Dramatic Growth; All Videshi?

soft.jpg (65910 bytes)The packaged
software market grew by a dra-matic 95 percent in the survey fiscal. The performance was
all the more impressive in the face of the poor growth rates recorded in domestic hardware
sector. But on the flip side, the dream of homegrown Indian packages dominating the Indian
marketplace remains but a dream.

NT sold in more numbers than it did the previous year.
Microsoft launched another marketing blitzkrieg for its office suite, and that too
continued to hog marketshare in the office suites segment. Novell NetWare lost marketshare
but still did well enough to keep the Novell flag flying. ERP was the other ‘big’ word and
SAP was the company that hogged much of the marketing mindshare. Baan too did not do
badly, notching up as one company executive said, “its first serious year of ERP
marketing.” Oracle did well enough for the company to rank India as the most
happening market, in the next financial year, in the Asian/South Asian region. Elsewhere,
it was Notes in groupware and McAfee in anti-virus. Packages all making good in a year
that isn’t the one that the industry would remember with too many fond memories.

Top 20 Packaged Software Companies

Rs Crore

NIIT Ltd143.0
Oracle Software94.5
Wipro Ltd92.7
Sonata Software Ltd48.4
Datapro Group43.0
Tata Consultancy Services39.7
Tata Infotech Ltd36.3
Godrej Pacific Technology Ltd32.1
Binary Semantics Ltd28.7
Structural Dynamics Research
Aptech Ltd24.0
Rolta India Ltd24.0
Pentafour Communication Ltd19.1
Hindustan Office Products Ltd18.7
Siemens Information Systems Ltd17.5
Tata IBM Ltd17.0
Peutronics Pvt. Ltd14.7
Tata Elxsi (India) Ltd14.2
Macmet India Ltd14.1

The Number Cruncher
Number-wise, this is the one segment that really stole the show. Growth rates for software
packages hovered over the 95 percent as the domestic industry lapped up software packages
despite the political uncertainty and, more importantly, the falling rupee. What is
interesting is that this growth happened in a year when there were no significant product
releases or even version updates from the vendors. This must be good news for the vendors
as they have all lined up a slew of releases for the current year. Starting with Windows
98, major upgrades for NT and SQL Server are expected from the Microsoft stable, while
Oracle too is looking to come out with an upgrade on its products. Overall, systems
software did business worth Rs 705.63 crore during the fiscal 1997-98. This is 105 percent
more than the Rs 342.81 crore worth of business done in the previous year. Application
software too recorded an impressive growth of around 90 percent, growing to Rs 1,250 crore
for the fiscal under debate from Rs 657.95 crore in the previous year.

The MNCs again dominated the packaged software showcase
with previous year’s market leader Microsoft recording a 60 percent increase in business
to end the year with Rs 320 crore worth of business. The big news for Microsoft was
undoubtedly the increased acceptance of NT in the enterprise segment. Its brightest day
came when Mumbai-based Mahindra & Mahindra opted for a SAP/NT installation which
according to the implementation partners is the largest SAP on NT installation in the

The story of the year must, however, be ERP. The
three-letter word was the most heard in corporate computing circle for much of the year.
SAP picked up the major mindshare, with Baan and Oracle following closely behind. With
corporate India waking up to the performance edge provided by ERP solutions, financial
1997-98 was the year when the potential of the market translated to reality. The ERP
segment also witnessed some activity from Indian software companies with Ramco Marshal
faring well against the MNC onslaught. But the most interesting product in this category
was an entry-level ERP package developed by Delhi-based ESS Pvt. Ltd. Costing around Rs 6
lakh, it is being positioned as an ERP solution for the small and medium enterprises
segment. Though the company has sold only 11 of the packages, what is interesting is the
positioning and the marketing strategy that could see ERP actually become a product that
is used across all industry segments.

In fact, the SME segment was the target for other software
companies too, with both Microsoft and Novell/Oracle offering special bundle offers for
this segment. The tie-up between Oracle and Novell to bundle five seats of Oracle
alongwith NetWare for small businesses was clearly aimed at ensuring that NT does not run
away with this segment. ERP apart, the other story of the year was groupware. Lotus Notes
continued to dominate this segment as corporate India discovered the benefits of messaging
and collaborative computing. MS Exchange and Novell GroupWise also sold, but in small
quantities. The preference for Notes comes from the product’s security features which
users say is not matched by competing products. This fact seemed to be vindicated when the
Central Bureau of Investigation (CBI) too chose Notes for implementation across the
country. The CBI order was Lotus all the way, with even SmartSuite piggybacking on Notes.
Modi Xerox bought Exchange, due to the worldwide standardization of Xerox on the platform.
GroupWise did some business, with Larsen & Toubro being the largest order of the year.

In office suites, however, Microsoft returned the favor to
arch rival Lotus. Its product MS Office is estimated to have a phenomenal 85 percent of
the Indian market compared to Lotus SmartSuite which has around 12 percent share. The rest
is with PerfectOffice.

Domestic Gloom
For domestic software package developers, the year gone by was a repeat of the previous
years. No new package of any significance and only one major product update-that of EX
(renamed Tata EX NexGen). The rest of the story is as dismal as before. Despite the huge
growth in demand for packaged software, Indian companies seem completely unable to break
the trend of being bit-part players in this market. What is unfortunate is that Indian
software companies have not been able to take advantage of the boom in the packaged
software market that is quite clearly happening now. The only product categories where
Indian companies still seem to have a presence are in traditional strongholds like
financial accounting and anti-virus software. Some companies did make an effort in the ERP
segment, but with prices of the majors coming down, survival rate of Indian ERP packages
is down drastically. The one area that did witness a lot of activity for domestic
companies was language computing. With the Government seriously pushing ahead with its PC
penetration plans this segment can only get hotter. Last year the hot news was the
development of the Susha font-set by Konkan Railway employee Harsh Kumar. By giving it
free, Kumar paved the way for product development at reasonable costs. Pune-based C-DAC
too cut down the prices of its Gist-based language packages and saw business picking up.
It plans to introduce a number of language packages this year. And also open up the source
code for the products to independent developers.

Hope In Exports
Another ray of hope for Indian software companies came in the form of multimedia titles
export. Though this segment is still too small to be treated as anything serious,
companies like NIIT and Pentafour have shown that it is possible to make this a lucrative
business. CBTs are hot in the international marketplace and multimedia companies
struggling to find a domestic market for their products will do well to tap into this
segment. NIIT did business worth Rs 70.90 crore from this segment alone. And similarly, a
major chunk of Pentafour’s exports came from the export of CBTs and multimedia titles.
Growth in this segment will be further fuelled by the Internet explosion. Both NIIT and
Aptech expect a major chunk of their CBT orders to be sourced through the Internet.

(Rs crore)(%)(Rs crore)(%)
Systems Software705.63105.843.2530.52
Application Software1250.4190.05295.25245.73

This is the one area where software companies wanting to
make a mark with packages can concentrate on. As far as the domestic market is concerned,
the heady growth of the current year will continue into the next year. With corporates
going for the high-value products like ERP, the going should be good for packages in the
domestic market.

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