With 19 states switching to the value-added tax (VAT) from today, the cash registers have started ringing for software companies providing VAT-compliant accounting solutions for small- and medium-sized firms.
According to industry estimates, the sector purchased accounting software worth Rs 1,500 crore (Rs 15 billion) in 2004-05, up from Rs 700 crore (Rs 7 billion) in 2003-04. In the current financial year year, the business is expected to cross Rs 2,000 crore (Rs 20 billion).
There are 3.2 million small and medium enterprises (SMEs) using accounting software in the country and the number is projected to rise by at least a million within the next 12 months.
Bangalore-based Tally Solutions, which accounts for about 90 per cent of the financial accounting software used in the sector (the remaining 10 per cent is divided among some 600 other providers), has got 240,000 new orders for its VAT-compliant software, Tally 7.2, in the lst 15 days, compared with 190,000 it bagged in 19 years since its inception in 1986.
"We had 80 people on our rolls till a year ago even though we had a 90 per cent market share; now we have 350 people," Bharat Goenka, Managing Director of Tally Solutions, said.
Goenka saw the opportunity a few months back and aggressively started marketing his product.
"We have spent Rs 25 crore (Rs 250 million) in marketing and Rs 40 crore (Rs 400 million) in educating the users about VAT," Goenka said.
At the same time, he increased the number of sale outlets from 500 to over 25,000 and cut Tally (single user edition) prices by half to Rs 4,950. (It has been raised to Rs 6,300 from Saturday.)
The price cuts helped. In the past, almost 90 per cent SMEs used pirated Tally. Now, the lower price tag made them go for the legal software.
"The piracy level has declined to 60-70 per cent from the earlier high of 90 per cent and is expected to further go down to 50 per cent," said Goenka.
As a result, Tally has been flooded with orders. "We are being able to meet only 30 per cent of the additional demand that is being generated," Goenka added.
Surprisingly, the SME sector even in the Bharatiya Janata Party ruled states, which have decided not to implement VAT from today, is purchasing large volumes of VAT-compliant accounting software.
According to Goenka, Tally has sold 85,000 solutions in BJP ruled Gujarat, though the company had initially expected to do around 50,000.
Similarly, in Rajasthan, the company has sold 27,000 against the initial projection of 25,000. Clearly, traders and small businessmen in these states too know it is just a matter of time before VAT is implemented.
Other companies too are readying for a piece of the action. Microsoft India recently rolled out seminars in eight cities including Delhi, Mumbai, Chennai, Kolkata, Bangalore, Pune, Hyderabad and Ahmedabad to hardsell its offering 'AdVATage'.
The Microsoft package consists of a VAT ready accounting solution from Microsoft partners - Wings, Trio and Matrix.
VAT's IT
BOOKTIME: In the last 15 days, Tally has sold 240,000 VAT packages against 190,000 in the previous 18 years
PIRACY IN VOGUE: The size of the market is Rs 1,500 crore (Rs billion), but pirated software accounts for 60 per cent of it
COMPETITION: Microsoft has unveiled its "AdVATage" range solutions targeted at small and medium businesses
