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Can Tally’s Resilience Power India’s SME Engine?

Last fortnight, Tally extended a free 30 day license for its customers, amid the increasing pressure on SMEs due to COVID-19.


Even as a child, Bharat Goenka was a gifted mathematician. 

His academic brilliance is backed by a series of scholarships and grants-including NCERT”s National Talent Search Examination while still in class eight. Being a mathematics graduate and part of a Marwari business family, his love for numbers and business was immense. 

However, Bharat’s life changed In 1984, when his father bought him an IBM PC

Having no technical background, and clearly no Google or StackOverflow, Bharat began to tinker with the machine himself. He developed an accounting software called ’The Accountant’ with no-code. 

Not limited to accounts he helped to computerise the Shantinagar branch of Canara Bank. He even created a wedding invitation for his marriage in Hindi when vernacular fonts were not even available!

In 1986, Bharat’s father Shyam Sunder Goenka was running a small scale textile business. He struggled to find a simple and efficient way of managing his company’s account and ledger book. 

Goenka Sr. famously said: “When I’m buying a car I want to be a driver and not a mechanic.” When he was looking for a solution, the product had to help him run his business — not his computer.  

Every product that existed at that time required him to change the way he thought about his business. This was the fundamental problem, not only for him but for millions of other SMEs who are not very tech-savvy or fond of DIY products. 

Tally, Inside Out

To solve his problem, Goenka Sr. looked inside his own home for a solution. 

In 1986, when his father asked him to look at building a user-friendly business software, Mr. Bharat took it up as personal challenge. With insights and guidance of his father, it took him 6 months to successfully create an easy to use software called Peutronics Financial Accountant (PFA). 

v0 of Tally was officially launched.

Starting the Flywheel

In 1990, India was in the pre-internet, pre-PC age, with both being expensive and costing lakhs of rupees. 

Indian SMEs buy products only if they see great value for money. Selling any high priced business software was, therefore, going to be near impossible. For finding product-market fit, finding the market was as tough as finding a good product.

Maybe not for a product that was user friendly and actually solved a pain point.

What Bharat started as a business solution for his father’s textile company, Vijay Bobbins and Industries, soon got a good response from unknown buyers in the market. The positive response that the software received in such a tough market, led Goenka Sr. to believe in the product’s potential and market reach. 

He along with his son established Peutronics as a company and completely exited their family business of textiles. At the time, it was almost crazy to focus on a software product that they believed was the future of business accounting.

The first version of Peutronics was launched as an MS DOS application. As the business grew through the Goenka network and word of mouth of early adopters, Peutronics as a product was getting fine tuned for something bigger. 

With feedback from customers to improve the product and the fast changing landscape of technology, the next version was launched as Tally 4.5 in 1988. Over the next ten years, the duo iterated as PCs slowly began to proliferate. 

Tally 5.4 in 1996 hit the jackpot by striking a chord with its users. Its graphic interface version became so popular that its pirated version quickly started making rounds in the market. “Pirated software doesn’t become popular — popular software gets pirated”, quipped Goenka. 

As the popularity of Tally as a product and brand grew more than Peutronics, by 1999 it was decided by founders to formally change the company name to Tally Solutions Private Limited.

Tally as we know today was born.

Cranking Out Products

Globally, the 90’s was the time when computers and the internet were disrupting the way businesses were done. 

Amazon was born, as a business to sell books online. Windows had a new meaning in the digital world. India has gone through a radical change through liberalization, privatization and globalization.

For a software company, this meant an opportunity to expand and diversify as well as challenges of defending one’s territory from global and local competition.

As most of the companies, like TCS or Wipro, chased the services route to grow and grab a piece of this worldwide computerization boom, Tally remained focussed on what they were good at. 

Focussing on product line vs diversifying to services was a dilemma that every founder faced closed to the Y2K era.

However, the Goenkas were clear in their approach. From the start they wanted to change the way millions of people do business. By moving to services, they thought they would never be able to achieve that objective. 

They were unclear how long it would take them to get to a million mark, but the purpose of existence was to be able to touch millions of customers. 

Therefore they remained focussed on their product line and instead of moving to services or diversifying their portfolio, kept working to make Tally a name that everyone in business knew.

But what pain point was Tally solving that resulted in its growing traction?

Pipelines Built for India

Most SMEs start with maintaining physical books of accounts or at best manual entry of transactions in a regular computer. 

However, as the business grows, the problems associated with this strategy also grow, almost non-linearly. 

The opportunity cost for the man hours that go into manual accounting increases rapidly. Keeping track of different elements such as order book, receivables, cash flow, profitability etc becomes harder, leaving the small businessman with little knowledge of what is happening in their own business.

Add to this the complexity of maintaining invoices and returns for tax and banking purposes.  

Tally allowed SMEs to manage their accounting, inventory and compliance in one simple to use software. 

While tracking the order and purchase book, it offered important benefits such as payment reminders and sending automated payment emails. It produced financial statements at the click of a button, allowing enterprises to make daily decisions and plan ahead based on data.

For large enterprises, it extended its suite of offerings to cover payroll functions and remote management.  

The use case for Tally for SMEs was quite strong. But what made Tally’s product stronger was its built-for-India model.

Most importantly, selling to this market was extremely hard, deterring bigger players.

Key challenges revolved around access to small businesses, communicating the value proposition of a seemingly complicated ‘tech’ product and getting a hard-nosed businessperson to pay for this product.

How Tally built out its distribution and sales model is nothing short of exceptional and explains why new-comers, even the ones with deep pockets, found it hard to break in.

Tally’s goal was to open up the non-tech savvy SME market by delivering utmost simplicity in a product meant to solve for the complexity in business operations. 

Goenka started building out an extensive sales network to open up the market through a Partner ecosystem model. 

Between 2009 and 2015, more than 25,000 Tally Partners reached out to individual businesses, installing the product in their offices.

Large portion of partners focused on getting volumes while the rest got high margin yielding sales.  The physical distribution approach was noticeably distinct from the digital models adopted by its peers. 

It was working in India, but the flipside was increasing volume of customer traffic.

Lubricating Customer Friction

As the discovery problem became less of a concern, Goenka had to solve for retaining customer accounts through steady resolution of product queries. 

This coincided with the introduction of GST in 2016 that left a large section of the SMEs confused about filing a return and the implications of the change.

On the product side, Tally turned out to be quite an innovator. 

Its original platform was built to suit the complex Indian tax structure with a myriad of central and state taxes. It was then upgraded as the tax system evolved and brought VAT and input tax credit into the scene. 

However, GST not only created a unified tax structure but also mandated for all businesses to file a return on the GST network. Tally upgraded its software so as to record data and produce reports in GST compliant formats without any extra work. 

GST regulation meant that businesses had to turn towards software. Being the ambitious entrepreneur he was, Goenka realised that this was the opportune moment to go all out and capture a market that is now actively looking for a product.    

At this point, he overhauled the sales and partner model. 

A separate stock distribution team was created to provide software to Tally partners. Besides selling and implantation, a partner would now maintain strong customer relationships by providing advisory services to the SME. 

Some partners also went through technical certification and would offer more complex services to larger enterprises.  

Profitable and growing

The GST effect was visible in the financials. Revenue doubled from ~Rs 246 Cr in FY16 to ~Rs 500 Cr in FY17. 40% of the revenue in FY18 came from the sale of services highlighting the success of the after sales team. 

FY17 and FY18 returned record-high profit margins of 25% compared to the range of 2% – 3% achieved for the 3 years before that.

Let’s think about that for a second – double digit revenue growth at 25% profit margins. Not a single tech startup in India could boast of that.

This is the beauty of Tally being a family owned business that could be selective about where and how they grew, allowing the company to not burn through mountains of cash to achieve the growth that contemporaries could only yearn for.

In 2018 Tally’s customer base stood at 1.5MM customers but taking the pirated market into account, it was closer to 5 million. 

Another challenge has been renewals of sales. FY19 revenue dropped to Rs 520Cr from Rs 680Cr in the previous year because the one-off GST effect could not be sustained well.  

But the company’s resilience to cycles is deeply embedded in a well built product, enshrined in powerful company values.  

Value Control Systems

Tally has anchored itself to .ERP 9, and made it feature rich to address market demands.

For a long time, users had wondered why Tally had not launched Invoicing and Payroll features in their product. When asked, Bharat Goenka outlined a culture of pursuing perfection in Tally’s product offerings. 

In the opposite strategy to move fast and break things, Tally believed in moving slow and perfecting things. For Tally, there existed two options only. Either create a complete product, second to none, or not create anything at all. 

Before SaaS companies made ‘Land and Expand’ sexy, Tally wrote the textbook on acquiring customers cheaply through organic growth and then building ARPU through seat count expansion and broadening service offering.

Tally’s popularity stems from the philosophy that if Tally as a software is not valuable to customers, then their money is not valuable to Goenka. Only when customers see tangible value that they’ve paid for, will they tell their friends to also buy. 

In fact, Tally has instituted an unprecedented no-questions asked money-back policy, if the product did not fulfil the customer’s business needs. 

Culture eats strategy for lunch

What is standard in software today, was pioneered by Tally.

Tally also argues that the onus of simplifying the complexity of the problem should be borne by the designer, so that the end-customer experiences the ease of using the products. At the end of the day, a good programmer writes code not to make his life easier, but the user’s.

Good products differentiate themselves by their smooth and self-explanatory UX. To incorporate this, Goenka would initially test every feature of the product with his father. 

Tally depended heavily on word of mouth as their main pivot of marketing. When your customers become a champion of your product, successful businesses get created. 

Tally’s “madness” in the 1990s to build software was now proving incredibly smart.

Supercharge Customers

Tally’s adamant fixation on being a product company since 1986 was core to its success.

If at all Tally did solve some of the other problems outside the mainstream product, it did that for free. As a first mover in a nascent, but huge market, early adoption is the key to winning and entrenching itself in the business.

That is why traditional, long-standing enterprises have the early adopter skill sets to operate and use Tally. Being a one-time investment as opposed to a subscription model provides minimal reason to switch to new entrants in the market. 

But with the snazzy new UI and deployment on cloud for its competitors, how does Tally even compete today?

Tally wins, because it is no more a software, but has evolved to be a skill, especially for accountants.

Like “Are you skilled with Excel”, Tally is the bread and butter for accounting. With decades of training, and people skilled with Tally, it is near impossible to let go. Despite having a not very futuristic UI, its user experience and familiarity is hard to beat.

Tally thus sits comfortably with a secure moat built around its business.

It has built trust through dominating the accounting niche, with region specific features and deep accounting know-how embedded into the product. It has leveraged this to expand into other products.

Tally’s Empire Strikes Back

This also drove a low customer acquisition cost (CAC). Tally became the gold standard of accounting in India, which in turn became a source of growth.

Imagine a newly founded SME decides to hire an accountant to manage their finances – are they not likely to use the software that the accountant was familiar with?

Whereas today, startups provide deep discounts, freemium models and referral incentives that drive down their profit margins, Tally found its best salespeople in its customers.

For those familiar with the Australian software company Atlassian, this was also the way that maintained S&M spend at only 19% of revenue, relative to the industry stalwart Salesforce which hovers at 49%.

A good product = satisfied customers = organic growth. A hard path, but incredible to build resilience.

By 2018, Tally had begun to reap the benefits of building over decades.

Timing the Ignition

Tally has been buoyed by two main tailwinds in India over the past couple of years.

The ‘overnight’ digitisation of the economy and the increased adoption of enterprise-level business technology tools by MSMEs have both greatly enabled Tally. 

A combination of Jio’s attractive data plans bringing millions of people to the internet and demonetization driving consumers online in droves meant that having information at your fingertips became a must-have.

Numerous startups in Silicon Valley today like Rippling and Gusto are driving the sales pitch to MSME founders that Tally has been using for 30 years. Let us make it easier for you to manage business processes in an efficient and less error-prone way, so that you can focus on growing your business through customer and product growth.

Silicon Valley sounds a lot like Goenka Sr.

Tally led the charge of bringing MSMEs to a realisation that a good ERP solution can help businesses effectively manage relationships with customers, vendors and suppliers, while maintaining a high level of efficiency.

And it’s clear for all to see – this charge has been working and does not look like stopping anytime soon.

Today, Tally has 17 lakh paying customers, with an average ARPU of ~Rs. 3000 (FY 19 Revenue of 520 Cr / 17 lakh customers). Tally is just skimming the surface of the overall MSME market in India which is not only growing double digits annually but also increasing adoption of software tools.

Having been around for 30 years, Tally could be considered the ‘legacy’ company in the space relative to newer players like Khatabook and Vyapar, but the storied history of the company hasn’t stopped it from continuously innovating – a skill that has served it well in the trying times of COVID-19.

In a prescient move, Tally announced late February that they have launched v6.6 of their ERP tool which includes instant access “on any device, securely and privately”. 

What at the time was an initiative taken to allow business owners secure access to their company reports away from the office, came into a new light of importance when COVID-19 caused customers around the world to have to work from home.

Tally’s 30-year history and penchant for gold-standard product quality facilitated a zero disruption. Its transition to this access anywhere model that only amplified its mission critical nature to their 17 lakh customers.

In trying times for the global economy, Tally has stayed true to its mission of ‘Making Everyone Who Touches Tally Happier’ – announcing a few weeks back that they are making a 30-day license of their flagship product free for businesses across the world.

Over 10,000 businesses signed up to avail of the free service and Tally was able to transition their entire customer support team, called TallyCare, to a remote workforce.

For a legacy “old man”, Tally could lead a new wave of customer growth while helping SMEs who are hardest hit in recent times.

Building On a Resilient Engine

Boiling down to the basics, any enterprise focused company grows revenue in two key ways: adding new logos or providing existing customers with new products/services. 

Tally has an incredibly large untapped market to expand into over time, so it seems likely that consistent growth will come through that avenue.

A large market to address

But what about product/service expansion? Tally’s strategy here could be the difference between becoming a global business management giant or continuing on its relatively linear path since 1986.

If you listen to their management, the next step is clear. Tally wants to become for Billing what they become for Accounting.

Their goal of entering a crowded market filled with deep-pocketed competitors will not be without challenges. Getting SMEs to pay for software is hard, even if it’s just Rs. 300 per month.

This challenge is real, however well funded you are.

But Tally has the infrastructure in place to make this expansion possible as well as a captive audience of 20 lakh customers that are familiar with and satisfied with Tally’s services.

In a continually developing world, Tally will need to stay one step ahead of its competitors and either buy or build the next generation of ERP tools for SMEs.

Tally’s 30 year history has positioned it well to dominate a growing market of Indian MSMEs, but where does the future lie?

Building an Ecosystem.

The greatest business management companies (think Oracle, Salesforce) went from being useful tools to mission critical backbones for companies because they were able to construct an entire platform that made it impossible to operate without them.

Tally is taking its first steps towards this. 

Tally launched Xcelerators – an effort to drive SME development in the nation by “promoting entrepreneurship, fostering individual entrepreneurial capabilities, building institutional capacity, and encouraging employment creating investment”. 

By becoming a partner to the next generation of SMEs, Tally is hoping to position themselves as the go-to software solution for all things ERP.

The second part of an ecosystem is services built around the main product. In addition to Tally’s existing partner network, as adoption grows in the SME industry, so will the need for Tally ‘management’. 

Enter Biz Analyst – an application that allows SMEs to analyze their Tally reports through an outsourced ‘analyst’ for less than Rs. 5 a day.

Over time, we expect more services will be built around Tally, leading to a burgeoning environment for their service to customers.

However the next 30 years play out, it is clear that Tally has found a niche in the India SME environment that has made customers love the product and allowed them to fend off well funded global competitors like Quickbooks.

In a world where high-growth, money-losing venture backed startups tend to grab all the headlines, Tally has positioned itself in an enviable position to ride the next few decades of SME growth. In the times of unicorns, Tally is a camel that is built to outlast.

Tally has built the resilient plumbing to power the SME engine for India’s future growth.

By Abhinav, Abhinay, Raj, Saloni, Shiraz and Aviral

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3 years ago

What an article!!!! You people rock. 10/10

Jasdeep Singh
Jasdeep Singh
3 years ago

Thanks for the article. Very well written and quite informative. Though its a long article ( actually a story), but I never lost interest and the same goes for the recent Zomato’s story. You guys are great story-tellers. Love reading your articles. And I appreciate all your time and efforts.

3 years ago

While Tally does (and should) get credit for being first to market in India, its continued dominance is primarily due to the very high switching costs of moving your accounting data from its platform to any other and the monopoly it enjoys with the accounting community where accountants in India don’t know accounting, they know how to use “Tally”. If you even try to use something else, your accountant in all probability will force you to redo your books in Tally since that is what he is “used to”. It is like a protection racket. I don’t know if any… Read more »

3 years ago
Reply to  Aviral

Thanks for your response Aviral. Forced innovation due to a change in regulation is very different from internal innovation to better serve the needs of users. They had a similar surge in adoption during the movement from CST to VAT (in the early 2000’s), however at a much lower scale. Back then they had a lot of challenges with software piracy which today they have solved through their system now not working without continuous internet access. Their recent surge again I believe demonstrate the power of network effects that come with “accounting training” in India meaning knowledge of Tally. They… Read more »

Meheryar Tata
Meheryar Tata
3 years ago
Reply to  Meheryar

Aviral, could you explain what “It was based on the Indian double digit bookkeeping system, which foreign software products ignored.” means?

You can mail me directly. Would be happy to continue this conversation offline.

3 years ago

Truely, BG sir efforts are appreciated in all manners..

3 years ago
Reply to  Farheen

We second that!

3 years ago

Nice article on Tally and Bharat ji .   I have respected him to have developed the only, true, universally accepted software product.   Creating a product is a tough task and sustaining it even more difficult, technology changes , the way people work and look at business changes. Unfortunately Tally has not been able to enhance in technology. It is the same 20+ year old framework, they are trying to retro-fit it every now and then but it is still a retro-fit.   They are in a situation!, they have millions of old generation packages out there to support… Read more »


[…] Reminiscent of a self taught son building to solve his father’s accounting problem technically, Khatabook was born like Tally.  […]

3 years ago

Very well written. Meticulous, informative and analytical!! Thanks for writing this and publishing.


[…] on to create a tailored software application to handle his father’s woes.That was the birth of Tally, the earliest of Indian SaaS companies that have now taken over the […]