Volume 12 - April  2006

 

 

Indian IT Industry - New Avenues

 

 

 

 

The hype around India has never been higher. The “India Everywhere” campaign at Davos set the tone for 2006. A great example of collaboration between industry and government, the key message was a cleverly crafted ““India is the fastest growing free market democracy”. The inevitable comparison between India and China continues – today, however, there are many interesting views – the most interesting one being that India is a more a groundup economy whereas China is a top down model, and hence India has an inherent advantage over China. The IT industry in a sense is hugely responsible for fostering an entrepreneurial culture that is fairly unique.

 

With the huge success of Infosys, numerous professionals jumped in to create their own companies, and created a class of first generation professional entrepreneurs. Not all may succeed, not all will grow to become another Infosys, but they have certainly added color and variety to the industry landscape.

 

The industry, comprising over 3000 companies, employs close to 400,000 people and generates over $13 Billion in revenues. In the past, the focus has mostly been on the large, scale players in generic IT services. While the first tier players continue to outperform the rest of the industry, there is now a more healthy mix of mid sized and emerging players.

 

What have been the typical strategies pursued by mid tier and emerging players?

Creating IP or helping someone create IP is one of the most  often encountered strategies.  Though this was not considered to be a forte of Indian companies till recently, the situation has changed swiftly in the recent past. With companies like Subex and Tally leading the way, there are many companies in India that are creating innovative products, both for the local and international markets. One interesting example of a company in this space is Cranes Software- after languishing for over a decade as a reseller of software products, altered its business strategy a few years ago – the company decided to combine its understanding of the product market space (from being a reseller) with the merits of low cost software development from India in choosing this strategy – what Crane now does for a living is to buy out “underperforming” IP assets, bring them to its offshore product development center in Bangalore, refurbish and sometimes even overhaul it completely and then take it back to the market. Bold strategy, but well executed and has paid rich dividends for the company.

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While on products, the niche area of offshore product development or OPD is a fast growing opportunity. Traditionally, most Indian companies have focused on end user companies. Global  ISVs or software product companies have typically located themselves and their R&D efforts in the market- in accordance with the long held belief that you need to be close to the market to build relevant products. Over the last few years, this has changed- the market itself has become more global, hence location close to the market takes a different meaning now. Second, the compelling advantages of locating in India – cost and talent availability have made ISVs, large and medium, open development centers in India (and other emerging IT hubs). In parallel, with IP protection processes becoming more robust and the offshoring industry maturing, ISVs have become more open to outsourcing non-core and core product building activities to third parties. This has resulted in a new breed of services companies that exclusively cater to the ISV market.   Persistent, Aztec and Induslogic are examples of companies with sole focus on offshore product development.

 

Another common strategy is targeting the emerging markets, including India. With large players well entrenched in the traditional markets of Europe and North America, companies have started exploring emerging markets. Tally is a good example of a company that adopted an emerging market strategy. There are many examples of product companies that have created low-cost solutions to target emerging markets. Midas Communications, with the world’s first WLL, is a great example – their solutions have been deployed in India as well as in Brazil and other Latin American countries, Encore, which has developed a low cost mobile computing platform that has been deployed by the Indian Army.

 

Talking of Midas and Encore, the Indian telecom industry, and mobile telecom in particular, is experiencing a boom and the number of mobile users in India has crossed 100 M. Numerous companies have jumped in to provide technology solutions that address the telecom segment. Onmobile, Nazara, Bharti Telesoft and Mauj are companies that have responded to the burgeoning opportunity. At the other end of the spectrum are companies like Jataayu and Tejas that are working overtime to create the next generation communication infrastructure.

 

On the BPO side, the emergence of KPO, or Knowledge Process Outsourcing, is an important trend. Areas with significant potential for KPO include pharmaceuticals, biotechnology, technology, legal services, intellectual property, research and design, and development for automotive and aerospace industries. Early movers in this space include Evaluserve, Market Rx and Genpact. Emerging KPOs include Integreon, Indecomm Global Services and TutorVista.