I Want My Dotcom

It’s a bubble that just keeps growing, and shows no signs of bursting. Those naysayers who held that Indian software wizards were actually a bunch of nerds in disguise-whose only skills lie in churning out reams of code for Y2K and low-end client-server software-better think again. For after the seamless rollover into Y2K, Indian software companies are eyeing the all new El Dorado-e-commerce.

Witness NIIT, for instance. In 1998-99, the company garnered 10 per cent of its software revenues from e-commerce. Prior to that, this figure was so insignificant that NIIT didn’t bother tracking it. And this year, it has positioned itself as an out-and-out e-commerce solutions company. Bangalore’s two major software powerhouses, Infosys and Wipro, also exude the same optimism. Till September last for 1999-2000, 8.5 per cent of Infosys’ revenues had come from e-commerce solutions, in contrast to a mere 2.5 per cent during the same period last year. It’s going up by the quarter. In the quarter ending June last, the figure stood at 6.4 per cent, while in the September quarter, 10.3 per cent of the company’s revenues came from e-commerce software solutions. And Wipro has seen fairly steady growth. While it identified e-commerce as a high growth area in 1996, the company has seen 8 per cent of its software revenues come from e-commerce during the past two years.

Things are expected to get even better. "In the next 12 to 18 months, we expect e-commerce earnings to constitute 25 per cent of our total software revenue," says Ramakant Desai, general manager technical, electronic commerce, Wipro Technologies. The sentiments are echoed by the largest Indian software company, TCS. "In the next couple of years, almost all the work that TCS will do would be Internet/e-commerce-based," says resident manager, Surya Kant.

Just what’s it that makes these companies so optimistic? First, all that they have to really do is ride the crest of a wave that’s touching virtually all the shores in the world. "By 2002, 80 per cent of all infotech services will somehow be related to e-commerce. Therefore, most software services are bound to revolve around this. And that means a huge, huge market," says Jayesh Parikh, software analyst at Smifs Securities. Besides, Indian software firms have many inherent advantages. Says Arvind Thakur, director, NIIT: "E-commerce software solutions exploit the skill base of Indian software professionals to the optimum. That’s because programmers in developed countries-where the software industry took off much before it did in India-grew up in the mainframe era and used cobol programming. For e-commerce, you need to unlearn all that. Our programmers come from the more recent client-server generation where it is much easier to migrate to e-commerce technologies." Adds Yashwant Kini, vice-president, corporate research, SG Securities: "Indian software programmers are hired more on their potential to learn, ensuring that they can adjust to new technologies faster." Then, there’s also the fact that India is currently riding the world’s software boom. "The best news is that nobody in the world is ahead of us in e-commerce. Whereas in the past, in areas such as IBM mainframe and client-server technology solutions, the West had better access to technology than we did in India," says Desai of Wipro.

Considering that India has everything going for it, it’s important for the software companies to get it right. Y2K and ERP (enterprises resource planning), which have been the mainstay for some companies, are on the verge of becoming extinct. "If companies are to maintain the 50 per cent topline growth that they’ve witnessed in the past, they have to crack the e-commerce market. It’s the only area that has the potential to be the bread-and-butter for Indian companies over the next five years," says Subrata Ray, research manager at dbs Securities.

Besides, it also offers Indian companies the opportunity to move up the value chain. That’s something industry critics-though there aren’t many-have been taking a dig at for some time now. Says Sharad Talwar, general manager, marketing, HCL Infosystems: "It’s a boon for the industry that Y2K, which was all about low-end coding, is getting over. E-commerce is all about ideas and creativity. Plus, the opportunity to create new products is much higher." That’s because in e-commerce one can create a new product for virtually every problem, since e-commerce applications are fairly specific to each customer.

But to make the most of this opportunity, or to face the threat that looms with Y2K drying out, there is a fair bit of re-engineering to be done by software companies, today’s darlings of the bourses. Probably the only strong negative that Indian companies suffer from is the relatively low domain knowledge that exists within the country. Says HCL’s Talwar: "The low Net bandwidth here has meant that e-commerce penetration stays low. This weak domestic e-commerce deployment has made it difficult to build capabilities to cater to advanced solutions. It’s important that e-commerce takes off here." This negative, though, has been slightly rectified by the fact that a fair share of our programmers have been working on projects abroad and have garnered a fair amount of domain knowledge.

Even then, the most crucial issue to succeed in the e-commerce market is domain knowledge. "You have to experience the technology yourself, otherwise you will always get an outsider’s perspective of the e-commerce domain. For that, you have to e-enable every aspect of your business," says NIIT’s Thakur. In fact, that’s what NIIT has been concentrating on in the past year, by offering its training modules and software services online. "That’s where companies like Hyderabad-based Satyam are expected to benefit, since it is already an ISP and is getting into e-commerce in a big way. This will help it gain domain knowledge," says Vimal Jain, assistant vice-president at Prime Securities. And TCS has been trying to do that for some time now. Says Kant in typical techno gobbledegeek: "We have been working with Net technologies since the early ‘90s, initially to build internal products and systems to internalise the technologies. These technologies built up on internal projects are then externalised and utilised in customer projects."

Next, Indian companies must work at reducing their time to market. "The traditional software process has to change to shorter cycles with quicker delivery," says S.D. Shibulal, director and head, Net consulting practice, Infosys. Typically, e-commerce solutions have to be up and running within six months of the initial concept, since a major factor for a dotcom’s success is being first off the blocks. To do this, e-commerce software solution providers need to be able to re-use components from previously developed e-commerce software. "If we set up two e-marts one after another, it is possible that the catalogue and payment systems of the two are common. Therefore, these components can be used for the third e-mart that we set up," says Thakur. Sure, these components are available off-the-shelf from other companies, but then outsourcing them costs a lot more. "But to be able to exploit this advantage, Indian software firms must ensure that they own the intellectual property rights (IPR) of the solutions they develop for their clients. For this companies must negotiate aggressively with their clients to give them the right to reuse components of the software they’ve developed," says Thakur.

Since e-commerce projects are short-duration projects, marketing and the number of customers are key. "An average e-commerce project takes up to six months. Therefore, one needs to constantly get new customers," says Parikh. Infosys, for instance, can tap its 130 customers, primarily in the US (which is by far the fastest growing e-commerce market), while Wipro and NIIT can do that to their 100 customers each across the globe. But Thakur believes that e-commerce market will be equally split between start-ups and existing customers, with whom Indian software firms have built up relations over the years.

Analysts believe the next six months will give a fair indication of how successful Indian software companies are in cracking the e-commerce market. "We’ll soon see Indian firms getting their first few trial orders, and the aggressive ones should have about 10-15 per cent of their revenues coming from e-commerce," says DBS Securities’ Ray. By the looks of it, the top honchos in India’s software industry are near that figure. Guess they are already home and dry.