The Neon Show
00:25:49 · Bhaskar Ghosh, Siddhartha Ahluwalia
[00:25:49] S1: Yet. So [00:25:50] S0: they'll not... Never get SaaS kind of multiples. [00:25:53] S1: Look, that final valuation stuff is anybody's guess, it depends on the market. But make no mistake, these are going to be massive dividend earning businesses, cash flow businesses. And the margins might expand dramatically. What multiple people will pay for, what the formula will be, I don't know. But can these be incredibly lucrative businesses? 100%. [00:26:18] S0: But do you think the kind of TAM available to grab right now is at the highest. Because that TAM creates companies, right? [00:26:31] S1: That's why the services side is really exciting. I mean the TAM scales with world population. It is insane. So the answer is, what will it grow to? I don't know. What is it today? It's already uncountable. What is it today? Actually don't know the answer. Don't put me on the... Multiple trillions of dollars for sure. Whether it's tens or twenties, I don't know the answer. But it is vastly larger than the enterprise software space. That much I can tell you. [00:27:00] S0: Then it leads to the... [00:27:01] S1: Both times are very large. Services time is much larger today than software time. Both are massive. [00:27:07] S0: So it leads to the question then, companies like Snowflake, ServiceNow, Salesforce got created in the last fifteen years in enterprise software, enterprise, infraspace. So the coming TAM, because of what AI is unlocking, is much larger than that?
00:27:29 · Bhaskar Ghosh
[00:27:29] S1: On this enterprise software, in the examples you gave, I'm not sure that I will support that statement strongly. I think companies buying software are still buying software from the same vendors, from the same departments. So will they pay more? That part I don't know. But I think that's unlikely. It has to do with the customer's domain. Are they going to grow a lot more? That is an unlikely observation to me. So I don't know if the rate of growth of pure enterprise software, horizontal software that you... You know, all the stuff you mentioned, the Snowflake, Databricks, ServiceNow, Salesforce, SAP. Right? Oracle on the enterprise software side. I don't know if the rate of growth of the TAM has grown. Don't know the answer. The question is, can they now sell this software to new industries that has never bought it? Maybe that is going to be true. Because models will be used, because orchestration software will be used. And you will be selling into new domains that have not been touched. If that is true, bridge is created, where software of the new sort can be sold into new domains, then the answer is true. So that's a great question, worth visiting again. Now, the same is true for the services side. I think services side will become more efficient for sure, as it ingests more AI enabled software. Will it enable it to create new markets? Might be true. It might be able to do new things that has not been done before. We haven't even mentioned things like manufacturing. We haven't mentioned things like defense. We haven't mentioned, you know, all the applications of robotics. We haven't even gone there. We haven't talked about the chemical industry. We haven't talked about the mechanical industry. There are massive, massive... We haven't talked about supply chain changing. There is going to be massive impact in those industries also. How will the fundamental TAM of this industry change? I do not know that answer.
00:29:42 · Siddhartha Ahluwalia
[00:29:42] S0: And do you think in the last twenty years, if you think fundamentally, TAM decided the course of how new companies got produced in enterprise software?
00:29:53 · Bhaskar Ghosh
[00:29:53] S1: I think there was growth all around. There was prosperity and growth all over all over the world. I think a few things happened. I think Internet and mobile phones changed everything. So people were much more connected, not just social media, but through commerce. If you look at India, India basically hopscotched and went from one generation to fifth generation through mobile phone infrastructure and the use of mobile phone, number one. Secondly, India and Brazil did very foundational work and went from a first generation to seventh generation for its payment infrastructure. All the stuff you know really, really well. And that has caused feedback loops and network effects in not only bringing people out of poverty, but in expanding the middle class. So if worldwide there is more growth and more prosperity getting created, then the answer is yes. It so happens that the enterprise software market has grown remarkably in the last twenty years during a time of mostly peace. And of the middle class rising in many companies, rise of China, rise of India, rise of the Far East of of Southeastern Asia. I don't know, I can't predict the future well enough to tell you that in the in the, you know, in the presence of climate change and in the presence of the current geopolitical situations, how global prosperity will grow. But I think TAM is also tied to that, which is probably something that you're also bringing up. Yeah. Don't know the answer, but that's the... How the question should be posed.
00:31:28 · Siddhartha Ahluwalia
[00:31:28] S0: And and then the next thought is, you know, the India US corridor. It saw in last twenty five years the emergence of IT services companies. I think that's why, you know, India had a what worked for India was highly qualified labor that could do IT services and various kind of services available in The US and that was a tailwind behind TCS Infosys and all the services companies that got created. In the initial part of 2010, Zoho Freshworks captured a bunch of use cases starting with ticketing between the India US corridor because as the new economy was growing, new companies are getting built up, they needed software like ticketing and much other software. We are seeing the third era, if you have to say the first era was IT services, second era was some products, SaaS. So what is this third era and how much companies can we see, how big companies can we see in this era and what needs to happen for that to happen?
00:32:39 · Bhaskar Ghosh
[00:32:39] S1: That's a great question. Just to like frame the conversation well, remember, and you and I talked about it, in my past life, some of my best teams during my LinkedIn days and my Yahoo days sat in Bangalore and Hyderabad. American companies, whether it's Oracle, whether it's LinkedIn, whether it's Yahoo, it's Google, it's Facebook, have had phenomenal... And you know, before that Cisco, analogue devices has had amazing core product team sitting there. Not QA, not support. Not like what we call wink wink, second class functionality, but core functionality. Secondly, if you look at amazing deep tech companies, whether it's Nutanix, whether it's Rubrik, whether it's ThoughtSpot, whether it is Qubole, whether it is today Databricks, have had amazing engineering teams there. I just want to call out, these are all core, deeply difficult software pieces that were sitting there. The other thing I'm very excited about India. So, you know, I I gave a very engineering centric view of the world, it's a bottom up view. So let me finish that first. I am very excited about the technical talent and leadership I saw in quote unquote Indian native companies like RazorPay, like PhonePe, like Swiggy, like Flipkart. I think those are very important things to call out. The reason being, these are the kind of cadre of engineers and leaders who are thinking about much deeper systems problems, AI problems, data problems. And I feel that's where a lot of the heart of Silicon Valley lies here. That those level of problems, people have to know how to solve them, want to solve them, and want to do deeper things which lead to technical modes and network effects. I am still optimistic that will keep on happening in India, not just SaaS. So if I look at my portfolio, some of our best engineers of my portfolio, whether it's in Rocketlane or Usher or Yugabyte or Pankaj Patel's company, John Timers company, Nile, and I can keep going on and on. The best engineering teams and the major part is all sitting in Bangalore and Madras. So to me, the score daring and technical depth that these teams bring in is really important for the future of the India US corridor. SaaS, indeed, departmental SaaS, I see more of that happening. Vertical SaaS, I've seen a bit less happen out of India.