Dataquest forecast 2000

The Internet will continue its boom as India enters the new

millennium. So will the Videsh Sanchar Nigam Ltd. (VSNL), though not without competition

from the private Internet Service Providers (ISPs). While Apple may not see too many

takers, Dell will make a second attempt. These are some of the 20 projections made by

Dataquest in its edition dated August 15, 1999.

Calling the current year as The Year of Hope, Dataquest has

said that business would be more than normal for the IT industry in the next fiscal. We

give below each of the 20 forecasts made by the magazine:

Dell will make a second attempt this year



Not exactly a forecast. Fighting for the No. 1 slot worldwide, it would be highly
incongruous if the Indian PC market does not get to see 'direct from Dell.' The pressure

on Dell is that if it has to sustain the growth rates that it has set for itself in India,

then there is very little choice the company has. The burgeoning Indian PC market, which

will finally cross 'the one million mark' in the current year, will be too large to

ignore. Questions that beg answers are: Will Dell go direct in India too? How will it lick

the infrastructure issue? Where will Dell pitch itself, in the MNC brand segment or in the

VFM segment? Will it partner with locals here or will it go alone? Having conquered the

Dragon, will it ride the Tiger, by its tail?

Will the Apple season bloom?



Unlikely. Apple and Mac have lost too much blood for too long. Despite iMac's debut last
year and aggressive pricing, the end result was not very rosy. If anything, Apple's market

share is likely to dip further as its unit shipments will grow slower than the overall PC

industry. True, its global fortunes are swinging, but the same replicating itself in India

is a fantasy that even its newly appointed high-profile chief, Naren Ayyar, may not like

to have. The mandate for Apple in Y2K: stop the bloodletting, retain old faithfuls like

publishing and end up with a black line. Not very ambitious, but realistic.

The iterations of internet



So what is the big crystal ball gazing here? Sure, Internet will boom, as will
VSNL, will be the major service provider as well as infrastructure provider. Not that ISPs

will keep silent. There will be a proliferation of ISPs in all shapes and sizes and the

big ones a la Satyam, will even set up their own gateways, to escape the VSNL clutches.

However, VSNL's lead is likely to increase, what with the company going for major

expansion plans and its subsidiary, VSSL, getting its act in place shortly. Internet costs

will come down sharply, but with an eye on the bttomline, all ISPs are likely to give

preferential treatment to corporate customers. The latter will also be the cynosure of

cable modem makers for 'internetizing the enterprise.' The much-hyped Power Grid and

Railways carrying Internet traffic may not be realized in the current fiscal.

Channels will become the biggest marketing

differentiator



With cost lines pegged along some perceived benefit chains, channels will make or
mar a brand. The possible exception is probably going to be Dell. Companies like

GPTL,

ERIL and Redington will grow dramatically, with GPTL crossing the Rs 1,000-crore mark!

Channels will start impacting the software business, too, as Microsoft, with very strong

affinity to channels, will prosper. If anything, ceteris paribus, channels may actually

have a calming effect on margins which have been heading southward for the past two years.

Most of the pure distribution companies will need to up their investments in systems to

push their costs downward. No major new entrant is expected, as these three companies will

neatly carve up the country amongst themselves. So much so, that even some of the national

vendors will have the need to supplement their channel marketing efforts with pure

distribution companies. Value chains will go up. Much more sophistication will come into

the channels as the basic structure of the channels and the dynamics within the channels

in India.

From two to three tires, oops, tiers



The year 1998-99 has shown clear evidence of corporates and the government
realizing the need for IT applications to enable business productivity. As the deployment

of applications continues into 1999-00, supported by resurgence in business activity,

systems architectures will exhibit increasing maturity. The medium and large enterprises

will move from two-tier client server to three-tier client server architectures. Those

with existing three-tier client architectures would be deploying applications across the

web and web-enabling their existing application. This will also tie in with the

enterprises' dream of finally tapping the web for commerce and not just for kitsch.

Low on cost, high on acceptance-----AS/400



The IBM AS/400 server will continue to be a strong competitor through its lower
cost of ownership against Unix competitors. As deployment of applications like

ERP, data

warehousing and messaging continues across the Indian enterprises, this requirement will

become increasingly important and apparent, especially in medium-size

organisations. This

is also the year when IBM's strategy of demarcating the market for AS/400 might just bear

fruit. Peddling the e-commerce route, IBM and AS/400 might just surge ahead in the

corporate web-enablement space.

Swear by SAP



Sap will continue to be the dominant ERP player in the domestic market. The product
continues to enjoy unprecedented top of mind recall, acceptance and demand in spite of its

cumbersome and prolonged implementation, high cost and the somewhat exclusive approach

taken by the vendor. Bulk of SAP's customers will be the large enterprises, while at the

lower end, Oracle will set a pace which might become a tad tough for others to emulate.

With Oracle Applications certifications increasing at a faster pace than

Baan, the

penetration of Oracle Manufacturing and Financial Application may soon exceed Baan and QAD

in terms of user licenses. Oracle is likely to give QAD and Baan a run for their money for

the second position. At the lower end for the typical SME segment, few of the above will

find acceptance. Holding a sway on the market at the low end will be companies such as

Eastern Software Systems and Radix, which enter at a much lower cost and are faster to

implement. In face, pressure on the middle-tier vendors such as Baan and QAD will also be

from these vendors.

Web, web and webs in the enterprise



After all the above predictions, this is only to be expected. The top technologies for the
Indian enterprises would be web application development, mail and web server management,

extended ERP across the web, e-business and e-trading applications, OLAP, data warehousing

and mining and other related technologies. While the prognosis does appear good presently,

exactly how many get real benefits and how many get carried away by the rhetoric will be

the acid test for the industry. This is probably one opportunity that has the potential to

put the Indian IT - both suppliers and users - on to a new trajectory of growth. It is

possible that some of the early birds might become the harbingers for the new globalised

Indian corporate future. Nonetheless, a shared responsibility.

You are now entering Microsoft country......



With the huge number of Microsoft certifications in the country, Microsoft software would
be the preferred application development environment. Independent software vendors would

continue to develop applications across SQL Server, Exchange and NT environments. In

medium and large enterprises, NT would continue to edge out Unix and NetWare. However, in

the small enterprise user segment, NetWare appears to be holding its ground. This is

likely to get strengthened as and when NT 5 (Windows 2000) comes out.

Lotus 5, 4, 3, 2, 1....take off



The share of Lotus Notes in the messaging, groupware and collaboration space will increase
through growing acceptance of Release 5. For much of the year, Lotus may be the preferred

collaboration platform, with MS Exchange being unwieldy in comparison. That is only half

the prediction. The other half is if Microsoft reads this prediction and decides to take

corrective action. Not exactly known for defending its turf against Microsoft, Lotus may

just capitulate the advantage. Nevertheless, the crystal ball seems to be spinning the

Notes way furiously. Lotus will try and forge stronger OEM relationships for Notes in the

current year to take advantage of the bundling deals that may tilt the market balance in

its favor.

Second harvest of the networking crop



There is now a second wave of demand for networking professionals in the country. The
first was with the advent of licensing in the telecom raj in the early nineties and the

dismantling of technology import regimes. But, this time around it also involves the sheer

demand for Internet professionals. This has been thrust upon the industry with the opening

up of ISPs and the Internet application market space. To realize this, consider the 50 per

cent-plus revenue growths reported by most networking majors in 1998-99, in comparison to

single-digit-and even negative-growth figures of the previous years. Spells great

opportunity for the Novells and Microsofts, besides the quintessential training vendors

such as NIIT and Aptech.

And the Oracle book of gospel may soon be no more



In the RDBMS market space, Oracle will continue to maintain its leadership
position, thanks to the tremendous brand loyalty it enjoys in the Indian enterprise.

However, with powerful ease-of-use features, lower cost and large mumber of certified

professionals, SQL Server will continue to make inroads into the RDBMS enterprise space,

eroding Oracle's share. The real fight will again be in the SME segment, where SQL will

take on Oracle. This is a territory where Oracle does not really have any distinct edge.

Price will be the determinant, and if that is true, then Redmond will triumph over Redwood

Shores.

The networking industry will continue its forward

march



The state governments of Andhra Pradesh, Maharashtra and Karnataka have shown keenness to
invest in the networking infrastructure. Close to 60,000 bank branches are waiting to be

networked. Private companies are putting their networking infrastructures in place. All

these activities will see the industry posting a growth rate of 50%-plus. Higher brand

recall and excellent relationships with all the major vendors will see that Cisco

continues to be the numero uno player in the industry. It will continue to be the biggest

player in the routers segment though tough competition is expected from increased number

of router players and the Layer 3 switches.

The mainframe era----part II



With the global relaunch of the IBM S/390 with inbuilt TCP/IP and Ethernet, the
Indian business user and the GoI appear to be determined not to be left behind this time

around. The tremendous capability of this machine to scale across the enterprise has made

it a serious contender in corporate and government decision making. What is also aiding

and abetting this effort is the need for large databases in the service provisioning

business, both amongst the ISPs and the large enterprises. As the Internet adoption

explodes across Indian businesses and homes, outlook for mainframes will increase

proportionately.

The middleware surge



With distributed computing becoming the norm in these times, technologies like
COM/DCOM,

CORBA and Enterprise Java Beans will see tremendous growth. Companies like Advanced

Technology Labs and Organizations like the Component Management Group and STPI have been

working aggressively for some time now and the number of professional from India will keep

rising in the coming years. The only problem here is that while the demand is rather spelt

out, there appears to be a big shortfall in the number of people being trained in this

area.

More deployments in the WAN segment



The WAN segment will see the growth in enterprise switches and routers. However,
with internet growth, the hot product for the coming years is the remote access server

(RAS). Modems, too, are expected to ride on the Internet bandwagon as the current year

will see the full impact of the few private ISP operations. In the VSAT segment, the

industry is expected to get out of the bandwidth crisis with either the launch of Insat-3B

or policy decision being taken on allowing the Ku-band, as per the Telecom Policy. Add to

this the expected increase in spending by industry and government and the segment seems on

a firm footing. However, the total benefits are expected only by fiscal year-end.

Will Merced make magic?



While Intel is already setting off a hype wagon extolling the virtues of Merced,
the current year will not see any major impact of Merced, for two reasons. One, it will

come too late to have any significant impact on the purchases in the current fiscal. Two,

as it will be the first 64-bit processor from Intel, there is a distinct possibility of

some ironing out that might need to take place. What will create magic will probably be

McKinley, which will be the second generation after Merced, with all debugging done, which

willtake 64-bit computing to a different plane. The likely casualties: Alpha of Compaq and

PARISC of HP, IBM may yet survive with Power PC with AS/400 and RS/6000 doing well and

Apple playing a good second innings. Merced will set the stage for the battle for 64-bit

and, unquestionably, Intel will dominate this scene for the near term, Impact on Indian

IT: insignificant for 1999-00, marginal for 2000-01.

Life after Y2K



Growth will continue, although euro is not likely to be the kind of revenue booster as Y2K
was, simply because the US is far less complex a market than the European Union. A handful

of Indian companies will take any advantage of the euro market, and those that do will be

simply doing on-site development. However, the momentum of the services export will

continue, moving past the $3 billion mark. Apart from vanilla services, IT- enabled

services will become significant as an opportunity for Indian service providers to tap

into. Japan will emerge as a significant market, especially for HCL and

Wipro.

Long live the extranets, down with Intranets



The Indian enterprises have bypassed the Intranet stepping stone in its start and stopped
progress along the application deployment road map. With no strong drivers and enablers in

the domestic workplace, Intranets have not been viewed as a necessary competency test bed.

With reducing costs for WAN deployment and corporate Internet access, the Indian

enterprises appear to be headed for corporate extranets and associated e-business

technology adoption.

Software management will be the buzzword



The Indian IT market space has now started showing signs of mature usage on the
enterprise software front. With some top-notch enterprise knitting their systems with

high-end software applications, together with the maturing developer movement which

requires meticulous processes, the needs for managing the applications and for a

"factory approach" to development will be felt. This will create more room for

players like Computer Associates, Rational and PVCS/Merant.

DATAQUEST