In 1986, six years after Infosys was born, another software company took shape in Bengaluru. Tally Solutions rose from the ashes — literally. A devastating fire had laid waste to a family cotton business founded by Shyam Sunder Goenka, a Marwari entrepreneur with roots in Kolkata. The only thing that could be salvaged from the wreckage was a computer on the shop floor.
The electronic survivor became the prized possession that the twenty-something Bharat Goenka -- the son of Shyam Sunder Goenka -- relied upon to create Peutronics Financial Accountant, an accounting software application which eventually became Tally Solutions. For his troubles, Bharat Goenka was honoured with the Padma Shri award this year.
Today, Tally Solutions is the overwhelming market leader in business software for small and medium enterprises, so much so that the term Tally is generic for accounting software in the diversified small and medium businesses of the country. And nearly 35 years after its founding, Tally is transforming itself for the 21st century, with a new Goenka in charge —Managing Director Tejas, the 30-year-old son of Bharat Goenka.
Tally may be a household name for those in the trade, but it is still puny compared to the software giants Infosys and Wipro which emerged in the 1980s.
Big ambitions
While Tally might not become as big as an Infosys or a Wipro, it does have big ambitions. In the past decades growth was easier since competitors were few and far between, but Tally now has to contend with hungry startups, some of them backed by deep-pocket venture capitalists who are willing to burn money to capture market share.
The core elements of Tally’s strategy, said Tejas Goenka, revolve around two important areas — expanding into new markets, and introducing complementary product offerings. While the target is micro-businesses like restaurants, kirana shops, medical stores; the entry point will be billing.
“Accounting is Tally and Tally is accounting,” said Tejas Goenka. “I want the same to be true of billing.”
Mom-and-pop outlets still form the backbone of retail in India. While online retail is growing and is estimated to hit close to $100 billion soon, it is still a small share of more than $800 billion retail market. As per a report published last year by Deloitte and Retailers Association of India unorganised players dominate 88 percent of the retail market in India and Tejas Goenka wants to be friends with them.
The reason Tally becomes a runaway success with small business is its ability to pay attention to detail. For example, Tally doesn’t fuss about date formats; editing older entries is a breeze; and it is designed so that simple graduates can operate it with ease.
“A small-business owner in Tinsukhia (in the eastern end of Assam, close to the Myanmar border) should not have to call someone to operate the platform. If we can solve that we will be able to solve the retail digitisation problem,” Tejas Goenka said, predicting that Tally will be a major player in the retail business by 2021 or 2022.
Challenges are aplenty
While entering into retail might sound exciting, challenges are aplenty. To start with, Tally has to completely rewrite its software to make it suitable for these businesses. Besides, retail is becoming a crowded space. From digital payments unicorn Paytm to large point of sales companies and even early-stage startups like OkCredit, Vyapar and Khatabook, everyone is targeting this sector.
“It is true that first to market matters a lot, but I believe best to market matters a lot more,” he said, pointing to Facebook’s demolition of Google-owned social-media site Orkut.
In 2018-19, Tally Solutions reported revenue of Rs 500 crore and net profit of Rs 86 crore. The previous financial year was a bonanza because of the implementation of GST. Its profit was Rs 160 crore on revenue of Rs 658 crore. The reason that the GST-induced growth hasn’t sustained is because a one-time purchase doesn’t always result in annual subscription. This is the biggest challenge, where getting businesses to pay for software is difficult.
Tamonash Dey, who manufactures leather gloves in Kolkata, has been a Tally user for than a decade. He told Moneycontrol that there is a reason why Tally enjoys more than 90 percent market share in the MSME segment, and that is its ease of use.
“Having been a software engineer before starting up, I know how difficult it is to customise large software platforms for small businesses. Tally addresses all issues and allows us to make changes easily, which helps in tax compliance,” he said. “Also it is easy and cheap to get an accountant who knows Tally, which is a big positive.”
The old-school model of trust and belief
It is this old-school model of trust and belief which can drive Tally into the future as well.
While retail is his next bet, Tejas Goenka is trying to modify the trademark accounting platform for the new-generation entrepreneur. As business goes smart and mobile, Tally will be designed for connected devices, keeping the owner connected even if he or she is on the move. While connecting different systems within the company is something the company recently launched, the bigger challenge is to create a network of businesses within a supply chain who are all using Tally.
If Tally can connect different businesses, thereby enabling free flow of information between vendors and suppliers, it can automate data-entry processes completely. The trick here is to manage the different systems in different companies and make data readable across platforms.
Tally’s vision has never been in question, but its agility will be the key this time. The competition can be counted on to be nimble and Tally has to contend with legacy systems and a more traditional workforce.
Goenka agreed it is a big challenge, but at the same time explained how the company has already gone through a transformation five or six times since inception.
“I think in the software world, if you need to survive you should be ready to rewrite everything from the beginning leaving behind only the brand. By end of next year we would have wiped out 100 percent of our existing code base,” he said.
While technology and product are crucial, stronger business metrics will be derived from more revenue channels for the company and reduction in piracy.
Piracy is one big issue the company has been grappling with since inception. Out of more than 60 lakh businesses using its software, only around 20 lakh are paid users. But this is changing, claimed Gonka.
The company has invested in creating a base of 28,000 distributors and has seen the number of registered users jumping from 25,000 several years back to 20 lakh now. Events like GST implementation and mandatory e-way bills boosted demand, helping double the customer base in less than three years.
Relatively cheap
Besides piracy, Tally needs its customers to continue paying for its services. It needs to realign its customers onto a subscription model. Goenka said that 50 percent of Tally’s revenue is already from that channel but the overall pie needs to grow.
A Tally subscription comes relatively cheap at Rs 3,600 a year, even selling that to hard-nosed small business owners is challenging. But the hope is now with compliance becoming strict, GST rates changing all the time and new modifications coming in from the government, businesses will find benefits in the subscription model.
Also, the planned expansion into West Asia and Southeast Asia will help potentially generate higher revenues.
Tally has challenges ahead, no doubt, but it is sitting pretty in its core business of selling software to a customer base that is difficult to please and even harder to make money from. It might face competition in the retail segment where it is trying to foray, but its accounting platform has not been disrupted yet.
Further, it will be difficult for any venture-funded company to match the financial might of Tally. Being a family-owned business, the company has no compulsion to listen to investors and get forced into business lines it does not get excited about.
“The biggest challenge for early-stage tech startups is to replicate the high-touch model that Tally has built through its distribution network and this segment of businesses need physical support,” said a top executive of another accounting startup. “This network of chartered accountants, Tally distributors, software developers and trainers is too big to be dislodged by any incumbent easily.”
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
