Nishan:
No bull’s eye here… |
Creating a database of a billion people and keeping it up and running does
not involve rocket fuel or nuclear science, but it sure requires political will
and action. But inaction has been the only word that describes what the home
ministry did on this front in 2001. Incidentally, this was also the year when
terrorists managed to breach the security and launch an attack on Parliament
House itself. And while the country debated on hi-tech security gizmos, the
lowest form of citizen identification–a physical ID card with a citizen number
that would have helped in authenticating the identity of any Indian–got no
closer to becoming a reality. A feasibility report submitted by Tata Consultancy
Services (TCS) to the Union home ministry in March 2000 advised that the
government enact legislation through a Bill in Parliament towards creating a
national database of all citizens. A second step was to create a national
registration authority to implement and sustain the system. The report suggested
a five-layer network for a National Identity System Home Affairs Network (Nishan),
to be further sub-divided on the basis of functionality. According to the
proposal, 15,000 franchisees would form the base of this pyramid network. Data
captured by these franchisees would be transferred to 462 distribution centers
located in each district having good optic fiber connectivity. Data from these
distribution nodes would be forwarded to 43 access nodes, all of which would be
located at major urban centers on the DoT’s STM rings. Finally, data from the
backbone layer would be transferred to a central database for the purpose of
verification, PIN and card issuance and storage. The result–zilch. The project
gathered dust for well over a year before being shelved unceremoniously. |
Death of an icon |
One of India’s best-known software lobbyists, Dewang
Mehta, who was the
head of the National Association of Software and Service Companies (Nasscom)
died of heart attack on April 12 in a Sydney hotel. He was 38. Dewang was part
of a high-profile delegation of experts from the field of information technology
led by Pramod Mahajan, minister of information technology and
telecommunications, to Australia. He was slated to catch the morning flight for
home but was found dead by hotel staff when they went to look for him in his
room after being told that he had missed the flight. A qualified chartered
accountant and cost and management accountant, Dewang joined Nasscom in 1991 and
went on to lead the organization to change the face of the Indian IT industry.
Under his guidance, Nasscom hired global management audit firm McKinsey & Co
to draw out a roadmap for the Indian software and services sector for the next
decade. In May 1998, Dewang was appointed member and spokesman of the
high-powered National IT Task Force set up by the Prime Minister to draft the
National Informatics Policy. In 1997, Dewang was awarded the ‘IT Man of the
Year’ Award by Dataquest. He was also awarded the ‘Entrepreneur of the Year
2000’ award by Ernst & Young and selected as one of the 100 Global Leaders
of Tomorrow by the Geneva-based World Economic Forum in October 2000.
|
Slowdown blues |
The party is long over, and good news seems distant. In fact, it seems that
heads are still rolling thanks to continued pressure from the slowdown. Even
towards its fag end, Year 2001 showed no signs of respite from the hangover…the
slowdown was the common theme for Y2K1. For software exporters, over-dependence
on the US market took a heavy toll. According to DQ estimates for 2000-01, 63%
of overall software exports came from services undertaken for US companies. And
this story is the same for all software exporters in the country–even today, a
major chunk of their business comes from the US market. With the US slowdown–worsened
further by the attacks on the World Trade Center and the Pentagon–showing
little signs of immediate turnaround, happy days are far away. One contrary view
running through market circles is that Indian software companies will benefit in
terms of the US slowdown, thanks to increased outsourcing by US companies. Till
the end of 2001, though, that didn’t really happen. The latter part of the
year, therefore, was spent in scouring the horizons for new markets, with a view
to expand the "egg" base. The frontrunners in the new market segment
are the European and APAC markets. If tapped right, Indian software companies
can sing away their slowdown blues in Y2K2.
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Dot-coms and last gasps... |
VCs zipped up their wallets and investors began losing faith in fledging
investments… As dot-com dreams got shattered and reality set in, the euphoria
was taken over by a struggle to survive. Though it is difficult to put an exact
number to the dot-coms that crashed, worldwide estimates indicate that dot-com
layoffs in the second half of 2000 increased by 600% in comparison to the first
half. Dot-coms, a.k.a. ‘the shortest route to success’, were replaced by an
urgency to sustain. It was time to go back to business basics. No room for
short-cuts, please. Plush hi-tech offices, slick managers paid astronomical
salaries, and not to mention ESOPs… everything seemed in place. But no one was
quite sure where the revenues would flow in from. So, the inadvertent, the
inevitable had to happen. After all, how long could you endlessly spend
investors’ funds over extravagant ad campaigns and those so-called creative
pursuits? Money that was spent less on value creation and more on keeping pace
with the hype had to run out some day. As most dot-coms realized the
significance of profitability to sustain their businesses, their focus began
shifting towards a ‘strong revenue model.’ However, there were some sites
that managed to buck the slowdown trend and last out the storm, at least for the
moment. Among them were rediff.com, which utlized its first-mover advantage to
the full, as also leveraged on branding to attract funds. Another was
indiamart.com, which, pegging its strategy on service partnerships, prudent
financial management and revenue strategy, stayed away from extensive
advertising and media hype. It is still around and going strong. A third was
apnaloan.com, which focussed on a niche service with a clear advantage on offer.
The prior experience of its promoters in financial services helped create an
offline presence that supplemented business well and ensured longevity. And then
we have naukri.com, which also used its first-mover advantage to the full, apart
from a brand image with mass appeal and sold its large database of Indian jobs
well. And who can forget the tehelka.com episodes–match-fixing and murky
defence deals–that brought in funds for Tarun Tejpal’s company even as other
sites found little in the way of VC funding. Finally, clickforsteel.com and
bazee.com, the first backed by three steel majors–Essar, Mukand and Uttam
Steel–and the other capitalizing on strong management that managed to attract
funds through the year.
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The ISP shakeout |
Accustomed to growing at a rate of more than 200% since their introduction in
1995, Internet services have had to witness a major setback this year. During
the April—June (AMJ) quarter, the Internet subscriber base grew by only about
400,000 in spite of free accounts and discounts. This means the growth reduced
by less than half compared to the previous year. Although the overall Internet
subscriber base has crossed the 3-million mark, the declining health of
operators and the slackening subscriber growth has dampened the spirits. VSNL no
longer remains the largest ISP in the country. Satyam Infoway and Caltiger
romped home with the honors in the paid and free ISP categories respectively. As
on 30 June 2001, Satyam Infoway had an enviable subscriber base of 500,894 while
Caltiger had an even bigger subscriber base of 682,565. VSNL, the largest ISP
till 31 March 2001, saw a decline in subscriber base, from 630,970 then to
485,730 by June-end, thus getting relegated to the third spot. With falling
bandwidth prices and diminishing margins from dial-ups, ISPs have begun looking
at value-added services as alternate sources of revenues. This includes services
such as VPN, Web hosting, Web designing, ASP, and network integration and
management.
|
Stock markets |
It might have been a topsy-turvy year for most of us, but for the stock
market, this is a year that would best be forgotten in its entirety, and never
mind the late-December rush. Through the year, there’s been one setback after
another, leaving scrips frothing at the mouth and pulling them back just when
they appeared to be on the verge of pulling back. If it was Ketan Parekh and his
chosen stocks that led the slide in the initial period of the year, taking down
UTI and killing its US 64 scheme once again, it was the worldwide tech-led
slowdown made the going horrible for IT scrips, once the market darlings. And
when that showed some signs of relenting, we had the 9.11 shocker in New York,
which sent the world and the stock market, the barometer of international
economies and business, into a tailspin. And when that showed some signs of
pulling through, we had the US demanding Osama Bin Laden’s head, and taking
punitive military action against an uncooperative Taliban. And when that showed
some signs of rolling over, we have had the December 13 attack on the Indian
Parliament and the subsequent souring of relationships between India and
Pakistan. And the more the talk of war gathers heat, the more markets are losing
steam… But the one saving grace amid all the gloom–things are beginning to
look up. Importantly, business, stricken by sagging sentiment for long, seems to
have finally decided that enough’s enough, and is moving ahead regardless of
extraneous forces. Amen.
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The media’s bleeding too… |
While the slowdown has been bad for the IT industry, it has been dramatic for
the IT publishing segment. When the IT industry was going boom in Y2K, the party
played host to a plethora of new IT publications hitting the stands–Computer
Gaming World, Smart Computing and the like. As the slowdown set in, cost-cutting
and austerity measures adopted by vendors set the problem ball rolling for the
IT media houses. The first one to go in early 2001 was Media TransAsia Group’s
IT department, taking Computer World, Communications World and PC World out of
circulation. The stage was set for others to follow, and by the end of the year,
a total of nine IT magazines were sapped of life. These included Jasubhai
Digital Media publications like Chip (later re-launched as Digit), Tele.com and
Computer Gaming World. Also, the much-awaited Information Week was shelved
before it was launched. And finally, Living Media’s Computer Today decreased
frequency from fortnightly to monthly. The same scenario was witnessed by
various IT portals and the players in this segment, who had been calling the
shots barely a year back players– IT Space, IT Nation, Net Pilgrim–cut short
their IT vision. The only IT that has managed to keep all its publications
intact is Cyber Media, the publishers of Dataquest. Even CMIL, though, has had
to tighten belts and rues the loss of the competition that has goaded it to
newer heights…
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IT
training: Feeling the heat |
The
slowdown has made life dull life for IT training institutes. The impact is
evident from the sharp drop in the number of inquires and registrations.
Obviously, when the IT sector as an employment destination takes a beating,
training facilities for those same jobs would find few takers. And that’s
ensured that in May and September–usually peak season for IT training
institutes–the half-yearly figures of most of the players show flat growth.
The training business took its toll on the bottomline of the top player–NIIT–which
closed its books with total training revenues of Rs 509 crore, a drop of 18.6%
from the previous year. Aptech’s training revenues too suffered a 39% drop in
the April-June quarter, compared to the JFM period, while SSI saw a fall in Q1
revenues. And while the giants worked hard to notch up numbers, 2001 saw smaller
players downing shutters.
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VCs target late-stage funding |
The perception of VCs has changed, sure, but their funding capability remains
undiminished. The ability to execute and deliver in the longer run is the key
factor that venture capitalists are looking at now. From being portrayed as
evangelists to being touted as hawks now, the perception of VCs has undergone a
sea-change through the year gone by. The dot-com bust, coupled with the
slowdown, led to many a start-up struggle for its next round of funding,
especially as revenue streams dried up and VCs started demanding proof of P2P–path
to profitability. Gone are the days when announcements about a dozen new
start-ups were being funded every week were commonplace. The mood has been
replaced by one of caution, but the availability of funds is strong as ever. VCs
still have bulging pockets but the catchword now is viability. Funding saw a
definite shift from first round to later-stage funding. While VCs earlier sought
the quick exit option, cashing in on the hype over unreasonable valuation,
market conditions have forced a change of thinking. With the stock market down,
the quick exit option has vanished, and so have non-serious players. Venture
capitalists have a new middle-name now–‘long term players’. And the reason
for that is that safety’s more important now that quick returns.
|
Virus attacks on the rise |
2001 was a year that system administrators will never forget. Viruses, worms
and insects (!) of every caste and creed played their nasty games with computers
if every kind, size and nationality. Whether it be blamed on shoddy coding, or
whether on basic unpreparedness, or on simple ‘taken by surprise’, 2001 was
the Year of the Worm. Nimda, Code Red, Badtrans, Anna Kournikova, the list was
long and endless, alongside the list of millions of infected systems. Most of
the year’s early worms were mail-based, exploiting settings in Microsoft’s
Outlook e-mail program, which made it the preferred propagation tool for virus
writers worldwide. Later though, most of the new worms turned to the Web, taking
advantage of software security breaches to break into Web servers and launch
attacks. Firewalls and catchwords were little protection from them, and across
the world, billions were lost through the year in damaged/destroyed data,
projects delays and the like. On the other side, increased security measures and
patches saw many more billions being spent. Microsoft software was at
centerstage when the bugs struck, with Nimda and Code Red attacking the megalith’s
IIS Web server. As the year wound to a close, a future in which worms would
spread through multiple methods–such as e-mail, the Web and chat applications–was
beginning to come into sharp focus, much as virus researchers had said it would.
If predictions for such so-called "blended threats" came true in 2001,
many were left wondering whether 2002 would see the advent of another prediction–of
newer worms, ones that can update themselves automatically to avoid detection by
anti-virus software. And that would be a tall order to meet for most of the
bug-busters.
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Nasscom’s new face |
All that the dapper and unassuming Kiran Karnik wanted to do when he was
young was to grow up and become an engine driver. He past two decades tell us,
of course, that he has already achieved far more–guiding DD and Discovery to
newer heights, working with the Atomic Energy Commission, and creating a special
place for himself in the world of communications. The year 2001 saw Karnik face
perhaps his toughest challenge yet–that of filling up the slot vacated by
Dewang Mehta, the man synonymous with Indian IT. On September 15, Karnik took
over as Nasscom president, and his immediate charter is to maintain the
organization’s position as the software and services segment’s guiding force
and soothsayer. And much as the doubters have had a field day, Karnik has let
his actions do all the talking. Nasscom successfully organized the Asocio meet
in December, with IT and telecom minister Pramod Mahajan walking away with the
honors–the Asocio IT Award for 2001. Next in line for Karnik is a dream to
take IT to the masses–he wants Nasscom to lead the way in the emergence of
NGOs as a strong force in propagating the use of information technology. As he
says, "What is IT but what it can do to improve the common man’s
life?" How true…
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