`Firms now know they need e-com to survive'

Vishwanath Kulkarni

BANGALORE, July 29

WHILE 1998-2000 was the period of the `Internet Revolution', when the infant Internet companies received market valuations that were the envy of much older firms, 2000-01 was the year of `reality', with these valuations crashing dramatically and bursting hopes of overnight wealth.

In India, and around the world, there is currently a large degree of scepticism on the Internet's potential for value creation.

In an interview to Business Line, the Nasscom Chairman, Mr Phiroz Vandrevala, spoke on the relevance of `E-biz India 2001' in this scenario.

After the dotcom bust, what is the e-com scenario like?

The e-commerce story is far from over. The Nasscom and Boston Consulting Group joint study suggests that e-commerce related spending would become the most significant part of IT spending worldwide.

Global investments in e-solutions are expected to go up to 69 per cent of total IT services spending in 2005, compared to 32 per cent in 2000.

There is a growing realisation that pure-play dotcoms in many industries are unlikely to be successful. And incumbents have struck back with their own plans, for example industry-backed exchanges and private marketplaces, to claim the value that pure-plays attempted to carve out for themselves.

There is also the realisation that online market sizes are far smaller than anticipated and cannot support the large number of ventures competing to capture a share of the opportunity.

Will e-commerce now be dominated by brick-and-mortar players e-transforming their businesses, with no role for pure-play Internet companies?

There are vast differences among Indian corporate players in their understanding of e-commerce benefits and readiness to capture the opportunity.

However, there is a growing realisation that corporates who do not implement e-commerce could see a permanent erosion of their competitive positions.

The industry is talking about the $3-trillion e-biz market. How can India tap this market and which are potential areas?

The Nasscom-BCG study estimates the worldwide market for e-business to grow to $640 billion by 2005. The study projects a $9-billion global business opportunity for Indian IT companies from this market.

The domestic market for e-solutions is expected to grow from a base of $65 million in 2000 to $500 million in 2005.

To capture the opportunity, Indian IT companies will need to build domain expertise. They will also need to modify their marketing and implementation approach to suit sales processes of e-solutions.

Companies will need to prioritise marketing targets and accordingly choose areas where they could build expertise.

What is the future of e-commerce in India, given the lack of infrastructure and the fact that some of the legal issues still have to be tied up?

E-commerce in India is moving from potential to reality. The Nasscom-BCG report has predicted rapid growth in e-commerce transaction volumes over the next five years.

Due to the multiple barriers to e-commerce adoption, overall estimates for e-commerce transaction volumes vary from a low Rs 1,20,000 crore to a significant Rs 2,70,000 crore by 2005.

As a first step towards plugging the existing gaps in the current legal and regulatory framework, the Government should form a working group dedicated to keeping IT laws relevant and up-to-date as has been done in the US.

What is Nasscom's latest estimate of Indian sotware exports this year, in view of the slowdown continuing to affect operations?

Nasscom estimates that exports for the year 2001-02 will reach Rs 40,000 crore, a 40-per cent growth.

Is there any revision in the $50-billion export target by 2008?

No. The estimates of $50 billion are based on a CAGR of 35 per cent per annum and the industry is equipped to meet these targets.

What are the new technology areas that Indian software companies could look at to improve revenues? Has Nasscom done a study on this?

There is a huge business opportunity to be tapped in the emerging e-commerce, wireless and other WAP-enabled technology, various areas of embedded software such as consumer electronics, SOHO and home networking, industrial automation, automotive, real-time operating systems, semiconductor design and mobile computing.

The Indian IT industry has already established its niche in the services sector globally. It needs to invest and emphasise on R&D and new technology development in various sectors such as healthcare, education.

Picture: Mr Phiroz Vandrevala