Though the software industry will post robust growth inthe new millennium and continue to provide good returns to the share-holders, there are many new entrants whose aim is just to capitalise this opportunity for short term gains, they say.

"While it is difficult to generalise on reputations, somecompanies have larger capital base and funds for shifting into new areas like web-based solutions, while others having lower Financial muscle may fail and quit the scene," says P Krishnan of carlson investment management (far East).

With Y2K (millennium bug) business coming to an end, thecompanies will have to move to electronic-commerce or internet solutions, which could prove a difficult task for firms having a low level of investments, he says.

Though Indian companies are healthy enough to face anychallenge from other countries, one needs to view some of the newer companies that have sprung up with a little scepticism, feels Sukumar, fund manager at the Kothari Pioneer Asset Management Company.

For achieving sustained growth, software companies have to build strong businesses and possess organisational strength to face new challenges, Sukumar says, adding those failing to do so may collapse or get merged with larger players.

Web-based solutions is the future direction that software business is bound to take and opportunities would abound there for the strong players, feels Krishna Kumar of Anush & Company here.

There are also such promising fields like euro financial system solutions where Indian firms can reap a rich harvest in the coming years, Krishna Kumar says while expressing the need for tougher regulations on these firms like in the US

It is too hypothetical too talk about regulations similar to developed nations coming into force in India as even the Securities and Exchange Board of India (Sebi) has given no indication in this regard so far.

However, Sukumar is of the view that several software companies had adopted world class accounting standards besides bringing in more transparency in their books after witnessing the success of Infosys Technologies.

"It is process discipline and management practices that would ensure sustained growth and good profit margins in the future," he says while pointing to the good market acceptance of Ramco Systems and others.

The robustness of the Indian information technology (IT) sector could be guaged from the eagerness among global majors like Microsoft, IBM, Compaq, Novell and Oracle to set up their development centres in the country, Krishna Kumar says.

However, Sukumar is of the view that since exports mainly focussed on the group of eight developed nations, any negative developments vis-a-vis political relations with them will have an adverse impact on the Indian companies.

Referring to fears expressed in some quarters about the spurt in Chinese software, the analysts said the growth rates in Inia would be substantial enough to negate the threat from across the border.

"The demand will be so vast that even China's entry into software exports will not make a significant impact on Indian companies. Our expertise is of global standards and it would be virtually impossible to topple them," says Krishnan.