With the dot.com collapse and the telecom equipment sector downturn, spending for new applications is on the wane. "What we are saying is that as the technology business sees some downside, lets cater to telecom service providers and the new area of large-scale system integration to offset the downturn," Wipro's vice-chairman Vivek Paul said in a recent interview with Reuters. The key word being "large-scale". Muddling through Satyam said after the results it was repositioning itself as a global solutions provider, either collaborating or competing with leading consulting companies and systems integrators. "Systems integration involves some hardware reselling, some maintenance...it is a slightly muddled kind of business and none of the front runners intended to focus on it," said Ajay Mathrani, an analyst with ASK Raymond James. "But if they have to achieve their 40-50 per cent growth rate targets, they will have to take up all kinds of projects," he said. Scrambling for high-volume service contracts has become particularly important for a company like NIIT. The software services and training firm — India's largest computer education provider — posted a shocking 93 per cent fall in April-June profit over the year-ago period. Yet it said the order book for its newly formed maintenance and modernisation practice had increased substantially during the quarter. "The trend during the downturn by corporations has been to divert budgets to maintain existing core applications rather than build new ones or invest in emerging technologies," NIIT President Arvind Thakur said after the results. Going for size That the slowdown has started to take its toll on the growth of the Indian software companies is evident from the April-June results released this month. The cumulative net profits of six leading software companies rose 48.8 per cent and sales by 41.8 per cent over the year-ago period. But from the previous quarter, net profit fell 6.2 per cent and sales by 4.9 per cent. The performance of key firms was mixed, but almost all said the pricing environment was "challenging" and indicated they were going to get after volumes, hoping to offset lower billing rates. "There is no point chasing high margin, high value business if it is not coming," said Jayesh Parekh, analyst with SMIFS Securities. "It is better to chase these
bigger contracts and make a presence felt and hope to have the client
offer you the high-value business when it is there." |
‘Private
exchanges in, B2B out’ INDIAN software companies that were trying to move up the value chain, are reverting to mundane work like maintenance and systems integration to keep the order books flowing. "This goes on to prove that clients are no longer indulging in wasteful expenditure. Rather, they are going in for products that’ll actually deliver value, including software tailor-made to suit their needs, " opines Tariq Faroouqi, Director, SAP India, that has its head office in Bangalore. SAP India, a subsidiary of SAP AG headquartered in Walldorf, Germany, is a company targeting small and medium enterprises to customise software. Right now, the company has over 300 clients in India, including Colgate Palmolive, Cadbury’s and Tata. Farooqui, who was in the city last week to participate in an awareness campaign launched by the company, feels that the era of dot.coms has gone and that of e-business has begun. In fact, e-business is also getting more focussed. B2B portals are being replaced by private exchanges. "In B2Bs, the transaction is not directed whereas in private exchange interaction is fruitful as companies deal with each other on one-to-one basis well aware of each others needs. It’s something like going to a fixed place to buy or sell," he says. Due to the bad market situation, software companies are facing lean days. However, market study conducted by the International Data Corporation (IDC), India concludes that packaged software is likely to grow by 23 per cent this year. Further, a report by Goldman Sachs says that small software firms are losing ground to bigger ones and software vendors having established ties with large integrators may benefit in this environment. Farooqui agrees: "When software
can be parameterised, why indulge in wasteful expenditure by purchasing
software aimlessly. In fact, this has been realised by small and medium
enterprises (SMEs). Chandigarh is one such city where SME market still
lies untapped," he says The SAP Director feels that getting a
commitment from the users is the most difficult challenge being faced by
the companies who are into providing application services through supply
change and customer relationship management. "All I c an say is
that people have to change the way they work to combat the current
sluggish market," he adds. |