Forecast 2000

Amid the prophecies of

turn-of-the-century disasters, DATAQUEST continues to exhibit that never-say-die optimism.

The prognosis: Business will be more than usual for the IT industry in the next fiscal.

Here's a look into the crystal ball.

Nostradamus said the world would end

in July 1999, it did not. Economists predicted that the Indian economy would nosedive in

1998-99, it did not. MAIT said we had sold One million PCs in 1998-99, we did not. So what

is really the sanctity of any prediction or research? On what basis does one say something

will happen, or that something will not? After all is said and done, numbers tell only

half a story. The other half comes from the straws in the wind. Straws, which indicate

which way the wind is blowing. The numbers are then totted up, gut feels are factored in

and what we are left with are, to use a very clinical term, forecasts. Gut feels and

straws do not get equity from the populace, but the wise know that they are as important

as the numbers are, except that they must clearly transcend the distance between bias and

subjectivity-a distance which must be bridged to withstand the crucible for market

credibility.

Now, where does that leave us?

Crun-ched between numbers and ranks, crushed by the sheer weight of PATs and ROCEs and

trying to figure out the gap between intranet and internet! On the one hand, when the DQ

Top 20 Survey took place, there were numbers galore, performances to analyze, ranks to be

accorded and the industry totals to be factored in. On the other hand, our discussions

with the industry players also revealed the subjective, the gut feel part of the story.

When the totting up took place, the straws in the wind also revealed some gleanings. In

that sense, this is but an amalgam of the Top 20 Survey in its entirety, taking the past,

factoring in the present, to look into the future.

Just one last thought that came to

our mind (which we are sure is on your mind now): Have we always been absolutely correct?

Have all our predictions come true all the time? The answer is No. But then, neither have

Nostradamus's.

Well will make a second attempt

this year

Not exactly a forecast. Fighting for

the #1 slot worldwide, it would be highly incongruous if the Indian PC market does not get

to see 'direct from Dell.' The pressure on Dell is that if it has to sustain the growth

rates that it has set for itself in India, then there is very little choice the company

has. The burgeoning Indian PC market, which will finally cross 'the one million mark' in

the current year, will be too large to ignore. Questions that beg answers are: Will Dell

go direct in India too? How will it lick the infrastructure issue? Where will Dell pitch

itself, in the MNC brand segment or in the VFM segment? Will it partner with locals here

or will it go alone? Having conquered the Dragon, will it ride the Tiger, by its tail?

Will the Apple season bloom?

Unlikely. Apple and Mac have lost

too much blood for too long. Despite iMac's debut last year and aggressive pricing, the

end result was not very rosy. If anything, Apple's market share is likely to dip further

as its unit shipments will grow slower than the overall PC industry. True, its global

fortunes are swinging, but the same replicating itself in India is a fantasy that even its

newly appointed high-profile chief, Naren Ayyar, may not like to have. The mandate for

Apple in Y2K: stop the bloodletting, retain old faithfuls like publishing and end up with

a black line. Not very ambitious, but realistic.

The iterations of internet

So what is the big crystal ball

gazing here? Sure, internet will boom, as will VSNL. The only issue is that with 400MB of

capacity by year-end, VSNL will be the major service provider as well as infrastructure

provider. Not that ISPs will keep silent. There will be a proliferation of ISPs in all

shapes and sizes and the big ones a la Satyam, will even set up their own gateways, to

escape the VSNL clutches. However, VSNL's lead is likely to increase, what with the

company going for major expansion plans and its subsidiary, VSSL, getting its act in place

shortly. Internet costs will come down sharply, but with an eye on the bottomline, all

ISPs are likely to give preferential treatment to corporate customers. The latter will

also be the cynosure of cable modem makers for 'internetizing the enterprise.' The

much-hyped Power Grid and Railways carrying internet traffic may not be realized in the

current fiscal.

Channels will become the biggest

marketing differentiator

With cost lines pegged along some

perceived benefit chains, channels will make or mar a brand. The possible exception is

probably going to be Dell. Companies like GPTL, ERIL and Redington will grow dramatically,

with GPTL crossing the Rs1,000-crore mark! Channels will start impacting the software

business, too, as Microsoft, with very strong affinity to channels, will prosper. If

anything, ceteris paribus, channels may actually have a calming effect on margins which

have been heading Southward for the past two years. Most of the pure distribution

companies will need to up their investments in systems to push their costs downward. No

major new entrant is expected, as these three companies will neatly carve up the country

amongst themselves. So much so, that even some of the national vendors will have the need

to supplement their channel marketing efforts with pure distribution companies. Value

chains will go up. Much more sophistication will come into the channels as the basic

structure of the channels and the dynamics within the channels in India.

From two to three tires, oops,

tiers

The year 1998-99 has shown clear

evidence of corpo-rates and the government realizing the need for IT applications to

enable business productivity. As the deployment of applications continues into 1999-00,

supported by resurgence in business activity, systems architectures will exhibit

increasing maturity. The medium and large enterprises will move from two-tier client

server to three-tier client server architectures. Those with existing three-tier client

architectures would be deploying applications across the web and web-enabling their

existing applications. This will also tie in with the enterprises' dream of finally

tapping the web for commerce and not just for kitsch.

Low on cost, high on

acceptance-AS/400

The IBM AS/400 server will continue

to be a strong competitor through its lower cost of ownership against Unix competitors. As

deployment of applications like ERP, data warehousing and messaging continues across the

Indian enterprises, this requirement will become increasingly important and apparent,

especially in medium-size organizations. This is also the year when IBM's strategy of

demarcating the market for AS/400 might just bear fruit. Peddling the ecommerce route, IBM

and AS/400 might just surge ahead in the corporate web-enablement space.

Swear by SAP

SAP will continue to be the dominant

ERP player in the domestic market. The product continues to enjoy unprecedented top of

mind recall, acceptance and demand in spite of its cumbersome and prolonged

implementation, high cost and the somewhat exclusive approach taken by the vendor. Bulk of

SAP's customers will be the large enterprises, while at the lower end, Oracle will set a

pace which might become a tad tough for others to emulate. With Oracle Applications

certifications increasing at a faster pace than Baan, the penetration of Oracle

Manufacturing and Financial Applications may soon exceed Baan and QAD in terms of user

licenses. Oracle is likely to give QAD and Baan a run for their money for the second

position. At the lower end for the typical SME segment, few of the above will find

acceptance. Holding a sway on the market at the low end will be companies such as Eastern

Software Systems and Radix, which enter at a much lower cost and are faster to implement.

In fact, pressure on the middle-tier vendors such as Baan and QAD will also be from these

vendors.

Web, web and webs in the

enterprise

After all the above predictions,

this is only to be expected. The top technologies for the Indian enterprises would be web

application development, mail and web server management, extended ERP across the web,

e-business and e-trading applications, OLAP, data warehousing and mining and other related

technologies. While the prognosis does appear good presently, exactly how many get real

benefits and how many get carried away by the rhetoric will be the acid test for the

industry. This is probably one opportunity that has the potential to put the Indian

IT-both suppliers and users-on to a new trajectory of growth. It is possible that some of

the early birds might become the harbingers for the new globalized Indian corporate

future. Nonetheless, a shared responsibility.

You are now entering Microsoft

country.

With the huge number of Microsoft

certifications in the country, Microsoft software would be the preferred application

development environment. Independent software vendors would continue to develop

applications across SQL Server, Exchange and NT environments. In medium and large

enterprises, NT would continue to edge out Unix and Net-Ware. However, in the small

enterprise user segment, NetWare appears to be holding its ground. This is likely to get

stren-gthened as and when NT 5 (Windows 2000) comes out.

Lotus 5, 4, 3, 2, 1...take off

The share of Lotus Notes in the

messaging, groupware and collaboration space will increase through growing acceptance of

Release 5. For much of the year, Lotus may be the preferred collaboration platform, with

MS Exchange being unwieldy in comparison. That is only half the prediction. The other half

is if Microsoft reads this prediction and decides to take corrective action. Not exactly

known for defending its turf against Microsoft, Lotus may just capitulate the advantage.

Nevertheless, the crystal ball seems to be spinning the Notes way furiously. Lotus will

try and forge stronger OEM relationships for Notes in the current year to take advantage

of the bundling deals that may tilt the market balance in its favor.

Second harvest of the networking

crop

There is now a second wave of demand

for networking professionals in the country. The first was with the advent of licensing in

the telecom raj in the early nineties and the dismantling of technology import regimes.

But this time around it also involves the sheer demand for internet professionals. This

has been thrust upon the industry with the opening up of ISPs and the internet application

market space. To realize this, consider the 50%-plus revenue growths reported by most

networking majors in 1998-99, in comparison to single-digit-and even negative-growth

figures of the previous year. Spells great opportunity for the Novells and Microsofts,

besides the quintessential training vendors such as NIIT and Aptech.

There is now a second wave of demand

for networking professionals in the country. The first was with the advent of licensing in

the telecom raj in the early nineties and the dismantling of technology import regimes.

But this time around it also involves the sheer demand for internet professionals. This

has been thrust upon the industry with the opening up of ISPs and the internet application

market space. To realize this, consider the 50%-plus revenue growths reported by most

networking majors in 1998-99, in comparison to single-digit-and even negative-growth

figures of the previous year. Spells great opportunity for the Novells and Microsofts,

besides the quintessential training vendors such as NIIT and Aptech.

And the Oracle book of gospel may

soon be no more

In the RDBMS market space, Oracle

will continue to maintain its leadership position, thanks to the tremendous brand loyalty

it enjoys in the Indian enterprise. However, with powerful ease-of-use features, lower

cost and large number of certified professionals, SQL Server will continue to make inroads

into the RDBMS enterprise space, eroding Oracle's share. The real fight will again be in

the SME segment, where SQL will take on Oracle. This is a territory where Oracle does not

really have any distinct edge. Price will be the determinant, and if that is true, then

Redmond will triumph over Redwood Shores.

The networking industry will

continue its forward march

The state governments of Andhra

Pradesh, Maharashtra and Karnataka have shown keenness to invest in the networking

infrastructure. Close to 60,000 bank bran-ches are waiting to be networked. Private

companies are putting their networking infrastructures in place. All these activities will

see the industry posting a growth rate of 50%-plus. Higher brand recall and excellent

relationships with all the major vendors will see that Cisco continues to be the numero

uno player in the industry. It will continue to be the biggest player in the routers

segment though tough competition is expected from increased number of router players and

the Layer 3 switches.

The mainframe era-part II

With the global relaunch of the IBM

S/390 with inbuilt TCP/IP and Ethernet, the Indian business user and the GoI appear to be

determined not to be left behind this time around. The tremendous capability of this

machine to scale across the enterprise has made it a serious contender in corporate and

government decision making. What is also aiding and abetting this effort is the need for

large databases in the service provisioning business, both amongst the ISPs and the large

enterprises. As the internet adoption explodes across Indian businesses and homes, outlook

for mainframes will increase proportionately.

The middleware surge

With distributed computing becoming

the norm in these times, technologies like COM/DCOM, CORBA and Enterprise JavaBeans will

see tremendous growth. Companies like Advanced Technology Labs and organizations like the

Component Management Group and STPI have been working aggressively for some time now and

the number of professionals from India will keep rising in the coming years. The only

problem here is that while the demand is rather spelt out, there appears to be a big

shortfall in the number of people being trained in this area.

More deployments in the WAN

segment

The WAN segment will see the growth

in enterprise switches and routers. However, with internet growth, the hot product for the

coming years is the remote access server (RAS). Modems, too, are expected to ride on the

internet bandwagon as the current year will see the full impact of the few private ISP

operations. In the VSAT segment, the industry is expected to get out of the bandwidth

crisis with either the launch of Insat-3B or policy decision being taken on allowing the

Ku-band, as per the Telecom Policy. Add to this the expected increase in spending by

industry and government and the segment seems on a firm footing. However, the total

benefits are expected only by fiscal year-end.

Will Merced make magic?

While Intel is already setting off a

hype wagon extolling the virtues of Merced, the current year will not see any major impact

of Merced, for two reasons. One, it will come too late to have any significant impact on

the purchases in the current fiscal. Two, as it will be the first 64-bit processor from

Intel, there is a distinct possibility of some ironing out that might need to take place.

What will create magic will probably be McKinley, which will be the second generation

after Merced, with all debugging done, which will take 64-bit computing to a different

plane. The likely casualties: Alpha of Compaq and PA-RISC of HP. IBM may yet survive with

PowerPC with AS/400 and RS/6000 doing well and Apple playing a good second innings. Merced

will set the stage for the battle for 64-bit and, unquestionably, Intel will dominate this

scene for the near term. Impact on Indian IT: insignificant for 1999-00, marginal for

2000-01.

Life after Y2K

Growth will continue, although euro

is not likely to be the kind of revenue booster as Y2K was, simply because the US is far

less complex a market than the European Union. A handful of Indian companies will take any

advantage of the euro market, and those that do will be simply doing on-site development.

However, the momentum of the services export will continue, moving past the $3-billion

mark. Apart from vanilla services, IT-enabled services will become significant as an

opportunity for Indian service providers to tap into. Japan will emerge as a significant

market, especially for HCL and Wipro.

Long live the extranets, down

with intranets

The Indian enterprises have bypassed

the intranet stepping stone in its start and stopped progress along the application

deployment road map. With no strong drivers and enablers in the domestic workplace,

intranets have not been viewed as a necessary competency test bed. With reducing costs for

WAN deployment and corporate inter-net access, the Indian enterprises appear to be headed

for corporate extranets and associated e-business technology adoption.

Software management will be the

buzzword

The Indian IT market space has now

started showing signs of mature usage on the enterprise software front. With some

top-notch enterprises knitting their systems with high-end software applications, together

with the maturing developer movement which requires meticulous processes, the needs for

managing the applications and for a "factory approach" to development will be

felt. This will create more room for players like Computer Associates, Rational and

PVCS/Merant.