What would you identify as the major trends in the Indian software industry today?

We have a lot of companies trying to move up the value chain today, and in the process vacating space for other companies and also other countries to occupy the area that these companies are currently occupying. I could mention companies like TCS, Satyam, Wipro, Infosys and also RS Software.

Moving up the value chain does not necessarily mean going in for products.The focus is to move from a primarily horizontal focus where you are identified with one or a set of technologies to a vertical focus where you have domain knowledge about an industry. While a horizontal focus enables an IT company to cater to specific technological requirements of clients, a vertical focus requires understanding of the client's business with a view to recommending and implementing solutions for the client's needs.

There will also be a movement down the value chain -- providing IT-enabled services, essentially back office operations that will employ a lot of the manpower that are being trained by the Indian IT-training industry. In India today all these layers are co-existing. We will also need to build a domestic focus for our industry. Although margins in domestic business will be lower, in the long-term there will be appreciation of business in this area too.

Do you think Indian companies should go in more for products?

There are two models to follow--the EDS, started by RossPerot and now owned by General Motors that is engaged in the systems integration business and Microsoft, both with turnovers or around $12 billions each. While Microsoft is a product company and it employs around 16-18,000 people EDS employs 90,000 people. So naturally with the kind of manpower available with us in India, cheap manpower being one of our strengths, we should favour the EDS model that employs more people. As companies gain domain knowledge and become more vertically focussed they will also be able to come up with niche market products.

India obviously has a comparative advantage in cheap labour, and in services. But while countries like China are currently not a threat to us, that will not remain the case, say five years from now. So we have to plan ahead, which is the reason why moving up the value chain is important.

What do you think about the present market valuation of some of the top Indian IT companies?

In a certain bandwidth valuation is perhaps much on the higher side. Yousee there is too much money chasing too few stocks or companies. In fact, even now in India money is not a problem for people with a good business idea. In the recent Nasscom seminar at Mumbai of the 600 delegates around one 100 were from various financial institutions, venture capital funds and angel funds.

A company like RS Software already has all the major foreign financial institutions making presentations since we announced our growth plans. The high value of some IT stocks are, however, not something unreasonable -- after all HLL enjoys a premium because there is some difference between it and the others. I feel there are at least 10-15 other IT companies whose stocks are not rated properly today and there will be a re-evaluation of these companies within the next 6-12 months.

So what do you feel is the way to value a software company?

Pragmatically speaking one has to look at the management bandwidth of the company and the direction the management is taking. Then of course you must seehow committed the management is to that and whether the business plan to achieve the goal in place. The areas of focus for a company is another important area and has to be matched to industry trends and of course one must find out how well the company is managing its resources. Most of Indian IT businesses are run by technology-entrepreneurs -- people who are strong on the technology but may not understand all the business processes. So we need business entrepreneurs to come up in the IT sector.

Futuristically speaking -- say 24 months from now the human resource with a company will also be very important. Some companies have already started doing this but the processes are not in place for most of the industry.

What were the implications of the Y2K crisis for the Indian software industry?

There are two factors. First, we kept on saying that Y2K will bring a lot of business for India and that did not happen. In fact even companies like Satyam and Infosys at one stage only got around 20 per centof their revenues from Y2K business and in India I do not feel we were doing more than a few thousand crores of Y2K work.

The Indian software industry has grown by 50 per cent every year irrespective of the Y2K business. The other things is that in many companies the internal systems people were put on the Y2K business and most other things were put on the back burner for a while. Post December 31, 1999 other projects will come to the fore and that will mean more business for the Indian companies.

What do you feel about the manpower situation in India?

There is a lot to be done. As an employer we still have to recruit engineers and train them at our own offices. A software company would like to concentrate on development work and not spend so much time or money on training but we have to do it in India and there is no other way. The people coming out of the NIITs and Aptech are not directly usable by our industry at our level -- although they will find jobs with the IT enabled services industry.But if you are talking about training of manpower qualified for a job at TCS or Infosys or RS we are in a very weak position.