The Hindu Business Line : Time to venture out!

Key software vendors in India have been, of late, focussing on the multi-billion dollar US retail industry. And it looks like this is going to be one opportunity that shouldn't be missed.

Over the last couple of months, some key software services vendors in India have been hogging media attention for focussing on the multi-billion dollar US retail industry. In late December 2003, Infosys Technologies shot into prominence by announcing a solution for Radio Frequency Identification (RFID), an Automatic Identification and Data Capture Technology which aims to help improve better product tracking and inventory controls in a retail environment. It is also expected to replace bar codes that are used currently and revolutionise supply chain management in the years to come.

And this concept can also be applied in the other verticals such as manufacturing or defence. A month earlier, Wipro also announced that it will be involved in developing business applications and data analytics for the retail industry using RFID technology. The buzz surrounding this technology has been triggered by the recent announcement by Wal Mart and US Department of Defence which has mandated all its vendors to be RFID-compliant by 2005.

Companies such as Cognizant Technology Solutions, Tata Infotech or Polaris Software, which are already offering solutions and methodologies for different aspects of the retail vertical, will also be poised to ride on this bandwagon.

Preliminary estimates suggest that RFID may emerge as a $1.5-3 billion opportunity for the software services opportunity, both in application development and embedded technology such as chip and product design services.

As this spectacular opportunity presents itself, it may be pertinent for Indian software vendors to explore two larger questions:

Y2K kind of opportunity: Since the project management capabilities of Indian software have already been established in the global markets, Indian vendors are well positioned to seize the prospects for RFID initiative.

Though the RFID technology has been available for years, the lack of standards and high cost of the technology have hampered its adoption. Since the Indian vendors continue to enjoy a huge cost advantage, bagging large-scale application development and embedded software contracts will not be a difficult proposition.

But if the Indian like-minded vendors (focussed on retail) have to fully capitalise on this potential, they may have to consider aligning their interest together, probably under the Nasscom banner.

It may be recalled that Nasscom, the software association had formed a special interest group consisting of around 50 members to target the Y2K problem. The Y2K projects had to be executed to pre-defined specifications and to stiff deadlines.

Between 1996 and 1999, India earned almost $2.5 billion from Y2K projects alone.

A similar alignment this time around for retail may ensure that the industry is in a good position to bargain in this emerging growth opportunity.

Secondly, it will also provide some cushion to neutralise the fear of loss of revenues due to an outsourcing backlash in IT-enabled services.

Offshore packaged solutions market: With Infosys announcing a solution for RFID adoption, it has revived the age-old debate of whether India should focus at least on becoming a base for solution-based offerings in different verticals. Since the pure products space has been eluding the Indian software industry, with a few exceptions such as i-flex solutions or Subex Systems, it may be interesting to explore whether packaged solutions can prove to be the next best alternative. It may be recalled that between 1993 and 1996, there were a clutch of companies such as Tata Consultancy Services, Infosys, Mastek and Tata Unisys among others which offered major offshore packages catering predominantly to the export markets. For that matter, during those years, nearly 10-12 per cent of the software industry revenues were derived from offshore package exports.

However, as the industry's focus shifted towards the offshore software development model over the next few years, these initiatives died a natural death. Considering the high margins which may be embedded in these packaged solutions and since the industry is in a better shape to experiment with such strategies, it may be an opportune time for this idea to enjoy a second homecoming.

maverick@thehindu.co.in

Article E-Mail :: Comment :: Syndication

Stories in this Section
Time to venture out!

Check your tracks

Size wise

Have your way with maps

Weighing every move

Script errors

Virus in the floppy drive

`Designed' to follow

Plot the books on a big graph

Quiz

IT is India's tomorrow

Cartoon