by Anju Govil
India has the second largest pool of software engineers after the US. Given this figure it is difficult to believe the country rates so badly in the fourth Annual Information Society Index. This index, produced by World Times and International Data Corporation, ISI 2000, measures computer infrastructure, Internet infrastructure, social infrastructure and information infrastructure in each country. May 3, 2000
India is ranked 54 out of 55 countries measured, scoring 871. The US, on the other hand, is ranked second with a score of 5041, just behind Sweden. Worse, India's improvement over last year's score of 793 (for 1999) is marginal. All this when the availability of skilled manpower is not the only advantage India enjoys at the moment.
The IT industry also enjoys the government's blessings and all the concessions that go with it. Growth through 1994-98 was 25.5 per cent in production and 43 per cent in exports. What is surprising is that the players in this sector have failed to climb up the value chain and exploit the favorable conditions to their advantage. Consider this - India enjoys an 18.5 per cent market share in the global market for customized software but less than 1 per cent in the higher value added packaged product segment.
The pattern of volume growth witnessed in the software sector is now being repeated in the virtual world. One reason being cited is the rushed approach adopted towards Web business worldwide. But India's position in the Internet industry makes it really explosive. India will have the largest number of Internet users in Asia by this year end, implying a yearly growth rate of over 273 %. And we already know that this expanding base has shown a ready inclination towards e-commerce transactions.
E-commerce transactions in India are likely to break $68.2 million during the current financial year. Given the profile of people accessing the Internet, this translates into three times as many customers in India's Net space as there are in its real world premium consumer segment. When manufacturers realize this, they want to get involved. Naturally, Indian giants like The Reliance Group and Tata are leading this exodus to the new world of the Internet.
Partnerships
India can match the political will and the human resources of the players leading the race. The missing input, financial resources, is also being provided - in some cases. Indian companies are getting funds from their global partner to facilitate their entry into the World Wide Web.
For example Federal Express' Indian associate, Blue Dart Express, a $40 million courier company, has decided to focus on Internet and e-Commerce for future growth.
Other players are still seeking international partners to aid their entry into the unknown virtual world. One such company is Nippo Batteries, a leading Indian manufacturer of batteries, which is hoping to tie-up with a UK-based company for Web applications and development.
Unsteady Start-ups
India has a population of 950 million, and the number of multiple usage Net connections is expected to increase from 7.16 million in March 2000 to 17.6 million by March 2001. But this isn't the only avenue of potential. Consider the facts that 85 percent of households in India have access to the television and Net through cable access is already in 37 million households - that's more than in the whole of Europe.
Companies justify their foray into the Internet based on these rosy statistics, and have little inclination to take professional help from a qualified consultant. In most cases, a person from the company is designated to prepare a project report and prospect for suitable global partners.
Unmindful of the strategic planning that big companies adopt and the expertise which a foreign partner can bring, companies from all industries and level of operations are planning to find a foothold in the World Wide Web.
Immediate fall out of this lack of planning is a company making promises to its investors based on a non existent growth model. Lack of proper business models also means that companies are spending more on marketing and less on efforts to develop standards, processes or work flow models. In some cases the hype created through advertisements in the traditional media attract the venture capital, and in others the hype follows the venture capital inflow.
Whatever be the trigger, the media, who are still trying to learn to analyze this volatile industry and who suffer from a lack of historical data, contribute to creating false hype. And the cycle continues with more and more new ventures being announced every day.
In some cases, even a brand which has been built up through decades of investment and nurturing, is put at stake. Take the case of "S. Kumars", a highly trusted and respected brand for its textiles, suiting and garments. It recently announced its foray into the Web world. The working model is very simple. Anybody with a capacity to invest about $3000 is asked to open a pay phone booth allowing public access. This set-up will subsequently also become the delivery point for the merchandise sold on the company's e-commerce site.
The only catch is that this merchandise will be bought because of price and convenience factors. Positioning or brand value makes no difference. Is this the right kind of company to risk what it has so carefully built up before for an Internet presence?
Out Of Balance
We all know that a significant proportion of Internet transactions are value based. Of $28.8 million e-commerce transactions completed during 1998-99, only $2.72 million was from retail business. Business to business deals constitute the majority of e-commerce transactions in India.
Although technical skills are available in the marketplace, management skills are proving to be more elusive. The Web bandwagon is sweeping existing business owners off their feet, and taking many of their blue eyed boys with it. The latest to switch sides are successful managers from the corporate circuits. They are quitting from well-rewarded and secure positions to join Internet start-ups and prove themselves as good entrepreneurs.
Helping them on this path are the angel investors and venture capitalists, who are now laying more emphasis on the presence of professionals in the management team of any start-up venture. The result is that many people are switching jobs despite the fact that most of the big Internet ventures have yet to take off. And where they have taken off, they have yet to make any money.
As all the accountants, business managers, entrepreneurs, journalists, industrialists and companies get caught up in the World Wide Web, India is fast pushing itself into an unbalanced nation, with the majority of its skilled workforce looking only at the IT industry and Internet revolution for their source of jobs.
In spite of all-pervasive involvement in the Internet world, only three Indian companies are listed on NASDAQ, compared to 97 companies from the tiny country of Israel. Israel has achieved this growth outside the Internet world. More than 50 percent of Israeli companies are from non-IT sectors, but most Indian companies are from the IT sector.
It's fine to rely on technology-based growth, but it does need to be well balanced. The current haphazard growth could fall flat on its face, or leave the country in a permanent slot at the lower-middle level of the value/revenue chain.
Anju Govil is a Web developer based in Bangalore, India.
Penton Media (an associate of internet.com) organizes India's premier Internet trade show - Internet World India 2000, September 27-29, New Delhi, India. For more details visit http://events.internet.com/
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