Tech Trends: Too Close to Call?

It would appear that there’s only one thing more difficult than predicting

whether a Bollywood release will please the box offices or not–and that’s

predicting which technologies will change the world in the next year. Nothing

illuminates this argument better than the recent issue of Red Herring magazine,

where, in a critical self-assessment of their own Top Ten Trends for 2001, they

admit to have called wrong on wireless commerce, fuel cells and the

consolidation of a single electronic communications network. They certainly got

it right with their prediction of increasing difficulty of intellectual property

rights (IPR) protection and a continuing shakeout of venture capital firms,

thanks to the "back-to-investment-basics" approach. And this raises a

hypothesis–it may be easier in these troubled times to predict negative

outcomes rather than positive ones!

In light of these developments, it is interesting to analyze Red Herring’s

predicted trends for the coming year and the likely impact they will have on

Indian industry. To make this analysis more meaningful, I have bunched those

trends that have impact on domestic consumption of IT and separately looked at

trends that have relevance for Indian players in overseas markets. Here goes….

Trends that will change the way we use infotech

Let’s start with three trends that could make their impact on computing in

this country; and hopefully get a lot of fence-sitters in industry and business

to seriously embrace IT.

• Development of high-powered data center technology;

• Emergence of mobile virtual network operators; and

• Proliferation of inexpensive multifunction portable
  
  computing devices.

In India, we have seen the quick rise and fall of application

service providers, Internet data centers and related hype areas spawned by the

short and bitter fascination with dot-coms. Amidst the fear of failure that this

has spawned within the industry, one should not forget that computing in India

was once pioneered by data centers. These were run by IDM, TCS, DPS and the like

and the model proved to be extremely successful till the fascination with

minicomputers and PCs led to their decline.

In today’s environment of shrinking budgets and technology

obsolescence, the emergence of a new powerful data center model running a range

of applications–from accounting to payrolls and HR to materials management–may

well integrate the robustness of the old data center with new technologies

brought in by the Internet boom. With Web-hosting revenue expected to rise to

$28.5 billion by 2005 and SingTel having announced plans to set up a network of

data centers in Asia by 2002, the market will soon hot up. The fundamental

difference between the former glass-walled data centers and the future world of

ubiquitous computing will push the proliferation of access devices and this will

be made possible as more and more portable devices emerge and are integrated

with operator networks. Higher memory, more features and lower costs will drive

usage faster this year–already, we are seeing Palm Pilots and I-paqs becoming

commonplace in some countries. The main migration we can expect to see in our

own country is the use of these devices for serious integration applications,

including e-mail, information search and entertainment. While MVNOs (Mobile

Virtual Network Operators) are still to emerge in India, we should see some

migration beginning to happen from traditional networks to this mode by the end

of 2002, at the latest. More power to the user!

Trends that will change the nature of the IT industry

itself

There are two dimensions to this–the maturing of new

opportunity areas and the predilections of the VC community. While nano-technology

and security startups are the flavour of the month, the latter will continue to

flourish as long as American firms worry about the security of their data and

applications. The real opportunity Indian firms should latch on to in the next

wave is in biotechnology, specifically in the area that Red Herring defines as

neurogenomics.

I had this interesting conversation with a young

French-American biotechnologist who spent nearly a decade in some of the best

labs in France doing brain research. He now plans to settle down in the

heartland of Indian biotech, the city of Pune. I was pleasantly surprised to

find that there seems to be a lot of conviction in the potential of biotech and

bioinformatics, and the potential both hold for Indian entrepreneurs if only

they could find a simple way of getting Indian VCs to understand the potential.

So whether it is cause and cure efforts in central nervous system disorders or

much more elementary areas like floriculture, there is potential waiting to be

tapped here.

The other trend that is predicted for the US, and which is

already beginning to make its presence felt here is the emergence of private

equity-backed late-stage merger deals between Indian and overseas IT firms and

indeed, within the Indian IT community, a la Mphasis and BFL. While Jerry Rao

may have been a pioneer in this area, one can expect to see at least three

similar deals in India in the next ear itself, with size becoming an imperative

for growth and many CEOs and VCs on the prowl for suitable partners and targets.

The only deterrent to this is the historical aversion of Indian owners to such

mergers but even that will be overcome as shareholder pressure and the sheer

economics of M&A force previously reluctant parties to come to the table.

Some predictions from my side? Other segments of Indian IT

too are expected to see some very sharp course corrections as Year 2002 plays

out. The training industry, currently at the nadir of both performance and

customer confidence, will make a few structural and pedagogic course corrections

(the pun is unintentional!). Significant merger and acquisition activity will

emerge in this sector with at least one or two of the top five players selling

out to larger American or European predators and some of the smaller players

either folding up or merging with their larger brethren.

Will that signal a revival in fortunes for this beleaguered

segment? With the inevitable linkage to the sentiment in the software industry,

there will be some lagging recovery in the third quarter if the much-anticipated

global software market revival happens in the first or early second quarter.

However, this will still be only for short courses (read four weeks to eight

months) and the death knell has surely been sounded for the long-term career

courses that saw the major players become so successful right through the

nineties. Therefore, close attention to quality and technology will become the

key differentiator between the leaders and the also-rans. The hardware and

peripherals industry will be dependent, in part, on the software sector and also

on business and government spend on information technology.

The last word on trends

One association that never seems to have a problem with

changing trends is Nasscom, which made software exports the darling of the media

and the investor community right through the nineties. After boldly holding out

with a 50%-plus growth prediction, the outlook has dropped by 10% every quarter

to the more realistic 30% mentioned recently. And this number is what many of us

have long said is the best that can be achieved in these troubled times. I must

confess that I have mentioned in this column that only TCS and Wipro have the

wherewithal to grow at 50% this year. I have six months to be proved right or to

be consigned to the majority of bad forecasters.

Ganesh Natarajan is

deputy chairman and managing director of Zensar Technologies and the global CEO

of Zensar