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India software body urges product push

Posted: 13 Sep 2002 ?? ?Print Version ?Bookmark and Share

Keywords:national association of software and service companies? nasscom? software? software system?

In an effort to jump-start a domestic software-products industry, the National Association of Software and Service Companies (Nasscom) is setting up a forum to push Indian software-services companies into product development.

Companies in India have shied away from developing products in favor of the low-risk and profitable software services for which the country is known. The products market, by contrast, requires large investments for development and marketing.

While India's software-services exports totaled $7.9 billion last year, the nation claims just 0.2 percent of the $180 billion global market for software products, Nasscom announced. At the same time, however, the number of Indian companies involved in product development rose from 317 in 1998 to 453 in 2001.

Observers have long said the Indian software industry missed out on the multiplier benefits of its work by failing to extend development efforts into products.

Most Indian software packages are designed for accounting, banking, and desktop publishing, which have limited global appeal and markets. A plan several years ago by some top Indian companies to forge a joint marketing forum to promote their software products in U.S. and European markets faltered even before it got off the ground because of disagreements among the participants.

Another reason for a lack of software products here is the lack of a substantial domestic market and the wide availability of off-the-shelf products designed abroad.

Nasscom's product forum will seek to provide relevant market data, foster an exchange of ideas and identify issues related to marketing, investment, and IP creation and protection, the trade association said.

Most of the global software giants such as Microsoft, Oracle, Novell, and Cadence have invested heavily in development centers in the country. At the same time, there has been virtually no significant effort by any Indian company to develop products. This is what Nasscom members would like to change as the forum attempts to bring together overseas and Indian software product developers to interact and share best practices on a common platform. Given the cutthroat competition in software product development, that is a tall order, observers noted.

"We have seen a substantial growth in the number of Indian companies in the software products development market," said Nasscom chairman Arun Kumar. "However, this growth has been limited because of the unique challenges that this sector faces. To address these challenges in a focused manner and to encourage IP creation in the country, Nasscom has set up the special forum for software products."

The forum will also identify niches in industry segments where products can be developed for the domestic market. Nasscom has already identified 350 U.S. companies as potential clients for Indian vendors seeking to develop products.

Analysts said Indian services companies have adequate domain expertise to develop products. The more important question is whether they will be willing to invest the necessary funds and move beyond the safe haven of services.

Nasscom said Indian companies must leverage the lower labor costs that overseas companies have exploited in the country in a flood of development centers. Emerging product companies could initially focus on developing components or subsystems that help speed up product development, the group suggested. In fact, Nasscom said it would organize meetings between large product companies to tap into new-product opportunities. "As the Indian IT industry matures, it is time to look at the product-development (market) more aggressively," said Nasscom vice chairman Som Mittal. "Some of the more promising vertical (industries) for the sector include banking, insurance, telecom, retail, hotels, and aviation."

With some Indian software companies - including Wipro, Infosys Technologies Ltd. and Satyam Computer Services - now listed on overseas stock exchanges, those vendors could be in a position to acquire product developers in the U.S. market. One way would be to use their stock to finance acquisitions and mergers. Nasscom said it would identify potential targets for Indian companies to pursue.

- K.C. Krishnadas

EE Times

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