Lessons from Bharat in building Tally Solutions over the past few decades, insights on creating products, culture, and a company that lasts.
Bharat Goenka is the vice-chairperson of Tally Solutions and is popularly known as “the father of the Indian software products industry”. Bharat’s journey with Tally offers invaluable lessons in a world teeming with different playbooks on building a product and creating a company that lasts. This is a masterclass—read on. (Some of Bharat’s answers within this interview may have been repeated elsewhere in the book under different topics. We are still sharing them here to ensure the conversational flow remains intact.)
PANKAJ MISHRA
So Bharat, you know one of the first questions to start this would be what changes would you make if you were to start up again or look at starting up again? In hindsight, what are the things that you would change and why?
BHARAT GOENKA
I have been called the dinosaur of the IT industry, not the old man of the IT industry. I am genuinely old school, so when I say that I am old school, we start up virtually every time. Right now, we are in startup mode as a company. When I say we are in startup mode as a product company, whenever you throw away your old codebase, you are in startup mode. This is the sixth time that we are starting up in the last 34 years.
About a year or so ago, we scrapped our existing code base, and we are starting completely afresh. We will probably be in the market in another year. There is an existing product in the current code base, and the new code base is being developed, and as soon
WHEN I SAY WE ARE IN STARTUP MODE AS A PRODUCT COMPANY, WHENEVER YOU THROW AWAY YOUR OLD CODEBASE, YOU ARE IN STARTUP MODE. THIS IS THE SIXTH TIME THAT WE ARE STARTING UP IN THE LAST 34 YEARS.
– BHARAT GOENKA
as the new code base comes into the market, the old code base will be thrown away. So, effectively, we are a startup.
What are we doing differently? Actually, all the six times that we have started up, we have, from a tech perspective, been doing the same things. From a market perspective, yes, you keep doing different things because the customer profiles are different, the market you are trying to address is different, and then there is the plan for growth. Those are the three buckets that we normally look at. I mean, in the sense of the big three buckets, of course, detailing is a different matter. If I take the tech perspective, what we have done consistently for the last four years is perpetually going around the fundamentals. When I say perpetually go around the fundamentals, I mean that we strongly believe that in the product space, tech is the differentiator. In the non-product space, your business model may be the differentiator.
For example, if you want to get into the fintech business, then technology is perhaps a minor differentiator, but your business model is a major differentiator. Suppose you are trying to do T+1 vs T vs T+2, suppose you are trying to do a subscription model vs per transaction model, so various types of business models will differentiate you in the market. A lot of that will depend on how deep your pockets are and how you will sustain that. I’m using the product in the sense that something will run on your systems, whether it’s on your phone or laptop or desktop or your servers. Something that is running in your hands rather than something running in the background, then technology is your primary differentiator. What we keep trying to do is push the edge of what computing can do today. Restarting six times, every time the computing environment has
RESTARTING SIX TIMES, EVERY TIME THE COMPUTING ENVIRONMENT HAS CHANGED WITH SOME SIGNIFICANCE, IT IS TIME TO THROW AWAY YOUR OLD CODE AND REDISCOVER THE BOUNDARIES OF WHAT IS POSSIBLE. SO THAT IS WHAT WE DO CONSISTENTLY.
– BHARAT GOENKA
changed with some significance, it is time to throw away your old code and rediscover the boundaries of what is possible. So that is what we do consistently.
Then the third point, which is planning for scale. I believe most companies tend to plan for a realistic scenario and not an optimistic scenario. When you invest in a realistic scenario, you choke yourself. When you plan for an optimistic scenario, your spending is higher. When actual reality hits, you might have spent more than you should have or needed to, but ultimately if you plan for success, you have to invest in the optimistic scenario. What I mean by that is particularly in the B2B space and the space that we work in, it is partially a product space and at the same time the post-sale process. There is a pre-sale process which is an engagement-based process, and there is a post-sale process which is the support process for the customer. We invest deeply in the capacity to do both of them, and that is oversizing our capacity by sometimes 3x or 4x and sometimes even 10x. And that is not easy to do because money is scarce, it has always been scarce. But from the beginning, we have always invested ahead of the success rather than trying to scamper to cope with the success because the moment you try to scamper to cope with the success, you start choking yourself. You start doing silly things, either in the quality of engagement you are doing or the quality of service you are giving.
Even in the early days when we didn’t have enough money to invest, we still used whatever money we had. We invested in the capacity even though we did not need the capacity, just optimistically believing that we would get a flood of customers coming in and how we’ll cope with them.
These two things I don’t think have changed over time. On the technology side, we continue to do what we’ve been doing for 34 years, and on the capacity side, we continue to do what we’ve been doing for 34 years.
MANAV GARG
Bharat, that’s a great framework. I have a follow-up question. So now, with the cloud coming in—you put it really well in terms of structure, technology, product, and growth—do you see that when you are designing the product, you could include new concepts of distribution of the product? Like free trial or open source? What are your thoughts on that?
BHARAT GOENKA
Truly speaking, it’s not just about now that cloud is coming into the picture. From the time the internet became popular, all products, including ours, would offer you a free trial, you can download it and run it, you can take a subscription for x number of months, and these models have been there before what you can call the SaaS model. Yet the thing is that the consumer behaves differently from the B2B space. Peter Thiel put it really nicely in his book Zero to One, and I’ve quoted him frequently because that is what we used to say earlier, but, of course, when someone like Peter Thiel says it, you get even more validation.
You can broadly divide the market into three: the consumers, the enterprise, and what you call SMBs. We play in the SMB space, and he used that statement to say that when you are in the consumer space, you throw money at marketing, and consumers self-serve themselves. So, you just make the product available, and you throw money at marketing. When you are in the enterprise space, you throw money at the sales engine. You create a sales engine because an enterprise wants that engagement-based purchase; they don’t just buy off the internet. You still need people to go there to make presentations and all of that. He called SMB the “dead-zone” because SMBs in terms of volume metrics are similar to the consumer, but in terms of behavior, they are similar to the enterprise. No one can run a sales engine of that volume because it’s just not cash efficient. Sales engines are expensive. Enterprise products are expensive because the cost of selling is higher than the cost of the technology. On the consumer side, you can make it as low as possible because you are getting high volumes, and you can make it a low-priced product, but the SMB is the dead zone.
I make that point because we are in that space, and different companies are in different spaces; whether you have a SaaS model or a non-SaaS model, the problem is that SMBs expect to engage, just like all enterprises expect to engage. It does not matter if they want to engage to discuss the features or price, or they just want to hand-hold for running the product
IT DOES NOT MATTER WHAT THE NATURE OF THE SOFTWARE IS— WHETHER IT’S A SAAS PRODUCT OR A DEVICE-ORIENTED SOFTWARE. IT IS THE NATURE OF THE MARKET THAT REQUIRES THAT CAPACITY.
– BHARAT GOENKA
or whether they want a call centre to be available. No one runs a call centre for a consumer business, so, therefore, it’s a problem of capacity. It does not matter what the nature of the software is—whether it’s a SaaS product or device-oriented software. It is the nature of the market that requires that capacity.
MANAV GARG
Since you mentioned SMBs, that brings me to the second stage. We have been talking about the India B2B opportunity for a long time, and Tally is probably the only example that has cracked it at scale. Do you think the timing is different, and the scale could come at a totally different level in the Indian B2B space?
BHARAT GOENKA
The scale in India, for example, today we have two million licenses sold, which roughly implies about five-six million businesses whose accounting and inventory are done on Tally. That makes us the third-largest such business software in the world. If you take the next level of the market and how large it is, if you go to the MSME industry, they talk about 60 million small and micro-businesses. But, realistically speaking, that is an artificial number from a technology solution perspective, at least in our space. I’m not saying that other solutions are not applicable to them, but the space that we play in perhaps the addressable market is closer to 15 million, so we have got 3x the size of our current market, which is addressable and we are currently going after.
I DON’T THINK ANYONE IN THE WORLD WHO CAN BUILD A GREAT PRODUCT REQUIRES MORE THAN RS 10–15 LAKH; YOU JUST REQUIRE A FEW GREAT COMPUTERS TO BUILD YOUR SOFTWARE, AND AFTER THAT, THE MONEY COMES FROM THE MARKET, MONEY DOES NOT COME FROM YOUR POCKET. IF YOUR CUSTOMERS ARE NOT WILLING TO PAY YOU FOR WHAT YOU’VE BUILT, SPENDING MONEY IN THE MARKET WILL NOT MAKE THEM WANT IT, AND THE BULK OF THE MONEY THAT PEOPLE ASK FOR IS TO MAKE A MARKETING SPLASH.
– BHARAT GOENKA
The scale will emerge mostly because more computing devices are in the hands of the people; the biggest barrier to the rapid growth of software is whether your customer has a device on which they can run this software. If you are running a SaaS model, it’s not like it does not require a device; it still requires a device to access the software. Without an access device, it is not possible for you to get a market, and now access devices have become dominant. Therefore, market acceleration has become greater than in the past.
I’ve continued to remain old school with this.
MANAV GARG
Old school is good, Bharat; that’s what we need. Old school sticks around and builds long-lasting companies. So, it’s good to understand the framework because people will struggle, and the range is very wide.
BHARAT GOENKA
I don’t think anyone in the world who can build a great product requires more than Rs 10–15 lakh; you just require a few great computers to build your software, and after that, the money comes from the market, money does not come from your pocket. If your customers are not willing to pay you for what you’ve built, spending money in the market will not make them want it, and the bulk of the money that people ask for is to make a marketing splash. At least in the B2B space, marketing does not work just like it does not work in the enterprise space. The enterprise space is sales-driven; it’s a word-of-mouth space just like the SMB space.
Sometimes after you earn some money, perhaps for your ego, you may want to do branding. Businesses don’t care about the brand; they care a lot about the product. Consumers care about the brand. Therefore, you have a marketing-oriented way of selling to consumers. But, tell me, for anything you buy or use for your business, do you really care about the brand?
MANAV GARG
No, we look at value. Nobody cares about the brand.
BHARAT GOENKA
So, what’s the point of spending all that money if you are in the B2B space? So, yes, people can ask for how many ever millions they want to ask for but, is it a need? The answer is NO.
There are a couple of things here. You go to any business school: 90–95 percent of whatever they teach you about marketing is all consumer marketing. There is hardly any B2B marketing material available because marketing is used in the context of consumers. So, everyone learns only that. Then they will hire a marketing person, that marketing person has learned only that, regardless of whether they are a fresher or a veteran in marketing. The only thing they’ve ever learned is consumer marketing, so everyone wants TV ads, billboards and there is no way to reason that out saying “businesses don’t care” but, they will say, if the brand is not there, why will the business want to talk to me? Businesses will still talk to you even if the brand is not there. It’s consumers that don’t.
PANKAJ MISHRA
Bharat, one of the other foundational building blocks is also the org structure, founding team, and building blocks overall. Any first principles that you can share from your journey that you believe to pass the test of time and outlive different cycles of disruption? Can you take us through some of those early learnings, and how do they fit now?
BHARAT GOENKA
We made a lot of mistakes, we have done many good things but, fundamentally for me, it’s not just about the Tally story, it’s about the lessons that we have seen from our partners. Some of them have grown from a two-three people company to a 300–400 people company. We as a company have grown from a one-person company to currently a 1,000-person company. I think the biggest mistake that people tend to make is that they structure themselves too soon.
For example, a couple of years ago, a person came to me and wanted to show me the business plan for the next five years. They were a seven-person organization, and he said the first thing that he’s going to do is hire an HR person because he believed that to become a good company you require a good HR person, and that’s the problem. Successful companies—when I say successful, companies which
SUCCESSFUL COMPANIES—WHEN I SAY SUCCESSFUL, COMPANIES WHICH HAVE GROWN IN TERMS OF SIZE AND THEREFORE YOU TREAT THEM AS SUCCESSFUL— AND YOU TRY TO LOOK AT THEIR STRUCTURE AND YOU SOMEHOW FEEL THAT THEIR STRUCTURE HAS BEEN THE CAUSE OF THEIR SUCCESS AND YOU SHOULD ADOPT THEIR STRUCTURE. BUT, IT IS THE REVERSE. BECAUSE THEY GREW, THEY NEEDED THE STRUCTURE—IT’S NOT THE STRUCTURE THAT CAUSED THEIR GROWTH.
– BHARAT GOENKA
have grown in terms of size and therefore you treat them as successful—and you try to look at their structure and you somehow feel that their structure has been the cause for their success and you should adopt their structure. But, it is the reverse. Because they grew, they needed the structure—it’s not the structure that caused their growth. So I asked him, assuming you hire an HR person, tell me what he will do for eight hours a day for 365 days, you have seven people, what is his work?
In terms of the structure and processes for an organization, you should be just a little bit ahead. In fact, barely 6–12 months ahead of your planned capacity of people, you should not build structure and processes for a 50-person organization when you are ten people. You should not make a structure and processes for a 200-person organization when you are a 50-person organization. And the reverse, of course: do not hire 200 people when you don’t have a structure and process for them. That was one of our biggest mistakes. It was both a mistake as well as it benefited us enormously in four months, we moved from 80 people to 800 people. For the next two years, it was chaotic, and we didn’t know whether we were coming or going because we didn’t have any support for that kind of capacity. So, in contrast, going from 1 to 80 was a breeze and once we wrapped our heads around this large explosion, continuing to grow has been a breeze. The point is, you should have just the right amount of structure and processes to support your capacity. You should not overdo or underdo it.
PANKAJ MISHRA
Just one thing, Bharat: Manav and I have been having this conversation with many founders. Think of me as an outsider. I’m asking it very bluntly. Manav, you are aware of this; a lot of founders we speak with say they wish they had had an org structure ahead of time but what we hear from Bharat is the opposite. Is there a middle ground? What is the best template?
DIFFERENT PEOPLE WILL HAVE DIFFERENT MANAGEMENT STYLES, AND PEOPLE SHOULD MAKE THEIR ORGANIZATION FIT THEIR MANAGEMENT STYLE.
– BHARAT GOENKA
BHARAT GOENKA
There is no question that different people will have different management styles, and people should make their organization fit their management style.
MANAV GARG
Also, Pankaj, the great insight that Bharat gave us is that you need an org structure to manage the growth and not the other way around. The org structure will not lead you to growth. The question is, are the entrepreneur team, management team or the founding team focused enough on the fundamentals of growth rather than the fundamentals of building the organization first? I think the interplay of that is very critical, at what point in time, what comes first, and what comes after. That is my takeaway from this.
BHARAT GOENKA
Absolutely. There is no doubt that your structure and processes can choke growth, potentially, but they are not your main cause for growth. I won’t say choke your growth; they can give some friction to growth, but rarely can they cause growth. The cause of growth is going to be the market and your offerings.
MANAV GARG
Since you made that point on the market, this is one thing, Bharat, I’ve seen many people struggle with. I struggled early on as well as I had just jumped into the business. In India, what happens is that two tech guys get together, they build the code, they pick the market which they have heard about or written about and then they go after it. At Tally Solutions, when you are starting something new like you are getting into the ERP market from accounting software, what is the structure, or what is the learning around how you think about market opportunities/growth? It will be good to understand your thinking on it.
BHARAT GOENKA
Generally, over the last several years, the way we have looked at things is that there are opportunities that are adjacency opportunities, and there are opportunities that are non-adjacent opportunities. When I use the term “adjacency opportunities”, you have got customers in a particular space, can you do something more on your product to accommodate more of their area of utilization and therefore drive greater revenue and perhaps greater adoption? So, that is what I call adjacency. Any product in the world, in theory, you can start, does not matter where you start. Given enough time you can finally have a product that does everything in the world because sooner or later everything becomes adjacent to each other. But, fundamentally, you are starting at some core and from that one core you are picking up adjacent opportunities.
Second is when I said non-adjacent opportunities, we are back to the old school of thought problem; we have rarely looked at non-adjacent opportunities. A couple of times we tried it, and then we discovered that there is just so much to do in the space that once we are in that we will not do justice to our space or the other opportunity.
If you look at different people, you will find people having spectacular success in handling multiple business lines and also have spectacular failures handling multiple business lines. Similarly, you can take people who have had spectacular success handling just one business line and having spectacular failure doing the same. All I’m saying is that there is no rulebook. For example, if you have got two million customers and you tell me why don’t you do this also, which is a non-adjacent thing because of the customer base and perhaps if you were in my shoes you would have made a beautiful success out of it. Perhaps I can’t do more because of the management style and capability to run those systems. So, we as a company have rarely successfully pursued non-adjacent opportunities.
MANAV GARG
So, what are some things that you would advise as Tally Solutions went into ERP as ERP is a massive space with massive competition from big giants like SAP, Oracle, and big brands? What has been your experience in the adjacent space? What are the main things that you would look out for? What is the framework of thinking that you would recommend to entrepreneurs?
WE NEVER EVEN FIGURE OUT WHETHER THERE IS A CUSTOMER PROBLEM THAT REQUIRES TO BE SOLVED. WE ONLY TRY TO SEE THE KIND OF SOFTWARE WE CAN BUILD, WHICH WILL BE DELIGHTFUL FOR YOU TO USE. YOU SHOULD NOT EVEN REQUIRE TO THINK THAT YOU ARE RUNNING SOFTWARE, SO YOU CAN CONTINUE RUNNING YOUR BUSINESS BECAUSE THAT REQUIRES YOUR ATTENTION; THE SOFTWARE DOES NOT REQUIRE YOUR ATTENTION.
– BHARAT GOENKA
BHARAT GOENKA
One of the things I think we do—which I think is very unusual and many people have criticized us for—is that we don’t study the competition. In fact, for 34 years, we have made it a point not to look at the competition, and sometimes you can express it as a very arrogant statement because we don’t treat anyone as competition.
The problem is that people tend to study successful companies, they don’t tend to study the customer. They try to assume that the reason why this company is successful is that they have cracked the customers’ problem, and I just need to borrow from what they have cracked and then try to crack it for my customers and therefore, not enough time is spent studying the customer and trying to be the customer. So, what we have perpetually done and continue to do is just spend an enormous amount of time with customers. Just really talking, not even about software, just talk about how things work, how they do things. And we are very clear that we are not there to solve any customers’ problems. It’s a continued and persistent mantra in our company that we don’t solve any customers’ problems. Let’s assume that Manav uses Tally, I really can’t solve his problem. His problem is the market; his problem is finance; his problem is employee attrition. Those are his problems. What problem am I solving? I’m not solving any problems.
We never even figure out whether there is a customer problem that requires to be solved. We only try to see the kind of software we can build, which will be delightful for you to use. You should not even require to think that you are running software, so you can continue running your business because that requires your attention; the software does not require your attention. It doesn’t matter whether we are going into the enterprise space or retail space.
THE FIRST IS YOUR BELIEF SYSTEM, SO WHEN I USE THAT WORD, I MEAN ARE YOU EVEN BUILDING TO LAST? DO YOU HAVE THE INTENT TO BUILD TO LAST? OR DO YOU THINK IT IS SOMETHING THAT WILL INCIDENTALLY HAPPEN ALONG THE JOURNEY?
– BHARAT GOENKA
We have to solve our problem, which is to make delightful software, and there are several problems to solve, that is our problem, that is my problem, that is not the customers’ problem. Shifting the mindset to understanding how a customer works so that your software can disappear into the background and it does not matter what the nature of the customer is. Touchwood, so far, this really unusual way of getting into this space has helped us.
PANKAJ MISHRA
Bharat, I have a little institutional question for you. You have built a company that has navigated many crises and perhaps some of them existential, and you have stayed relevant in that sense. If you look today at the SaaS landscape, there are a lot of companies taking birth, and a lot of them have good potential. How do you create a “build to last” enterprise in your experience, because that is when the ecosystem truly benefits for sustainability. So, if you were to define the whole “build to last” from your experience of building and surviving as Tally, what will be some of them?
BHARAT GOENKA
The first is your belief system, so when I use that word, I mean, are you even building to last? Do you have the intent to “build to last”? Or do you think it is something that will incidentally happen along the journey? Let me take an example. The very first version—I’m talking some 30 years ago—was the very first version of Tally that we sold in the market. It was the first version. But, that first version had been built to plan for its upgrade, so that our customers could self-upgrade because you are building a product where you can’t go to a customer’s place and upgrade for them, so you have to build a product that the customer can upgrade themselves. I’m talking about 30 years ago because you are expecting to last. You are expecting to be around for the next 2, 5, 10, 15 years. Therefore, the way you think even building your products comes from that perspective.
Especially since the time the lean model has come in, “build fast, fail fast”, you don’t just build fast and fail fast; you just fail honestly. At least, I have not been able to come up with an example of any successful software which had one or two prior failed attempts in the market. I don’t even know from where this theory comes that you should build fast and fail fast and because you will fail fast, you will succeed. I genuinely don’t have any example. I don’t know if you all have any example where there is a product where versions 1, 2, and 3 failed but version 4 suddenly took off because now they have learned.
So people aren’t even building to last, so how will they last?
PANKAJ MISHRA
Final question from my side, Bharat. The other thing that we have discussed with many founders—and Manav is a big proponent of that—is, how do you recruit and manage your board? A lot of boards today have investor representation and so on, but any particular lessons from the way you perhaps built aboard and what kind of expectation did you set?
BHARAT GOENKA
We don’t have a board.
PANKAJ MISHRA
Why is that?
BHARAT GOENKA
I don’t really know, honestly. I guess because of the way we were born. We were born as a proprietary company, and we continued running in that mode. So even though we are a private limited company from a regulatory perspective, in theory, there is a board, but because we are a private limited company, even that board is just inside people. But, are we operating as a board-run company? The answer is no.
MANAV GARG
Some really deep thoughts and concepts. I took away a lot of things, deep concepts about how you build products and a product company.
WHAT IS IT THAT WE WILL DELIVER SUCH THAT NO ONE WILL WANT TO GO BACK TO THE OLD WAY OF DOING THINGS?
– BHARAT GOENKA
BHARAT GOENKA
Hardly any of it will be relevant in the modern space because all our thoughts are very old and lonely thoughts.
MANAV GARG
This is a common mistake that most people make, i.e., don’t study the market enough and study the competition more. Pankaj and I are glad that you put it in a very succinct and clear manner. We’ve been asking this market question to everybody, and people say, do this study, go to this competition and do this research. But the two things that get missed are studying customer behavior and then figuring out what would benefit your customers and then studying the market more than the competition. They are great takeaways for us and the ecosystem.
BHARAT GOENKA
In fact, we keep asking ourselves whenever we look at the next thing to do, whether it is adding a feature or building a new product like we are building now. The question that we ask is—what is it that we will deliver such that no one will want to go back to the old way of doing things?
