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Indian ERP Comes Of Age 

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DQI Bureau
New Update

In the early eighties, the Government imposed high duties on both hardware and software. The thought was that IT is meant for the elite and thus can yield revenues for the Government. It took a few years before the Government realized that IT was actually a competitive tool which would allow Indian industry to go global and compete with the best. By putting high barriers against this competitive tool, the Government was actually affecting the growth of the Industry.

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In the eighties again, Indian programmers established a name for themselves in the international market. A large number of companies began to mushroom with the sole aim of sending Indian software professionals to the US. The Government again, was slow to wake up to this huge opportunity. However, Indian programmers were slowly but steadily able to make a name for themselves in the international market. Thus, in the late eighties the Government decided to reduce duties on both hardware and software. This opened the floodgates for the domestic IT market to develop. Most of the hardware and software MNCs started to move to India, even though hardware manufacturing was not yet feasible. At the same time, software exports started to grow. This created a huge pool of Indian software professionals in India and abroad. In addition to the software exports market the domestic software market also started to develop. All the campaigns started by the foreign companies to educate the Indian market about the benefits of IT started to pay off. In the early nineties the trend was to get customized software developed. But slowly and surely, the users started to realize that customized software is an expensive proposition and leads to tremendous amounts of cost and time overruns.

In the developed countries the trend had already started to move from customized software to packaged software. This trend started to take hold in India as well. By mid nineties a lot of companies started to shift their emphasis from bodyshopping to try and build software that can be replicated.

Thus, the trend of trying to build packaged software solutions started to take root and India was well on its way up the value chain in terms of software exports. Apart from creating a domestic market, moving into software package would also mean more credibility for the software companies planning to offer all kinds of software services in the US and elsewhere in the world. In the late nineties a strong Indian package market has developed which in turn will lead to a huge push for package software exports in the new millennium.

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As an example we could perhaps look at what has happened in the ERP market in the last few years. In the beginning–in the early nineties, large ERP software packages were available in India for a few crore rupees. To sell these expensive products in a country not used to spending big money on something as intangible as ‘software’–and perhaps not as worthy of shelling out so much money as a mainframe!–the vendors had to do a lot of hardsell. Lo and behold!, ERP became one of the biggest buzzwords ever in the IT industry. Especially to the large corporates, who had been struggling for long to build mechanisms for competitive processes in order to maximize operational efficiency and expand globally, ERP seemed like a panacea. In as little as a couple of years, most large companies with the wherewithal caught on to one big ERP package or the other. ERP had arrived in India.

However, over the next few years, a number of mid-size ERP companies also established their presence in the Indian market. By mid nineties it was clear that only a limited number of large companies could afford an ERP solution developed abroad. At that time, a lot of Indian software companies started developing ERP packages targeted at the Indian market. These mid-size players had realized that the market for large ERP packages would soon become saturated and SMEs too would look around for an affordable package they could buy and implement. And perhaps compete with the biggies on operational efficiencies. In fact, many would simply buy ‘mini-ERPs’ to be able to dovetail them with the big packages of large vendors and companies. And as SME became a boom-word, all these mid-size ERP companies began competing against each other in the Indian market, thereby driving the price of the ERP software down to a great extent. Several ERP software solutions soon became available for just a few lakh rupees. With the advent of these Indian packages the price of imported ERP software also started to come down. With so many companies offering ERP solutions, the market started to expand, as more and more users felt the competitive need to deploy an ERP solution. Thus, the prospect-base for ERP software–which was only a few hundred companies in early nineties–became a few thousand companies. Both vendors and users have benefited from the race for competitiveness and efficiency.

But the ERP boom is far from over. There’s a huge market out there, still waiting to be tapped. Sure, the period of hype is over, but the good thing that has happened is that ERP is now considered a must-have among most Indian companies–big, large or small. And the next big thing for the ERP users is the applications rental model. Today, in keeping with the international trends, Indian companies can rent ERP software over the internet for only a few thousand rupees. This has been made possible through the concept of Application Service Providers and its rapidly growing acceptance by users at all levels. Not only can users get all the benefits of an ERP solution at

tremendously low costs, they can also go live in very short time frames, as they do not have to make any capital investments. For India this will ensure that the

potential market size of ERP users continues to grow at a phenomenal rate. All Indian companies who have developed packaged ERP software can look at the international market once they have established themselves in the domestic market. Therefore, an open domestic

market without shackles will enable Indian packaged software companies to come of age.

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