Background
India’s IT industry is regarded as a hub of innovators providing world class technology solutions across the globe. Various international organisations have set up their offices here in India like Google, Accenture, etc. It has helped in changing Indian economy from an agriculture based economy to a knowledge driven economy. Information technology (IT) in India is an industry consisting of two major components- IT services and Business process outsourcing (BPO). According to National Association of Software and Services companies (NASSCOM), the sector aggregated revenues of US$147 billion in 2015. With recent activities practised by Narendra Modi relating to ‘Digital India’ to give IT industry a secured position inside and outside India has increased the growth and development of IT industry in India. In ongoing market India is the second largest exporter of IT and IT industry accounts for 5% of India’s GDP.
Types of software companies in India
In India, there are 2 types of software company-
- Product or Development based Software Company
These companies have a product or a set of products that provides for a major portion of the revenue. Top companies are- Amazon, Microsoft, Google.
- Service or consulting based software company
These companies provide services by means of business consulting, information technology, software engineering and outsourcing. Top companies are- Infosys, Wipro, Accenture.
There is a new breed of software company known as ‘Start-ups’ introduced in the industry. It provides a platform for fresher’s to experiment and grow. Top companies are- Flipkart, Redbus, Myntra.
Services offered by software companies in India:
- Internet marketing
- Consulting
- Outsourcing
- Programming services
- Custom business solutions
- Application development
How to start up a software company in India?
Common documents and licenses required for Startup-
- PAN card copy of the owner or partners
- Aadhaar card, voter ID, driving license as address proof of owner or partners
- Business address proof like utility bills copy or rent agreement copy.
- Software license agreement
- Patent registration on technology
- Trademark registration to protect your brand name
- Copyright registration on your source codes
- GST Registration
- Construct a business plan:
There should be a strategic plan so that it can help you achieve the goals. There should be a detailed description of your niche market, since the type of software you develop is directly related to your clients. It has to include the types of skills and technologies that you are going to implement in the company.
- Selection of legal entity for conducting business in India:
It depends on the size of your company. Based on it you choose the employees, technology, R&D, facilities, etc.
- Sole proprietorship firm as a software company – this form can be effective for small business due to its ease of formation and complete control over the business transactions.
- Partnership firm – this can be effective if you are choosing to run the business with another person to take advantage of combined skills.
- Limited liability partnership – owners need to pay taxes on their proportion of profits through their individual income tax returns but are protected from personal liability for the decisions and actions of the company.
Other kinds of entity are-
- Joint venture
- Select location:
Select an ideal location for your business, which can be the related industry high density locations.
- Registration:
Registration of your company under Registrar of Companies is necessary. In order to register, you need to provide different names for your company, which shouldn’t be used by any other similar company. You will also have to prepare AOA and MOA and fill up the declaration of compliance, particulars of managers and directors. Registration under Software Technology Parks India (STPI) is necessary to start a software company in India. If your company is registered under STPI, you will be able to get tax benefits. When you register in a state under the Department of Employment, it is possible for you to post direct advertisements.
- Register your business name with your state government, if necessary:
A DBA (Doing business as) is needed whenever you are doing business under a name other than your own. Registering a DBA name is done through state government or court clerk’s office.
- Obtain necessary licenses required for your business entity:
Once you determine the legal structure of your business, research the requirements of your locality for licensing, paying sales tax and income tax, liability insurance and other requirements.
- Raise funds for your software company:
Software development requires time and resources. Make a complete list of the start-up capital you will need to finance your business. You can research grants and loans, explore venture capital funds, consider online funding sources.
- Purchase the necessary equipment and applications:
Equip your development team with necessary equipment and applications like computers, servers. Find office space to rent using a real estate broker who specialises in it.
- Hire developers and market your product:
In order to have quality service and best software products, you will have to hire people that are highly talented and have specialised skills. Hire candidates who have required programming skills and desire to work in a software start-up environment. Hire a marketing firm or professionals to work for your company and market your product. Determine a price point for your product by comparing it to similar products on the market.
- Protect your product idea:
Obtain the necessary patents and trademarks. If possible also obtain a non-disclosure agreement from your collaborator. A registered trademark that prevents others from using your products name needs to be obtained from Patent Office.
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