Spreading The Net

It all started in October 1998 when Rediff-On-The-Net man
aged to attract Intel. Today, the number of Indian companies with Intel
investments has swollen to 19, while several new partners are in various stages
of negotiations.

To quote Siddhartha Das, director, strategic investments,
Intel Capital, India, "India and China are the most significant areas in
the Asia-Pacific region for Intel. Normally, companies find these two countries
attractive due to the huge market. We at Intel are looking beyond." He
adds, "India not only offers a vast market, it also has a huge intellectual
capital that makes investment more attractive here.

So how would Intel actually benefit from these investments?
Das is clear about it, "Given that India has one of the best intellectual
capital and training facilities at par with developed countries, we find a huge
potential for actual technology to be incubated here. These ventures have all
the potential of emerging as commercial entities."

Financials and beyond

Though the primary purpose for Intel’s investment program
is strategic, experts believe that the company is also looking at generating
financial returns. The reason is tied to Intel’s strategic goals: if a
portfolio company is successful in improving PC products or in drawing new users
to the PC, it is likely to be financially successful. And the Internet is the
new driver of the PC market, in India and abroad. Though officials at Intel are
tightlipped about Intel’s returns from these investments, it is nevertheless
believed that the Capital program has generated reasonably well financial
returns.

According to Das, "The companies in which Intel invests
can gain in ways that go beyond Intel’s financial contribution. Intel brings
significant technology expertise in and around the PC that can be helpful to a
portfolio company." Both Intel and the companies it invests in gain
exposure to fresh ideas in areas such as the Internet, multimedia and
e-commerce.

Begun in the early 1990s, Intel’s corporate business development program has
become one of the largest investing programs in corporates in the technology
sector. Intel typically takes small, minority stakes–generally less than $10
million each–in private and some public companies. Today, Intel’s portfolio
includes more than 300 technology and related companies, valued at about $5
billion–26 of them being in the Asia-Pacific region.

New media tools and technologies

Enabling creation and delivery of next generation content and
media is another longstanding Intel strategy. The company claims to have a wide
array of developer programs in these areas. Das says that Intel is interested in
ensuring that the tools and technologies to create scalable, broadband-ready
content are ubiquitous. After creation of content, it is critical that the same
rich streaming content be delivered at high-quality levels to consumers and
businesses. Hence the decision to invest in the media delivery infrastructure
through technology companies like Ind Telesoft and Silicon Automation Systems (SAS).

While the Bangalore-based independent services vendor, SAS,
develops technologies focused on communications, multimedia and speech
compression, Ind Telesoft provides soft-switch solutions to service providers
and OEMs building the next-generation converged voice and data networks.

Net services and new business infrastructure

While Intel’s own Internet services businesses are actively
looking for channel and technology relationships that can bring mutual benefits,
the company has also been investing in companies like Bharti Telespatial,
Network Solutions and Banyan Networks. According to Das, the investments are
aimed at ensuring that the next generation of Internet services takes full
advantage of the reliability, scalability and price performance advantages of
Intel architecture servers and devices.

Content and commerce

Intel has also been investing heavily in a few major content
and service providers in India–providers of online trading, B2C and
e-commerce, and software infrastructure for SMEs.

The company’s investment in CIOL and Avigna Technologies
reflects its interest in promoting content and commerce that would increase the
Internet adoption rate and provide rich consumer experiences that scale up with
the availability of broadband services. The company also seems to be serious
about promoting B2C and e-commerce in the country and feels that small
businesses can benefit greatly from the integration of the Internet into their
existing business models. What this means is that Intel would be investing in
those services and technologies that readily enable small businesses to realize
the growing potential of the Internet–its investment in TSNShop.com, a B2C and
e-commerce company, illustrates this.

Enterprise applications

One of the highlights of Intel’s investment program in
India has been its decision to back Eastern Software Systems, a Delhi-based ERP
solutions provider that recently became an ASP to increase its market base
amongst its essentially-SME clients. Das says, "The rapid increase in the
outsourcing of services and applications has created numerous new market
segments and opportunities for nimble innovative companies that sell to larger
businesses. Intel is interested in ensuring that the next generation of
applications and services take full advantage of Intel architecture."

Software infrastructure

Another key area for Intel has been the software
infrastructure business. It has already invested in five Indian companies in
this category, Amoeba Telecom being the latest. Intel has also invested in
Ritechoice Technologies, Persistent Systems, Bharti Telesoft and Indus Software.
While Amoeba develops innovative traffic management solutions for
next-generation service providers, Ritechoice is engaged in developing back-end
software solutions for large stock brokerage houses in India. Similarly, Indus
provides solutions for retail financial service companies like banks, while
Bharti is into providing telecom software. And Persistent is setting up the
Konark IA-64 porting and competency center for Intel’s Itanium processor
family. Das reiterates, "Intel is investing in software companies to help
promote the growth of

the Internet and data services in India. These investments are being made with
the strategic intent to help promote usage of computing technology to improve
business efficiency and to support the adoption of e-commerce, at large."

SHUBHENDU PARTH

in New Delhi