Y2K Dead End

If history can be rewritten,
why not computer codes! There is perfect logic here. But the question
is, why compare history with computer codes? For, as history rewrites
itself to welcome the new millennium, the world will be watching with
bated breath the pranks that the Year 2000 (Y2K) bug may yet play. And
that is where the comparison between history and computer codes becomes
relevant. Companies, individuals and businesses who have made it to the
millennium mark without the Y2K glitch, but with burgeoning coffers will
consider this period as the best of times.

The Y2K problem has been a heaven-sent gift
for the Indian IT industry. India’s reputation for producing excellent
software coupled with the fact that we have a skilled, cheap and English-speaking
work-force, made the software industry go on a roll. But all good things
must come to an end. And with the Y2K problem tapering off, questions
arise–Where is the Indian software industry heading? Will the software
exports get hit? Which are the emerging areas where Indian software industry
can make an impact? Will the technology lock-down happening in the West
lead to a decline in the exports, affecting Indian software exporters?
These are questions which need serious thinking–and answers–if the IT
industry has to maintain, even by conservative estimates, an average growth
rate of 50%. The fear
looming large among companies, and the industry as a whole was–with the
Y2K slowdown taking a toll, will the bug bite into its coffers? The Y2K
computer glitch is likely to rock the world trade and may end more than
eight straight years of the US economic growth, says a special US Senate
panel studying the problem. Moreover, it was also reported that the technology
companies saw the first signs of the Y2K slowdown in the West, especially
in the US. Customers, who are trying to bug-proof their networks in time
for the millennium are scaling back orders for the new equipment. All
this does not augur well for the Indian IT industry, which still depends
on the US for over 60% of its business.

However, the industry is
mixed in its reaction to the enormity of the problem. The Indian IT industry’s
mindset is marked with skepticism to absolute optimism. While some thought
that there will be an adverse effect on the growth rate of Indian software
exports, others believe that the cooling period will only be a temporary
phase and would be over by the end of March 2000. The other view is that
it will not apply to business-critical or mission-critical systems and
infrastructure. As Arvind Thakur, Director and Senior VP, NIIT, says,
"In most of the companies, a freeze on new initiatives does not cover
e-commerce. In fact, e-commerce or business has separate budgets assigned."
However, Kiran Deshpande, CEO and MD, Mahindra British Telecom, says,
"There is likely to be an impact as business, government and industry
concentrates on minimizing the impact of Y2K."

In most
of the companies a freeze on new initiatives does not cover ecommerce.

–Arvind Thakur

Director and Sr Vice President, NIIT

The fact is that the Y2K
slowdown was anticipated and most of the major companies had already planned
for it. Though IT spending has declined in the US and Europe till the
first quarter of next year, it should not dramatically impact software
exports from India, according to Saurabh Srivastava, Executive Chairman,
IIS Infotech. This is because the normal development and support activity
is going to continue. "In fact, there may be extra need for software
support because of Y2K," says Vivek Govilkar, Head-Process and Quality
Management Group, CITIL.

So, the software exports from India in the
wake of Y2K may certainly show a low-to-moderate downturn, as there will
be a slight possibility of a global recession due to Y2K-related disruptions.
"However, IT being the strategic competing tool that it has become,
it will move ahead and a lot of pent-up demand that was on hold due to
the Y2K bug would then emerge. For those companies still into Y2K, there
will be a last lot of Y2K revenue that will come in," says R Mohan,
Director, BFL Software. As Dewang Mehta, President, National Association
of Software and Services Companies (NASSCOM), says, "The contribution
of Y2K solution projects is almost 20% of the total software exports in
the first quarter of the current fiscal." There are revenues still
to come, the in
ustry
feels, and hopes that the Y2K business that it was able to generate will
lead to new avenues and new sources of income.

"With the Y2K bomb ticking
its way into the millennium, Indian firms that have cashed in on the $5
billion opportunity, are eyeing new spin-offs from the bug. Companies
are focusing on non-Y2K business from the existing Y2K customers. Thus,
any Y2K activity will only act as door openers, enabling entry and a strong
foothold at customer accounts," says Saibal Mitra, Assistant VP,
Corporate Marketing, Sonata Software. This finds support from Srini Rajam,
MD, Texas Instruments (India) Ltd. He feels that though it will affect
the IT industry, there are different opportunities which the industry
can focus on.

Though IT
spending has declined in the US and Europe till first quarter of
next year, it should not dramatically impact software exports from
India.

–Saurabh Srivastava

Executive Chairman, IIS Infotech

The Y2K bug has been an opportunity
for the Indian IT industry to make an impact on the global scenario and
it has been made well use of. While it brought in close to 25% of the
total exports in the last fiscal, according to industry estimates, the
current fiscal will certainly show it coming down to a single digit figure.
And if the conservative growth estimates are to be maintained, new areas
should come up that will replace revenues from Y2K.

What will replace Y2K?

One thing
that crops up across the cross-section of the industry when we speak of
replacing the Y2K revenue is ecommerce. It has been the buzzword of the
new millennium and irrespective of the size of the company, one thing
common is the constant endeavor to convince and believe that ecommerce
is going to be the ‘inthing’. There is definitely no doubt about it, with
every new start-up pitching its strength on the ecommerce arena. But a
slight introspection will show that ecommerce, unlike Y2K, is neither
just dependent on manpower nor on cheap labor. The area of work is vast
and there are going to be no geographic barriers. The Indian IT industry
should cope fast, with companies in different sectors making use of the
business model rather than the technology model. The other area that is
being thought of to bring in revenue is euro conversion. But again, it
is a short-term window whose fruits will start showing only about mid-2000.

Internet has been looked at as a messiah
by the IT sector. And that is the main reason that ecommerce has been
looked upon as the business that will outdo both Y2K and euro put together.
As Achyut S Godbole, CEO, L&T Information Technology Ltd, says, "Web-enabling
of applications is catching up and is expected to make up a substantial
chunk of current year’s exports. Supply Chain Management, Customer Relationship
Management and IT-enabled services are likely to be the other prominent
areas. Maintenance of applications will also form a major part of exports
this year." Godbole has unequivocal support from the entire industry
on this matter. As Arun Jain, CMD, Polaris, says, "The possible areas
where the Indian IT
sector
can make inroads is in migration to new technologies, web-enabling the
current application and internet-based applications."

The other area where some
light has been thrown and which can definitely be a harbinger of things
to come is the embedded software area. "With the world moving into
an era of digital convergence or communication, there is a lot of scope
for embedded software opportunity. We have the skill set suited to this
need. However, it calls for some expertise in creating domain expertise
and once it is done, there is no looking back," feels Rajam. Agreeing
with him, Mohan says, "We are seeing large business coming from the
embedded systems area, particularly from the telecommunications, transportation
and leisure industries given the convergence of computers, communications
and entertainment. It is leading to the emergence of intelligent information
technology."

In the end, it seems that
ecommerce along with web-enabled applications are the core areas that
are bound to constitute a large chunk of exports for the country. According
to Mehta, the Indian software industry is now focusing on upcoming segments
like ecommerce, euro and a wide gamut of IT-enabled services.

Where does India stand?

The possible
areas where the Indian IT sector can make inroads are in migration
to new technologies,
web-enabling the current application and internet-based applications.

Arun Jain

CMD, Polaris

When we speak
about the emerging technologies and the scope for Indian IT industry to
make a mark in these areas, one has to take a look into where we actually
stand as far as these areas are concerned. There is no doubt about the
fact that Indians are fast to adapt to the technological changes and also
to learn and apply them. And one of the main reason has been the early
exposure to emerging technologies. As Arun Jain says, "The fundamental
reason is that the hardware platform for these technologies are cheaper
than mainframe and they are available in institutes as well as small companies."
It has been seen that Indian software professionals have been excellent
in adapting technologies. As Godbole says, "Maintenance of legacy
systems and ongoing applications development has always been India’s strong
point. Indian companies have always kept themselves up to mark in terms
of learning the state-of-the-art technologies such as communications and
embedded systems."

The sad part, however, as Mohan says, is
that the Indian industry lacks in conceptualizing the technology to serve
an end goal. "We look at technology for the sake of technology itself
and fail to recognize that technology is only a means to achieve business
growth for an enterprise. We need to build our ability to harness these
strengths to achieve an end business result." Adds Thakur, "Some
areas where we possibly lag are technologies involving security algorithms,
very large applications and trusted systems." Another thing that
comes out is the need for creating intellectual property rights (IPRs).
"India needs to go up the value chain in terms of creating IPRs.
Quality of service in telecom
must
improve. Restriction on certain telecom technologies like voice over internet
protocol (VoIP) need to be removed," says Deshpande, reflecting MBT’s
area of interest.

So, despite having the capabilities
and means to garner the expertise, Indian software industry has to pull
up its socks and gear up to the challenge. As Mohan says, "Ways and
means of doing this include taking on higher value-added roles such as
consultancy, systems integration and facilities management. An alternative
strategy can be to look at strategies such as product-based revenue and
fundamental software research." These are areas where the Indian
software industry lacks its thrust and until R&D is taken up seriously
by the companies, it will be difficult for Indian companies to keep in
step with the global market scenario.

Business model gets the
nod

India has
followed the traditional services’ model as the inherent strengths were
in this model and this has been successful to a large extent. There is
consensus among the industry captains regarding the services’ model being
followed. But we have seen that slowly the companies have started adopting
the onsite-offshore business model. And this has been successful due to
the price competitiveness and has provided significant value proposition.

The IT industry is
a big industry and the companies should invest in R&D and productization
as the technologies are available.

–Nitin
Wagh

MD, Merant Solutions

However, if the companies
have to be really one up on its counterparts from other parts of the world,
it is imperative that it slowly move to a model by getting into a customer
transaction model, where the company comes close to the customer’s point
of transaction. "In this manner, chances of an Indian company becoming
redundant will reduce and its ability to charge on a transaction-based
usage may go up. Already we are seeing the trend from Sun and Microsoft
on their office products for usage-based charging systems," says
Mohan. As Thakur adds, "Today, Indian companies are not interested
in merely being distribution partners in one country, but are looking
for global partnership models." But Govilkar says the services’ model
has been quite successful because of the obvious advantages of costs.
"So far only a few Indian software companies have attempted selling
software products internationally and even fewer have been successful,"
he says. Nitin Wagh, MD, Merant Solutions, says that R&D is going
to be the key word. "The IT industry is a big industry and the companies
should invest in R&D and productisation as the technologies are available."

Competition is going to come
mainly from countries like China, Taiwan, the Philippines, Mexico, Ireland,
Israel and Russia. Govilkar says even Bangladesh and Vietnam may give
the Indian companies a run for their money. "For, they can beat anyone
in the low price game". Moreover, as Rajam says, the competition
may come even from small, venture-oriented companies as they have the
ability to access the emerging markets.

All in all, it has been a
rosy picture all through for the Indian software industry. Everything
has been going around well and the bottomline as well as the topline have
been showing remarkable growth rates. The markets have been gung-ho and
investors have been bullish on IT scrips. But the time has come to take
a relook at where the software companies are heading. It is time the Indian
software industry got its backroom ready to face the challenges and threats.
The software export industry has been growing at an average of 50% over
the years and in the current fiscal’s first quarter, it grew by 55%, but
the next six months are going to be a period of extreme caution and preparedness
for the IT industry. "Anything could happen", is the voice of
the industry. If only we had a crystal ball!

 

RAJESH
MENON

in Bangalore

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