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India's software boomers face growing-up pains

BOMBAY: India's booming software industry has enough momentum to steam ahead, but must cope with challenges linked to size, global reach and sustainability as it grows, experts at an industry seminar said last week.

Experts at the annual conference of the National Association of Software and Service Companies said the sector, which has seen revenues grow at an average of 50 percent annually over the past few years, needed to focus more on building brands, seeking patents and managing restless armies of skilled workers.

"Clearly, the next paradigm is IPRs (intellectual property rights)," said Rajesh Hukku, director at Citicorp Information Technology Industries Ltd (CITIL), a Bangalore-based company whose parent is Citigroup.

India's Infosys Technologies Ltd and Satyam Infoway listed on the U.S.'s technology-laced Nasdaq last year and triggered a trend of firms wanting to list abroad, build war chests for acquisitions and seek global scale.

"In the product business you have to create a new paradigm. You need to understand what is the market, what is currently available in the market and most importantly, what is the bottleneck in the market," Hukku said.

Quality control was also critical, he added.

The good news was that many companies were already pouring energy and resources into product development, he said.

Indian firms have in the past decade offered cost-effective services, like Year 2000 (Y2K) solutions, for global clients, and have used the cash generated and contacts to seek new business.

India's software exports, estimated to reach $3.9 billion in the fiscal year to March 2000, are expected to grow to $6.32 billion in the next year.

Industry and government have set a target of $50 billion by the year 2007/8 with emerging areas of related services, like back office functions, adding to revenue from software.

However, brand premiums are considered critical for increased profit margins and strategic control of big businesses.

Amitabh Kumar, operations director at telecoms firm Videsh Sanchar Nigam Ltd, said aspirant Internet service providers (ISPs) needed to build volumes of user base.

"You need to have a quick ramp-up to get the ad revenue in place....you cannot grow slowly in the ISP business," he said.

Internet is considered a big business opportunity for Indian companies because of their technological skills, but experts cautioned that a global demand for services would not necessarily imply domestic demand for Internet portals and consumer sales.

"Dotcom is a media business and not a software services business or an engineering business in which India has very good expertise," said Jason Pontin, editor of Red Herring, a Silicon Valley magazine that specialises in the technology business.

India's Internet user base, estimated at between 600,000 and 700,000, is said to be doubling every year, but the volumes are not considered significant for aggressive media growth.

But Indian portal companies say an estimated 20 million overseas Indians are an attractive e-commerce market.

Noshir Kaka, senior engagement manager at consultants McKinsey and Company, told the seminar Indian firms could make significant gains as application service providers (ASPs).

ASPs, who deploy and manage frequently changing software for clients, are set to enjoy a global demand worth tens of billions of dollars annually, as cheap and efficient networking technologies enable the use and management of software operated from remote locations.-Reuters