By Mukta Malhotra

Software exports from India have been on a growth trajectory for sometime now. Consider: just five years ago, software exports accounted for just about 2.5 per cent of India's total exports and for 1999-2000 the figure is 10.5 per cent.

Not just software exports, even the number of software-exporting companies have recorded an upswing. According to a survey conducted by the New Delhi-based National Association of Software and Services Companies (Nasscom), during 1992-93 there were only eight Indian companies in the more than Rs 10 crore software exports bracket. But, during 1999-2000, there were as many as 37 Indian software companies in the more than Rs 100 crore (US $25 million)-software exports bracket and 180 companies in the more than Rs 10 crore (US $2.5 million) software exports bracket.

There is more news to cheer about. During 1991-92, offshore software development contributed just five per cent of India's software exports. But, during 1999-2000 offshore services improved their performance by rising to more than 42 per cent of India's total exports. Number of software exporters too increased in numbers to a record 1,250 companies during 1999-2000. This figure is expected to exceed 1,600 during 2000-01.

Upbeat projections
Turn to Indian software export destinations. According to a Nasscom study, during 1999-2000, India exported software and services to 95 countries around the world. The six OECD countries, USA, Japan, UK, Germany, France and Italy, together account for almost 71 per cent of the global software market. The top 25 software exporters in the world accounted for almost 61 per cent of software and service export revenues during 1999-2000. Between January and March 2000, software exports registered a 32 per cent share in India's total exports. This explains why India's software exports were not entirely dependent on Y2K.

Where do Indian software exports go from here? According to a Nasscom survey, the Indian software industry is expected to log in revenues of over Rs 39,500 crore (US $8.75 billion) during 2000-01. This will include software exports of Rs 28,500 crore (US $6.3 billion). Total annual software exports could get in the region of US $10 billion by 2002, that is by the end of the ninth five year plan.

Cohesive approach
That is good reason for the Indian software industry to feel gungho about. That does not mean the industry should overlook irritants on the ground. Some of the issues that need to be resolved are: leased circuit provided to software-exporting companies need to be increased from the 1,000 high-speed (64 kbps and above) level. There should be more two-mbps links to achieve high quality video conferencing and especially to execute remote maintenance projects.

A more cohesive approach is required from the government. For example, the General Agreement on Tariffs and Trade is expected to come up for discussion at the World Trade Organisation next year. The Government of India has played a significant role in assisting the Indian software industry to reach its present pre-eminent status. But, we still have miles to go. It is very essential that India should proactively lobby for getting trade visas.

With reason. These visas which allow software professionals to go on business trips abroad, are governed by immigration laws. As a result, countries have the right to reject without giving any reason. So, the Indian Government should proactively demand trade visas where pre-requisites are clearly defined and if the business subscribes to it, visas should not be denied. "The government should also work towards signing the double taxation avoidance treaty with most of the target countries," says Dewang Mehta, president of the New Delhi-based National Association of Software and Services Companies (Nasscom).

Exploring new markets
Not just that. The Indian software industry should explore new markets, penetrate into them and make efforts to expand in existing markets. In a bid to increase their shares in existing markets, Indian software companies should move up the value chain and enter new services. Bulk of Indian software exports is concentrated in three industries: financial services and banking, manufacturing and insurance.

According to a Nasscom report, India needs to tap export opportunities also in industries such as retail and distribution, data warehousing and extranets, professional services, groupware technologies, healthcare systems integration, web initiatives, communications, intelligent networks and data warehousing utilities.

True, there are big opportunities waiting to be tapped in the telecom software and multimedia sectors. The annual worldwide potential for software services in telecom, wireless services and other converged communication services is expected to be in the region US $ 150 to 250 billion.

Thanks to the developments in digital technology, convergence of information technology, telecom and broadcasting industries has become a reality. That means new media products and services can be made available at homes and to business segments.

The Nasscom report says that entertainment and information will continue to be the largest generators of revenue in 2008, accounting for US $50.90 billion of business. Digital content development has the potential to create three lakh employment opportunities leading to Rs 250 billion in revenues by 2008.

The Indian film industry has a large talent pool. This presents one major opportunity for Indian content-developers. There is a large market waiting to be tapped in the USA, UK, rest of Europe, West Asia and Australia. So, the Indian software industry should put in place an integrated set of country-specific initiatives such as beneficial international agreements, business development capabilities, onshore factories, strategic partnerships and dedicated offshore parks.

In a bid to target new and emerging markets, Nasscom signed MoUs with Israel, Singapore, Ireland, Mexico and Morocco in 1999-2000. Nasscom's India-Japan Software Alliance a.k.a Project Ninjas seeks to increase software business with Japan. During the FY2000, software and service exports from India to Japan was about Rs 600 crore or US $140 million.

Recently, Nasscom signed an MoU with Myanmar for co-operation in IT software and services. In 1999, Nasscom had also signed an MoU with the Israeli Association of Software Houses (IASH). Currently, the new markets being explored include South Korea, Japan, Malaysia and Australia. In the coming years, Indian software companies are expected to strike joint-venture deals and strategic alliances in Europe.

Europe apart, major software export opportunities exist in the Sultanate of Oman, Bahrain, Kuwait and Iran. Japan and Korea are fast emerging as major software partners in the Indian export market.

To capitalise on these opportunities, change in the mindset of software workers is required and efforts should be made to help them overcome their American obsession. Says N K Patni, director of Patni Computer Systems: "As Indian software companies put in more resources to train professionals in multi-lingual skills and people get a taste of life in other developed countries, this mindset is bound to change."

Focus on products
Changing mindset apart, the Indian software industry should work out strategies to consolidate export of services and gain leadership in software products and packages. The emphasis here: capitalise on the multiplier effect sale of software products has. Only then, the Indian software industry can hope to hit the export target of US $ 50 billion by 2008.

Though some Indian software companies have developed innovative software products and are now marketing them overseas, professional services and projects constitute a major chunk of India's software exports. Why this predominance of services in Indian software exports? Why are exports of Indian software products lagging behind? Says Dipankar Choudhury, vice president of ICICI Securities (I-Sec): "Indian companies are not focussing on products because of the huge marketing expenses involved. Most Indian software companies are small and capital is a limiting factor for them."

There are other reasons. Software products are a high-profit and high-risk business. Margins fluctuate widely here. They could be anywhere between zero and 100 per cent. Says Choudhury of I-Sec: "Failure is considered bad in India and a software company can earn a bad name if its products fail."

That apart, cost of software product launches might be high but these products offer major export opportunities. Says Kumar Subramanian, vice chairman of Silverline Technologies: " Indian software companies should collaborate with companies which already have a product line."