why codes are used in a computerised environment and if it was necessary. GT: Can you give an example of what you mean by that? BG: Take any organisation that is computerised. If you incur an expense — a hotel bill or a taxi fare for example — the receipt that the employee receives is entered as a travel expense. In order to enter that expense into a computer, someone will attach a code to it. Subsequently, when the management of that organisation want to view the expenses, they don’t want to see that code, they want to see the total expenses for that employee. In order to extract that information a code is used again, but to deliver the information, the code itself is not relevant. People are not using codes because accounting requires codes; they are using codes because computers require codes. How can we stop the computer requiring codes? That is the first level of simplicity that we look to achieve. Now, when you introduce that level of simplicity you reduce the power of the programme, meaning that it is only suitable for small accounting needs. We had to crack the problem in a way that allowed companies of all sizes to use the software. The codeless engine that Tally created has made this goal a reality. GT: So you achieve simplicity without compromising functionality. How challenging was it to actually develop software capable of this? BG: The challenge is really the scale the software needs to be deployed at. Today, we have companies with annual sales of US$400 million using Tally as their primary accounting system. One major advantage that we had in the technical areas was that the software we developed was going to be used internally as well. Even today, Tally Solutions remains the biggest user of the software and we develop the enhancements that we see are required. Ever since we started developing the software, the attitude has been one of not compromising on the goal of making a useful codeless environment. It actually took us a year-and-a-half to crack the codeless engine. This is a significant length of time for any software research activity. There are not many companies that will devote this long to solving a single element. We were willing to be patient because we knew we could not compromise in this area. GT: You seem to have moved beyond a simple accounting solution now in terms of functionality, with areas such as inventory management and reporting now included in Tally Solutions’ offering. How does this fit into the company strategy? BG: On the first release of Tally almost 20 years ago, we released a low power product that was intended to introduce the concept of a codeless solution to the market and gauge the reaction — as opposed to releasing a product with a great deal of functionality. Once the concept had become accepted in the market we then set about converting the product into a complete business solution. It is the result of that evolution that you actually see today. ||**|||~|tally3.jpg|~|Tally Solutions’ managing director, Bharat Goenka says the company has a unique approach.|~|GT: Has this evolution also extended the customer base that you address? You seem to have moved up from the small business segment into the midmarket. BG: We already have significant usage of Tally in the midmarket even though we have not yet developed a specific product for this sector with all the functionality you would expect. This is a sector where we are currently launching a product in the Indian market and moving into what I would call the ‘quasi-ERP’ segment. The acronym ERP [enterprise resource planning] is a very misunderstood term and I don’t want to say that Tally is an ERP vendor. I would rather say that we provide pervasive business solutions that permeate across all business activities. GT: Do you still see confusion between what constitutes an accounting solution and what is actually an ERP solution? BG: I will give you a rebellious opinion. Most companies, irrespective of what they say, realise that the core of their system has to be a strong financial and accounting engine, because, ultimately, business is nothing without financials. If you are unable to deliver results that translate into money then all the other functional elements of a system are just secondary concerns. We believe that we have developed the world’s most powerful money engine and have evolved the other aspects of the solution to tie into it. I am not so concerned if people get confused over whether Tally is an accounting system or ERP solution. At the end of the day it offers a fantastic accounting solution — and that is something that every company needs. GT: How big is Tally Solutions in terms of headcount and global presence? BG: Tally currently has approximately 580 employees in ten offices. We have presence in four countries: India, UK, Singapore and also the UAE in Dubai. Our foray into creating a global footprint has only really started in the last three months and if we talk in a year’s time I expect Tally to have offices in another 12 countries. We have realised that we understand the environment that people refer to as ‘emerging markets’. Tally knows that businessmen across these markets battle with the same growth rates, the challenges of technical literacy and the same business climate issues. Tally meets all these challenges and provides a solution that these businesses can start using very quickly. GT: You have 1.5 million customers in 88 countries and offices in only four countries. How have you achieved this sort of global penetration? BG: The spread of the software started eight years ago when India started becoming a destination for multinational companies. They started adopting Tally in their local offices and then started taking it outside India. The presence in 88 countries is not down to our marketing efforts, nor is it down to our partners. The customers themselves have spread the product, and when this happens it speaks volumes about the capabilities of Tally Solutions. If you look at the 1.5 million users, we have about 500,000 individual binaries operating with an average of three users each. Some have as many as 140 people on a single binary and this is a result of our licensing model, which involves an unlimited multi-user framework. When you go to a showroom to buy a car you don’t expect the salesman to say it is US$10,000 if you want to drive it, US$12,000 if your wife drives it too and US$14,000 if you want your children to as well. Customers buy Tally for their company, not for individuals within the company. GT: This goes against the policies that many other global software vendors use. What impact does it have on your revenues and financial fundamentals? BG: Over the next five years I expect the whole concept of software on computers to change. At the moment, the size of the non-computerised market, as well as the market not yet using Tally, is so huge that I don’t have to milk my existing customers to keep my top line healthy. If I win a new customer I am much more interested in his 50 friends and business acquaintances becoming Tally customers than I am in how much money I can extract from the first customer. GT: Acquiring new customers is an expensive task though. How does the Tally model address this challenge? BG: Where we are already is testament to the success of our model. We are the largest vendor in one of the most difficult geographies in one of the best emerging markets in the world — namely India. If our model was flawed we would not be in this position. Most people do not have the courage to apply this model. We probably undertook one of the most extensive channel exercises ever in India. We put out a small army of people in the market on the streets who went and met every single vendor and explained the benefit of working with a product like Tally. They explained the benefits of moving from a pirated environment to a legal one and the advantages of moving up the value chain as hardware margins continued to shrink. We did this at the beginning of 2005 and started seeing results within a few weeks. GT: So how large is Tally now in terms of revenues? BG: Let me give you two parameters here. Most software companies announce revenues based on the street price of the product and then take off the dealer discount as an expense. They don’t announce net sales; they announce gross sales to show a good top line. Tally always records net sales and last year that figure was approximately US$50 million. The gross figure was between US$85 million and US$90 million and that cushion shows the strength of the proposition that we have for partners. The pilot that we have carried out in the UAE shows that 80% of the partners that we have met are interested in selling Tally. Frankly, everyone has been impressed by what we have achieved in India and it acts as a proof point of what we will achieve in the Middle East and North Africa. GT: What advantages does your model bring in terms of building sales and developing channels in emerging markets such as the Middle East? BG: Most of the vendors from developed markets have real difficulty grappling with the structure of developing markets. The only way to achieve strong revenues in developing markets is by making sure you get the volume of sales — and this volume is very spread out. When you look at the customer landscape in a developing market, it is a very flat pyramid. The small customers at the bottom of the pyramid are the target and this is very wide in a flat pyramid. Vendors need the ability to reach out to these masses and that requires a different mindset from the approach used in developed markets. In developed markets, successful vendors have typically reached these customers through internet selling, not bricks and mortar selling. Internet selling will still take a long time to pick up in developing markets. GT: How important is the MENA region to Tally and what do you hope to achieve at Gitex? BG: It is very important and Tally is extremely serious in terms of its approach to the market. We are opening an office at DIC and expect to command between 70% and 80% of our target market by this time next year. In the UAE alone, we estimate there are up to 280,000 companies that are potential customers. The bulk of our business is done through partners and Gitex gives us the opportunity to meet with companies from across the region. Tally has the greatest level of expertise when it comes to delivering solutions for customers in developing and emerging markets. Tally is not an unknown brand in the Middle East, but now we have the ability to support partners and customers locally. GT: Are you excited about entering the MENA markets? How big can Tally become? BG: The excitement comes from knowing that we can achieve the pervasiveness in the market that we hope to — not only in the small enterprise space but also in the midmarket. We have done it in India and are confident that we can do it in MENA as well. From that perspective, yes, the pulse is racing. In terms of Tally’s growth prospects, we are targeting over US$1 billion in annual global sales by 2008 and we expect 10% of those revenues to be derived from the MENA region.||**||

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