Packaged Software: Simplify, Integrate and Step Around the Dot-com Puddle

VOICES across the packaged software industry spell reassurance and quiet

confidence in the future. And why not? Despite the slowdown in Q4, the industry

has seen a healthy growth of 37%. Between April 2001 and March 2001, Indian

companies launched over 92 new software products and upgrades in the domestic

market, while MNCs launched another 152.

E-biz solutions emerge winners

Given the slowdown in the economy, even traditional non-IT companies are

bound to cut back on IT spending. However, the gloom has not been infectious.

Plans to overhaul the entire digital structure or commence selling online may

have been axed, but essential upgrades, streamlining internal processes and

ramping up customer-facing operations remain top priority. Not surprisingly,

e-business applications are expected to grow 15% this year.

According to DATAQUEST estimates, in 2000-01, e-commerce software solutions

worth $1.2 billion were exported. This number is expected to increase to $1.8

billion in 2001-02. From a back-end database that cannot talk to the company’s

interactive Website to users who swear by the company’s legacy system–"the

new SCM is too complex". Technology has often wreaked havoc on unsuspecting

clients. Given the high investment in e-business packages, users find it

extremely frustrating to deal with complexity and non-compatibility among

different platforms. The year 2000-2001 has seen some of these key issues being

addressed.

Simplicity: The buzzword

"Oracle is waging a war on complexity," declares Somesh Bhagat,

head of marketing, Oracle Software India. "We want to help organizations

concentrate on doing business instead of spending 50% of their time and effort

in integrating technologies, platforms and versions," Bhagat adds. Oracle’s

11i, mySAP, iBaanERP, QAD’s eQ–all launched this year–are collaborative

e-business solutions addressing the issue of complexity with varying degrees of

success. These indicate a clear move away from ‘point solutions’ that tackle

just one aspect of e-business. The thrust is towards more comprehensive and

integrated solutions that are Web-enabled and support hardware from almost every

major vendor.

While it is simpler to integrate versions from the same vendor, the challenge

lies in cross upgradation. The year 2000-2001 was projected to usher in the

application service providers’ boom. Client server applications were to

swiftly give way to application servers and thin clients. Typically, ASPs

deploy, host, manage and rent access to the software from a centrally managed

location. They provide substantial benefits to companies–reducing software

maintenance costs, minimizing installation time, providing full product lines to

customers… However, the ASP revolution failed to take off due to bandwidth and

infrastructure issues.

CRM software

Today, CRM is being defined as ranking customers profitably. Here too, the

trend has been in integrating CRM solutions with the Internet as well as the

back-end systems of the organizational structure. For instance, using mySAP,

Villeroy & Boch sales representatives can access as well as upgrade current

customer and product data, orders, customer service records and information on

showrooms anytime and anywhere on their laptop computers. Other products from

Peoplesoft, Onyx, Oracle, Pivotal and Siebel also support browser-based clients.

One of the most important aspects of CRM strategy lies in answering customer

queries promptly and correctly. This is usually done by providing automated

responses using keyword matching or else in person–the most effective but

expensive option. The California-based YY Software provides answers to

text-based queries using what it calls knowledge-based linguistic processing, or

KBLB. KBLB combines patented linguistic processing with industry-specific

knowledge bases. The solution’s linguistic processing engine deals with

language much the way it is processed by humans–it understands sentence

structure and phrasing. Instead of charging a traditional software license fee,

YY charges by the correct answer at a rate that is below the typical

cost-per-answer in a CSR-based service situation.

However, a good CRM strategy lies in integrating voice, fax, Web as well as

face-to-face interaction–not just point solutions. For instance, PeopleSoft’s

CRM ‘Mobile Sales’ for wireless access protocol is designed to let field

sales representatives access customer service databases from a cellular phone.

Voice, fax and hand-held devices

As with PeopleSoft’s CRM 8, a pure Internet solution is now seen as a

shortcoming that needs to be upgraded instantly to integrate with mobile

connectivity. "Once software is Web-enabled, it is just a question of

transformation and does not involve cumbersome technology. A PDA or a mobile is

treated like yet another thin client," explains Oracle’s Bhagat. In

February 2001, Onset introduced Metamessage, a wireless service that displays

Web pages and more than 25 different file types on wireless e-mail devices by

converting Web pages, faxes and attachments into textual e-mails.

There are similar offerings by Equinox and Astata, and PDA software

applications such as ‘Documents To Go’ from DataViz, which let you view and

edit attachments on a Palm. These, however, have shortcomings like garbled text.

Office software

A 51% growth in PC sales has cascaded on to the office software segment. Not

surprisingly, the Microsoft office suite continues to occupy over 80% of the

market. The obvious reason for this is Microsoft’s business acumen. But for a

user, comfortable with any suite, switching to anything else just seems too much

of a bother. This is despite the fact that Corel’s WordPerfect, Lotus’

SmartSuite, and Sun’s StarOffice all offer some features that Office lacks.

For instance, Corel WordPerfect Office 2002 is a terrific word processor,

especially for long and complex documents, but import filters for Microsoft file

formats end up removing fancy formatting. As against this, Sun StarOffice 5.2

handles MS Office files well. And even more important, it can be downloaded

free.

Effect of piracy

Concerted efforts at checking piracy on the part of Nasscom and other

agencies have succeeded in curbing piracy to a certain extent. There has been a

50% growth in sales of branded PCs due to bulk purchases by larger organizations

and MNCs. Branded PCs are usually bundled with genuine operating systems. Users

have accepted that pirated software is often of inferior quality and are

gradually investing in genuine packages. Despite these buffers, it has been

found that software piracy has actually increased by 51%.

Bundling software

It is a buyer’s market and software vendors have been bundling diverse

products in an attempt to woo customers. The bundling strategy has worked in

cases where target users have been identified accurately. The cost of overheads

certainly goes up in such an exercise. But if the strategy works, growth in

revenue far outweighs the combined expenses of shipping, brand promotion and

advertising. For instance, SAP bundled complementary software like security,

implementation services and hardware in its CRM solution. Oracle launched a

performance bundle with 9iAS and DB. Customers today can purchase

out-of-the-box, pre-integrated, pre-installed Compaq systems with Oracle9i real

application clusters, resulting in faster-time-to-deployment and less risk.

While SAP and Oracle have exhorted the effects of bundling, Microsoft India

Managing Director Rajiv Kaul does not agree. "We do not bundle diverse

products from our company. We also do not bundle outsourced complementary

products. We often package our software applications together to provide the end

consumer with a complete solution. For instance, we launched the BackOffice

Server 2000, a suite of server products designed to address the needs of medium

to large enterprises. The suite comprises Windows 2000 Server, Exchange 2000

Server, Microsoft SQL Server 2000, Internet Security and Acceleration Server and

Host Integration Server 2000. In addition, the product also includes special

tools that make it simpler and more cost-effective for businesses to build,

deploy and maintain their information technology infrastructure" says Kaul.

Targeting SMEs

Another example of bundling, Microsoft’s Small Business Server 2000 also

corroborates the fact that software is increasingly aimed at small and

medium-sized businesses. The SBS 2000 includes Windows 2000 server and a suite

of Microsoft’s .NET Servers, including the Exchange 2000 Server for e-mail and

collaboration. Oracle 9i too was aimed at SMEs. Besides, about 48% of all Linux

server-based installations are in small companies. Looking to boost Linux-based

productivity among small businesses, IBM too launched its server-based Small

Business Suite. This spurt can be explained by plotting the IT lifecycle of an

organization (as explained in box).

The future

The Big Guns: Revenues

1999-2000



 (Rs in cr)

2000-2001

The growth in software exports is likely to be retarded by over 10% this

year. As a result, application development and deployment tools will be severely

hit. With dot-coms down and out, the demand for Web tools will be affected. As a

RedHat representative explains, "Due to the economic slowdown, the trend

observed last year would remain more or less the same throughout the major part

of 2001-2002. However, the slowdown has also provided an excellent business

opportunity to open source software companies. With more and more commercial

software available on Linux, enterprises are taking open source software more

seriously."

Microsoft chief executive officer Steve Ballmer had predicted, "Software

will no longer be packaged and sold to customers on a CD. Applications will no

longer be static programs that sit on a desktop or run off a server. They will

be delivered over the Internet as services that allow customers to interact with

them dynamically.

Fields like biotechnology and bio-informatics have shot up the demand for

robust, high capacity and intelligent databases. The biggest commercial systems

available today are 300 terabytes. The size of computing power needed to fully

analyze the human genome data will be measured in petabyes (1,000 terabytes).

Systems are required to capture and disseminate data and information involved in

target identification, assay development, screening and lead optimization, and

pre-clinical development.

Globally, computational tools like DoubleTwist, CANTAB, Blast and Neurotouch,

among others, have already made inroads into the biotechnology software sector.

In April 2001, Oracle entered into a joint venture with Utah-based Myriad

Genetics and Hitachi for the creation of a proprietary database by 2004. The

project involves the compilation of information on proteins and their

interactions within human cells. The software will be licensed to pharmaceutical

and biotech companies for use in drug and therapy development. Oracle and

Hitachi’s combined contribution for the project includes $85 million in cash

and $18 million in products. None of this has seeped into Oracle’s India

segment yet. Oracle assures us that it soon will…