It was in 1986 that Bharat Goenka’s father who was running a textiles business asked him to write a program which could handle the company’s accounts easily.All of just 23 years, at the time Goenka wrote the software and Tally Solutions, an accounting software firm was born.Three decades later, in 2017, the company is seeing a rebirth with a rising demand for accounting software by businesses to comply with India’s new taxation norms.“Our association with GST definitely is a big thing for us. In fact, it is the single most consuming thing we as a company have worked for (since past several months),” Goenka says.
Tally’s accounting solution has powered many SMEs since decades, becoming their de facto choice to manage finances and taxation.But GST rollout also meant widening of this customer base as more unregistered small businesses are scrambling to be GST-ready. An estimated 1 million VAT users upgraded to the Tally version in the initial phase of GST rollout, Goenka tells me.Tally also went out of its way to reach out to businesses that have never been exposed to Information Technology.The company conducted more than 7,000 events and training including daily webinars to educate and appraise SMEs on GST regulations.“More than 13 million businesses were to migrate to GST, only about eight or nine million actually did. Our training and information modules will help rest of the small business owners to register (easily),” says Goenka.
GST roadblocks ahead for India’s small businesses
“I wish I could talk about our GST story as a success, as yet! The whole country including us and the government is still trying to come to terms with it. It’s a journey. The first part of it wasn’t probably a very happy part,” he says.The GST rollout could have been done differently, he rues, in terms of the framing of laws and rules, including the implementation of its IT backbone.“Problem for the SME is not invoice-making. The problem was that they could not make sense of the whole GST regime. The original intent was that the written format will be easy to understand. But eventually, the written guidelines were complicated for an average SME businessman. That created cascading errors,” Goenka explains the problems in GST rollout.
The most important thing, Goenka feels, was the Government’s attitude in the initial rollout phase. “It seemed to be a signal of belligerence,” he says.With this apathy, Tally stumbled too. “We massively underestimated the amount of handholding the businesses will seek. It wasn’t just restricted to technological know-how. They would expect interpretation of the law, taxation implication, etc. We never accounted for such engagement in our manpower requirements. We had to pool all our resources to make this work,” Goenka says.According to him, things have started to sort out.Six months deep into GST rollout, the Government is now more receptive to industry’s views and “fundamentally that’s a major shift.”
Now that the company has got a hang of it, it is gradually releasing resources out of GST project to its internal projects that were put on hold due to the rollout of a new tax regime.Tally also suffered a one-year delay in the release of its updated software as GST consumed the company’s available bandwidth.Now we are restarting with a view to expanding domestically as well as internationally. Our next release is delayed by a year. It was supposed to happen now, but it will now happen next year,” Goenka says.But GST troubles are far from over for Tally.While the government has proactively taken the mantle to smoothen out issues with GST, the changes have been incremental at best.
The real problems that SMEs face today are still unresolved.A major shift, Goenka says, will be if the GST network is developed to wean out complexities and made more user-friendly.“Key characteristics of SMEs is not profit-motivated but cash-flow motivated. They have to keep looking for more sales to keep that up. As long as we let them focus on this activity rather than focusing on the recording of activity and its compliance GST will be effective,” he says.Tally, on the other hand, has been “designed to disappear.”
“We obsess far more on what will make something fail than what will make it a success. So that only causes of success remain,” Goenka reflects. The company, under Goenka, has adopted a common-sensical approach to developing products for SMEs.“We are constantly looking for causes why someone may find the software difficult. We test it in real-life simulations and incorporate them in the product. We try and make the system work seamlessly in the background with minimal intervention from the business owners. That way they can focus on doing business,” he adds.
“Now, look at GST, if it allows the SMEs to just punch in simple details and the system thereafter takes over completely that will make things much easier ,” he says.According to him, the government hasn’t taken cognizance of the fact that the GST framework was too complex for an SME to understand and adapt.It is this single-minded focus on making the SMEs life easier that has made several of Tally’s products a success.
Sticking to a product-driven approach
The company, which has seen several of its peers shift to services after the Y2K scare in 2000, stuck to its gun of remaining a products company.“Our peers moved to services because of steady cash flow. Products are a high-risk cash-flow environment. If we were not focused on SMEs, we would probably have made the shift to services too.We never saw any use case for services in the SME market. We saw more value for products that smoothen outs their day-to-day functioning. It was also our passion and we knew we are good at it,” Goenka says.So much so, that Goenka insisted on giving away ancillary services free of cost to prevent digressing from the focus on products.
“You cannot mix products with services. Once you build a profit line you are bound to turn to it. When we leave ourselves no choice but to work on only one thing, we can think of ways to improve our products so that we don’t incur cost on giving out services,” he adds.But the journey hasn’t been easy.In 2006, Tally released a premature product Tally 8.1, which was one of the breakthrough products from the company.It was multilingual in a sense that a system could seamlessly work in different languages being used by different employees of the same company.“It was a brilliant product in our minds, in the way it could work in different languages, the way keyboard sync was worked out, how information was disseminated, and so on,” Goenka shares. But the product bombed. In a matter of months Tally had to come out with an upgrade – Tally 9.
“Our judgement was that people will love it given the diverse nature of the country. But the damage was done. Tally 8.1 with all its marketing, rollout cost and so on, led us to negative cash flow,” he adds.
This setback came close on the heels of its 2004-05 fiasco when the company slashed its product fee from Rs 22500 to Rs 5000 in order to increase volumes.
“We were expecting to sell 10 times as much. But we sold just about twice as much,” Goenka elaborates. It almost halved the company’s revenue. Add to that “some ridiculous amount of money that was put in sales and marketing,” that pushed up expenses at the same time. It pushed the company to the brink of bankruptcy.
“All we could do was put down our head, go back to the drawing table, and work it out. Failures are part of a journey. We had no other choice but to recover from those failures. If we had had multiple streams, we could have been at the peril of falling back on services. But we had no choice,” Goenka nails his point.
His confidence is palpitating.
But what does Goenka feel about the growing competition from startups, cloud, and DIY IT infrastructure?
“It’s least of my worry because of India, essentially, isn’t a DIY economy,” he says.
“There is nothing called brand loyalty. Users can be passionate about a brand but they will go where they get the best product. They might hope their favorite brand does it for them, but if not, they will move elsewhere. So it doesn’t matter how many options consumers are presented with. Underlying point is, if we provide what the user wants, we will survive,” he adds.
Tally Solutions is also looking at introducing the benefits of cloud infrastructure to its clients, but it would rather adopt a hybrid approach.
The company is currently developing a cloud-integrated product, which it plans to launch soon.
The aim now, Goenka says, is to reach 10 million customers. Tally has over 1.3 million business customers at present.
“We got sidetracked by GST in last one year. It has taken the juice out of the company. We will resume working towards our targets now,” Goenka signs off.