Indian start-ups sense big opportunity in big data

An article that appeared in the Mint 

A new crop of enterprise software start-ups in India is promising to translate mountains of digital data into practical business insights in real time, challenging the dominance of large technology firms, Oracle Corp. and International Business Machines Corp. (IBM), in the big data market.

Backed by some big investors including Blume Ventures, India Innovation Fund and Lightspeed Venture Partners, Indian big data start-ups such as DataWeave, Qubole Inc. and Formcept are helping online retailers price their products competitively, among other things, by allowing them to quickly sift through and analyse massive chunks of data generated by social media.

There’s a growing local market for this, and a pool of experienced professionals ready to quit Google Inc., Facebook Inc. and IBM to start big data firms. The market for big data in India is anticipated to grow at nearly 38% a year, from $58.4 million in 2011 to $153.1 million in 2014, according to a study by technology researcher International Data Corp. titled Here comes Big Data: Perspectives from Indian enterprises.

Big data

Big data refers to a collection of data sets or chunks of information too large and complex to be processed using traditional software tools. By applying big data solutions, enterprises are looking to sift through massive amounts of information about users, analyse usage patterns on a real-time basis, and prepare personalized campaigns that can potentially increase revenue per user. Apart from this, firms can make use of big data insights to cut costs and boost profit.

Intel Corp. estimates that the world generates 1 petabyte (1,024 terabytes) of data every 11 seconds, the equivalent of 13 years of high-definition video. IDC estimated that in 2011 all the data created in the world amounted to 1.6 trillion gigabytes (1.56 billion terabytes). By 2020, 50 billion devices will be connected to networks and the Internet.

This explosion of data is also driving entrepreneurs to start businesses focused on different industries, working around challenges specific to them to build big data solutions.

Bharti Airtel Ltd, for instance, handles around eight billion calls every day, generating petabytes of data to be analysed for identifying new revenue opportunities. And Royal Dutch Shell Plc., according to a McKinsey report in May, uses advanced seismic monitoring sensors to collect up to a petabyte of geological data per exploration well that need to be analysed; it plans to use the sensors on 10,000 wells.

Last month, when private equity firm TA Associates Inc. invested $25 million (around Rs.150 crore today) in Mumbai-based Fractal Analytics Inc., which provides advanced analytics to Fortune 500 companies, for a minority stake, experts said the deal was an acknowledgment of big data as the next big thing in India’s technology space—a segment, investors, particularly technology-focused ones, are keenly watching.

“The number of companies is small but the quality is good. Unlike in the Internet space where one sees lots of companies but a relatively broad mix of quality,” said Alok Mittal, managing director of Canaan Partners India, a technology-focused venture capital fund.

Investors such as Lightspeed Venture have taken multiple bets on big data, backing firms such as BloomReach Corp. and Qubole.

“We are seeing a lot of innovation from start-ups that leverage this data to create actionable insights for enterprises or use this data themselves to disrupt traditional industries like credit risk assessment,” said Bejul Somaia, managing director, Lightspeed Advisory Services India Pvt. Ltd, the local unit of US-based Lightspeed Venture. “The question becomes how will companies benefit from this.”

Somaia, who is on the lookout for more investment opportunities in the space, said that in the past two years the number of enterprise technology-focused opportunities in India has increased. “It is still early. Are we seeing enough? Not yet. But the trend line is very positive,” he said.

Start-up opportunities

There are two segments being looked at by entrepreneurs for starting in big data—building pure technology infrastructure for managing the information, and analytical software that help enterprises in specific industries.

“The other problem we face and which has kind of motivated us is that there is not enough data available about India as such—and there is not enough data available on the Web. In countries like Europe and the US, anything and everything is available on the Web,” said Sanket Patil, head of product strategy of Bangalore-based DataWeave.

The DataWeave founders Karthik Ramesh and Vikranth Ramanolla trained their attention on the highly competitive and growing e-commerce market in India and developed a platform that would analyse huge chunks of data and offer competitive analysis of companies. Their aim was to “democratize data access” so anybody could have access to information for a small fee. Their flagship product PriceWeave offers pricing data and other competitive analysis for e-retailers such as Flipkart and Jabong.

DataWeave, founded in 2011, recently garnered close to Rs.1 crore in funding from Blume Ventures, 5 ideas TLabs and a group of angel investors.

The founders are now working on scaling their data products beyond India to markets such as Europe and the US through partnerships with data sellers. Currently, DataWeave is running a pilot project with a few online retailers outside India.

“We are approaching this as a global play. As the business model has been validated in India, we are looking to expand into other markets,” said Patil.

Qubole, founded by former Facebook engineers Ashish Thusoo and Joydeep Sen Sarma, is based on Apache Hadoop, an open source software framework, and offers cloud-based Qubole Data Service that focuses on making analytics accessible to all kinds of enterprises. “Our clients typically tend to be high-tech firms,” said Sarma, co-founder and head of the Bangalore and US-based company.

Formcept’s Suresh Srinivasan and Anuj Kumar offer an analytics software that drastically reduces the time it takes for companies to collect, organize and store data from various sources, including social media websites Facebook and Twitter, and handles most of their data infrastructure problems.

The Bangalore firm also offers competitive analysis of companies in a particular domain. For example, in e-commerce, Formcept’s software can be used to analyse and highlight the differences between products sold on Flipkart, Myntra and Jabong.

“Typically, a data scientist or analyst spends 80% of the time looking at things like data capturing, delivery, visualization, which we’re taking away with this platform,” said Srinivasan. “What we’re trying to do is solve the data infrastructure issues, which includes data capturing, data analytics, data delivery, data visualization and data management.”

Another Bangalore-based firm Bizosys Technologies Pvt. Ltd’s HSearch software is a patent search technology. The company is building new solutions on it and is in talks with a few investors to raise funds. “We are looking to raise $2 million,” said Sridhar Dhulipala, director-solutions, co-founder, Bizosys.

BloomReach says it generates 94% average annual incremental revenue for its customers through its BloomSearch product. “We are tied to a company’s revenues. Unless we make a financial impact, we don’t make money,” said Vinodh Kumar, head of BloomReach India. The company raised $5 million, $11 million and $25 million in three rounds of funding.

Other promising Indian start-ups with specialized analytics technology are Mitra Biotech Pvt. Ltd and Iken Solutions Pvt. Ltd.

Mitra Biotech’s software offers personalized therapy for cancer, analysing the effect of multiple drugs on cancer cells and recommending the best treatment for a patient in shorter than a week.

Iken Solutions, which was founded in 2008 and has so far received about $2 million in funding, counts Bharti Airtel as its biggest customer in the mobile value-added services analytics market.

For Bharti Airtel, India’s biggest telecom firm with more than 260 million subscribers globally, Iken uses its software to analyse the huge volume of data generated by the telco’s subscribers and personalize value-added services such as caller tunes and ringtones for each user.

Another Bangalore-based big data start-up, Frrole, uses analytics to sift through massive chunks of news data. The algorithm can tell a newsworthy Twitter post from a comment or a reply and sorts about half a billion posts a month based on four different analyses—metadata, language, semantics and statistics.

Small market

For the founders of Formcept, which was incubated at the Indian Institute of Management in Ahmedabad, the biggest challenge so far has been convincing companies in India about the value proposition of spending on a big data platform, with many small- and medium-sized businesses still hesitant about embracing and spending on new technologies.

“India is lacking in that arena where companies are more open to embracing newer technologies, unlike (in) the US,” said Srinivasan, who previously worked at IBM.

Qubole’s Sarma, too, said one of the biggest challenges for start-ups in India is getting access to potential clients. “People are more risk averse, they stick to other solutions that they are aware of,” he said.

The key market for home-grown firms, in fact, lies outside the country. According to technology researcher Gartner Inc., global spending on big data is expected to drive about $34 billion of overall information technology (IT) spending in 2013, up from about $28 billion in 2012.

Wal-Mart Stores Inc., the world’s biggest retailer, last month acquired Silicon Valley-based analytics start-up Inkiru to build its e-commerce capabilities by using their predictive analytics platform, as it looked to compete with Amazon Inc. For Indian big data start-ups such as DataWeave that focus on e-commerce it would make sense to target bigger markets such as the US, say experts.

They don’t think India as a market will support significant revenue scale for big data companies. “They may be able to build and test product here, but will ultimately have to target other markets to achieve scale,” said Somaia of Lightspeed Advisory Services.