The start of fiscal 1999-2000 was dominated by the opposition
squabbling over the rights of the caretaker Vajpayee government in making
far-reaching policy decisions. Elections were due in September 1999, but that
did not derail the momentum of Yashwant Sinha, et al., who continued pushing
through initiatives for disinvestment and the insurance bill, among others. The
much awaited IT bill heralding cyber laws and the formation of the Ministry of
Information Technology, had been shelved awaiting a newly elected Parliament. To
bring matters to a flashpoint, the ugly face of war reared its head at Kargil.
Opposition and the media cried themselves hoarse about an intelligence failure,
and questioned if the caretaker government had public sanction to take on the
enemy. From the government’s point of view, the economy was still reeling
under stagflation or recession or whatever the pundits of business health
thought fit to name the scourge. Industrial production and exports were lower
than a paltry 5%. Inflation was non-existent due to weak consumption and demand
levels, and the job market was still inexorably shrinking. Public sector
projects were in an overrun mode and RBI’s approvals for foreign direct
investments were down in the last six months of the fiscal. Money from gulf
expatriates was shrinking, and while the Bombay Stock Exchange (BSE) Sensex
continued a gradual northward migration, business confidence levels hit a new
low. It looked like it was going to be another year of fear, uncertainty and
doubt–another FUD year.
A turn for the better
But then things changed–dramatically–catapulting the country inexorably into
the new knowledge-based economy. The catalyst for the kick-off was victory for
the Vajpayee alliance in the elections and an absolute majority at the Center.
At last, this was what every intelligent business citizen wanted, never minding
it would still be BJP’s motley alliance with minor parties.
A majority ruling party at the Center sent the BSE Sensex on
a faster northward drive–the bull run had started. The Sensex now appeared to
be driven by a completely new crop of stocks–of information, communication and
entertainment companies. The BSE changed the composition of the Sensex, and the
index rose faster.
During 1999, Infosys and Satyam became the first and second
Indian companies, respectively, to list at Nasdaq. This fired the public’s
imagination, and expectations soared. IT became more than respectable–and old
stalwarts like steel, petroleum, capital goods, white goods were not wanted
anymore. Here was the future of the country–this was where India’s global
skills appeared to be. And then supporting this came the new wave of
e-entrepreneurship. These e-entrepreneurs were not rookies, with loads of cash
in pockets and loads of fire in bellies. They were the smartest of the lot, who
chose to walk off the planks of secure but probably redundant organizational
citadels and embrace the frontiers of technologies best suited for
tomorrow–technologies around the internet and ecommerce. Those e-entrpreneuers
included Suresh Rajpal of Hewlett-Packard who set up eCapital, Ashok Soota of
Wipro and Subroto Bagchi of Lucent who set up MindTree Consulting, and Arjun
Malhotra of HCL who launched Techspan, to name a few. For these early movers,
the bastions of power they held were not good enough for tomorrow.
In November 1998, the tether on private ISPs was removed. But
even a year later, only half a dozen national players were competing. While
Satyam Infoway was the next largest player, after VSNL, on the basis of its
early lead, DishnetDSL and BhartiBT were other national players with sizable
shares of the market. But all private ISPs lamented the same woes throughout the
year. Inadequate international bandwidth from VSNL, insufficient dial-up lines,
and lack of proper procedures for setting up private gateways. The MTNL and the
Department of Telecom (DoT) were involved in a confrontation with the Telecom
Regulatory Authority of India (TRAI). The authority is now faced with an
inevitable
dilution. The ouster of Jagmohan as Minister of Communication, paved the way for
the New Telecom Policy, and a delay in the decision to corporatize DoT. But
inspite of these hiccups and perambulations, the number of internet connections
and users kept soaring. It first crossed the four and then the five lakh figure,
and then led us to the next most important phenomenon of the fiscal–the
emergence of dotcoms.
Dotcoms arrive
The imagination of the dotcom community and then the business community went
riot when Rajeev Jain sold off IndiaWorld to Satyam Infoway for Rs 500 crore in
December 1999. While the number of Indian websites had been spiraling upwards
exponentially, to cross the 80,000 figure by the end of the fiscal, here was the
first real evidence of the value of dotcom property. Overnight, dotcom was hot
and deliberations started on the values of Rediff, Indiatimes, IndiaWorld and
other websites with high transit. There was more. Suresh Rajpal’s eCapital was
acquired by Leading Edge for Rs 900 crore in January 2000. Surely, this was the
way to go. Never before had India Inc seen valuations, mergers and acquisitions
of this order and speed around ‘desi’ or home grown technology and property.
Yes, Bangalore-based Armedia was bought out by US-based, $200 million Broadcom
and later in the fiscal Zee Telefilms would buy out Star TV’s stake for Rs
1,300 crore. But eCapital, a web and internet services company only six months
young, had already made history–at least by being mentioned in the Economist.
The rise of the dotcoms heralded the entry of a new breed of venture and angel
investors including eVentures, Acquavit, Gateway Capital, Chrysalis Capital and
others. It also paved the way for the entry of those who work behind the scenes,
pulling off mergers and acquisitions–names that India Inc never thought would
be part of their fabric, including DSP Merill Lynch, Bank of America, JP Morgan
Stanley, Jardine Fleming, ANZ Gridlays, and domestic players like IL&FS and
Kotak Mahindra Capital.
Business confidence never looked as good. Confidence and
optimism drove the BSE Sensex to cross the 5,000 mark–an all time high. So
what if Yashwant Sinha presented a lackluster budget, a budget meant to set the
tone for the economy in the new millenium, but which fell woefully short of
expectations. So what if the combined fiscal deficit of the Center and the
states was taking the country to the verge of bankruptcy–a crisis worse than
the one faced by the Chandrasekhar government in 1990-91. So what if the
Government chose not to divest its white elephants or ‘navratnas’ and
continued to squander thousands of crores of valuations, while raising a few
thousands of crores from tax payers. So what if the government continued to go
slow on opening up the insurance sector and on reducing subsidies. So what if
investments in infrastructure were stagnant and the country continued to reel
under such limitations as primitive transportation and communications systems.
So what if India was continuing to slip as a tourist destination. So what if...
Here was the escape route for India Inc. A place where the
government had no place. A free market situation, driven by market valuations
and dynamics, completely dependent on the dexterity of the new breed of infotech
and knowledge companies. And in this arena, Wipro and Infosys, seesawed for the
prize of being the IT company with the highest market capitalization–Infosys
driven by its Nasdaq pricing and Wipro by its sheer size. And then Gururaj
Deshpande of Sycamore Networks became the wealthiest Indian, with a personal
wealth of $3.7 billion in December 1999, only to be overtaken by Azim Premji of
Wipro in March 2000 with a personal wealth of $37 billion. This personal wealth
brought him into the ranks of the top five wealthiest men in the world.
Propelled by the historic market capitalization of Wipro, at more than Rs
200,000 crore, Wipro came to shoulder height with India Inc giants, Reliance and
Hindustan Lever. The eYear had arrived.
IT, et al.
The eYear was characterized by the emergence of other knowledge-based market
segments. Besides IT, the pharmaceutical segment was also active with the
emergence of a number of patent vending companies, including Nicholas Piramal,
Ranbaxy, Dr Reddy’s Lab, Wockhardt and Sun Pharmaceuticals. While the
convergence of internet and media opened the ground for a completely new breed
of global players, they are yet to arrive on the domestic scene.
Among the major sectors active in IT investments were
banking, insurance, stock exchanges, healthcare, automobiles, telecom and
networking. Both public and private sector players in banking were active in
investments. Among the public sector banks, Indian Bank, United Bank of India,
Bank of Baroda and UCO Bank, were among the leading IT purchasers in fiscal
1999-2000. Among private banks, Citibank, ICICI and HDFC were top IT purchasers.
HDFC entered into a tie-up for ecommerce with National Computer Systems,
Singapore, and expanded its ATM network to include the Amex Interchange.
Nationalized insurance companies had initiated automation of their front offices
in 1998-99, and this year the drive continued into back-end and inter-branch
networking. Leading stock exchanges like the National Stock Exchange (NSE) and
BSE continued expanding their networks. Other stock exchanges like those in
Bangalore and Ahmedabad began computerizing their operations. With the advent of
a large number of multinational car manufacturers in the country, including,
Hyundai, Ford, General Motors, Fiat, Skoda, Daewoo and Toyota, demand for
CAD/CAM services including third-party design outsourcing and ERP support began
looking up.
Among manufacturers, Larsen & Toubro was a leading
implementer of mySAP.com, the thin client version of SAP’s monolithic ERP
product, R/3. Other manufacturers active in initiating implementation of ERP
were ONGC, BPCL and HPCL, mostly across the very small aperture terminal (VSAT)
network. In networking, expansion of telecom networks, implementation of ISP
infrastructure and corporate connectivity were the main drivers. MTNL remained a
leading purchaser of basic and value-added telecom, networking and ISP
equipment, as it sought to establish itself as a cellular and internet service
provider. More excitement in networking arose from the new telecom policy
stating that competition would be allowed in long-distance telephony.
Infrastructure providers began to look at what they had and what they could do.
RITES, BPL, IRCON, Reliance, Power Grid Corp, Bharti Enterprises, GAIL and Enron
began looking at utilizing their infrastructures to provide connectivity across
the country–worth a whopping Rs 75,000 crore over the next five years, across
40 cities.
More fascinating affairs
The eYear witnessed a myriad of other interesting developments. Attempts were
made by the Manufacturers’ Association of Information Technology (MAIT) to
revive the hardware export manufacturing scheme with the government, under the
guise of the S-Bit scheme. But it received few takers. US-based Deluxe Corp
bought out HCL’s stake in HCL Deluxe, the e-banking services export company
and was renamed iDLX Corp. Apps on tap or software on hire, became a domestic
reality with the release of the thin client version of MakeESS ERP by Eastern
Software Systems. Pentafour Software and Exports was ranked third by Robi
Roncarelli in a global list of animation producers, after Lucas Digital and
Disney Studios. Third-party call centers and helpdesks became commonplace for
domestic companies, with Hindustan Lever, BPL, Godrej Soaps, Wipro, DoT, ICICI,
UP Police and Global Telesystems becoming early trendsetters. The Y2K bug failed
to bite globally as also within the country–perhaps because of exaggeration
over the possible consequences and extra zealous efforts by MIS professionals to
eradicate the vexed numerals. Reliance bought a 50% share in Bangalore-based
Peutronics, of Tally Solutions fame, and vowed to turn it into a software export
house in 2000. Garment manufacturer, SKumars, suddenly decided to go hi-tech and
invited all its channel partners to turn themselves into e-partners overnight.
It also proposed an extensive VSAT network connecting hundreds of outlets.
But the biggest surprise of the eYear was the reverse brain
drain. IIT grads who had fled the country a decade ago, suddenly found reason to
pride in their country, and returned. A high percentage of dotcom start-ups in
Silicon Valley were headed by IITians. Hence, IITs in the country could now be
taken as dotcom nurseries. What a haven for venture and angel investors!
Parallelly, IITs, which had suddenly found themselves high and dry without
funds, following a slowdown in government disbursements, found support from
their ‘phoren’ alumni. The Indus Entrepreneuers (TiE) led by Kanwal Rekhi
was one such support fund. Pledging $1 billion over the next six years for the
IITs, the fund is also steered by Nandan Nilekani and NR Narayanamurthy of
Infosys, KB Chandrasekhar of Exodus, Suhas Patel of Cirrus Logic and Vinod
Khosla of Kleiner Perkins. Other efforts at creating institutions includes the
Society for Innovation and Development at Indian Institute of Science, which
raised Rs 15 crore during the year. Also, the Indian School of Business to be
started in 2001 at Hyderabad by a group of Indian expatriate management gurus,
including CK Prahalad.
The eYear is over and the e2Year has started. The future of
India Inc has changed irrevocably. Competitive business will now not only have
to embrace infotech but also e-infotech. And so what if the country’s
population crossed the billion mark. At least we got off the starting block!