Yesterday, American software giant Intuit made a somewhat unexpected announcement. 

In fact, Zoho immediately released a statement declaring that they would be happy to transition all of Quickbooks' existing customers to their product. And because Indian news publications aren’t particularly savvy, most outlets faithfully published Zoho’s quote in their story announcing Quickbooks’ exit. Zoho didn’t even have to spend a rupee, and it got its message right where it wanted, to whom it wanted, at the right time.

We’ll come to Zoho and Tally in a bit, but for me, the strangest thing was that there was very little chatter about why Intuit made this decision.  

Intuit is not a venture capital-funded, cash-burning, loss-making company. In its latest earnings call, it told investors that it expects to make US$12 billion in revenue this year, and it reported a net income of a couple of billion dollars last year. 

Basically, this is not a company with limited resources. 

Plus, it makes software, which has a near-zero marginal cost. You make it once and distribute it for free forever. I don’t know the exact numbers, but I highly doubt Intuit was spending much in India to distribute Quickbooks. I suspect it was just keeping the lights running. 

Under these circumstances, from Intuit’s point of view, you’d think that cutting off access to India would be more of a hassle than just doing nothing. 

I mean, why bother at all? 

Also, I really doubt Zoho, Tally, or any of the other companies can capitalise on this. 

And the reason has nothing to do with any of their products. 

It’s all to do with India itself. 

Let’s dive in.

Tally is an accounting software used by most small and medium businesses in India. For most of us, accounting software sounds like the most boring thing in the world (which it is), but mention Tally to anyone who has worked in accounting, or taxes, and you’ll see their eyes light up with joy.

In the boring accounting world, Tally is a superhero. It’s their God. They worship it. Tally was around when the universe was formed, and it will be there when it dies. Older accountants have Tally as their DPs on WhatsApp. Teenage aspiring accountants have a poster of it in their bedrooms. 

Okay, I may be exaggerating a bit for effect, but my larger point is this—in India, in accounting and taxes, especially for businesses, Tally is everything. Just like Xerox and Kleenex, Tally is a brand that’s synonymous with the category itself. Millions of accountants all over India use Tally. Right from the time they prepare for exams, all the way until they retire. 

Most accountants usually refuse to use anything else. Ask them why and they’ll swear by Tally’s wonderful user-interface, how simple it is, and how beautiful it looks. 

Let’s take a look. 

Here’s a typical screen on Tally. 

No. I didn’t apply a sepia filter. 

That’s actually what Tally looks like. 

Depending on how you measure it, Tally has a market share of 80%. Some reports suggest that that number may be as high as 90%. I can’t think of another product that dominates a category like Tally does, apart from maybe Google in search. And this is an enterprise product which is essential for every single small, medium, and large enterprise across the breadth of India. Need to keep track of your expenses and inventory? Tally. GST filing? Tally. Need to apply a filter on your cat photo and upload on Instagram? Tally.  

By all rights, Tally should be an outrageously successful company, making money hand over fist by selling software that every business needs to users who love it in a market that it has a stranglehold on at an obscene profit margin. As a company, it should be worth billions of dollars. 

In March 2020, Tally reported an annual revenue of around Rs 500 crore. 

That’s a little less than US$60 million, which is what Netflix paid Dave Chappelle for two of his stand-up specials. 

Honestly, this is not a knock on Tally. At least they are making some money, at a reasonable profit margin. In fact, if anything, Tally is the outlier. It took the long, hard road to get to where it is today. It was started in the late 80s, and it’s taken them thirty five years to get here. 

We keep hearing a lot of stories about the emergence of Indian software-as-a-service (SaaS) companies. Freshworks. Zoho. Chargebee. They are all admirable examples, but what all those stories neglect to mention is that Indian SaaS companies make almost nothing from India.

Take Zoho, for example. 

Last year, it recorded a revenue of close to Rs 4,500 crore (US$570 million).

Less than 5% of that was booked from India. 

There’s a general theory in software and the internet that once you lock-in the users, the money will follow. Acquire now. Engage well. Monetise later. Every growth strategy teaches you this. Many successful companies have been successfully built on this theory, from Snapchat to Facebook. Among modern consumer internet companies, it’s not a theory. It’s a law as immutable as gravity. There’s a variant of this, for enterprise SaaS, that suggests that if you make your product so compelling that it’s able to create an ecosystem, where everyone all across the value chain uses your product, trains others on it, and hires for it, it practically becomes the standard for everyone, and then you make tons and tons of money. Look at IBM, and after that, Microsoft. And SAP. And Salesforce. The list goes on and on. Again, it’s like gravity. It just works. 

Tally shows us that you can do all of the above, and you still can’t make money. Gravity in India works differently. 

Part of the reason why this is happening has to do with why Tally got so popular. It’s not because of its simple UI or great functionalities or sepia filters. 

No, the real reason has to do with timing. 

Tally was a software product that businesses in India used before the internet era. Millions used the product. Most of them didn’t bother paying for it. In other words, Tally got super popular because it could easily be pirated. And soon, everyone was using it. The ecosystem was built and Tally never saw any of its benefits. This is something that haunted Tally for decades. Back in 2005, Tally’s President estimated that piracy was “over 90%”. 

Over 90%. 

Piracy has always been a problem for software companies, and the solution was found when the internet came along. Now software could be deployed and accessed on the cloud, instead of being installed on your device. This automatically solved for piracy as well. Until the cloud came along, companies sold software. Now they could sell software as a service. 

Except, India kept the software and refused the service. 

This behaviour was more common among SMEs in India, especially because there were little consequences, and quite honestly, not much money to spend on software expenses. 

But there are new-age companies who don’t see Tally as a cautionary tale. Companies that are hoping to crack India’s vast network of SMEs (like kiranas) using the law that they think will work for them. 

Acquire first. Monetise later. 

Companies like Khatabook, which has raised millions of dollars at a valuation of US$600 million. All to create a product which they’re giving away for free. 

Also, as any enterprise SaaS Product Manager will tell you, the only thing worse than having no users for your product is having the wrong users. If Quickbooks remained in India, it would be forced to listen to its customers, and to add features and support things that they asked for. Normally, SaaS companies do this in the anticipation that this will lead to new customers. But what features can you possibly add that will break an entrenched ecosystem of Tally users, all of whom have been indoctrinated into it thanks to decades of piracy?

Nobody wants to buy software in India. 

And for everyone else that does, there’s always the RBI.