'High-speed telecom infrastructure hinders growth of on-demand software in India'

Even as solution vendors are going gung ho about on-demand software market in India especially for the SMB sector, a majority, unlike in the APAC region are skeptical about aggressively pursuing these cost effective solutions to increase productivity.

The on-demand software market in India will open up by the end of this year says Subbaraman Iyer, Director - ICT, Frost & Sullivan in an exclusive interview with Usha Prasad of CIOL.

Excerpts from an interview:

CIOL: What are the factors responsible for the growth of on-demand software among SMBs in India?

Subbaraman Iyer: The first and foremost factor that spurts the growth of on-demand software is its deployment, and secondly the quickness of deploying it. But it is unlikely to be mission critical in any sense. Here the usage of software is purely limited to few people for a specific activity and it is more easy to make updates and changes in the software configuration.

CIOL: The on-demand software market in APAC region has recorded 23.2 percent growth in 2006. Will India witness a similar growth?

SI: Yes, we do see a growth in India. However, the major factors that prove to be impediments are - robust high-speed telecom infrastructure for enterprises. The software companies have not really tied up in terms of business relationships with the telecom companies.

In India, the software and telecom infrastructure companies have not come together and developed a common, mutually acceptable business model.

Agreement between software and telecom companies is yet to happen in India. It has not received any significant traction.

The drive has to come from a small software company, who is looking for an innovative way to cover the entire market coverage in India.

CIOL: The CRM software is dominant in APAC. What's the scene in India?

SI: In India, it can be anything in terms of the SMB sector. The software for SMB penetration is very minimal. Given the size of the Indian SMB sector, the penetration level is not even more than 10 percent. It can be from accounting to CRM to HR systems to anything. So any package in India, on a host of things, will actually be a real big money spinner. It throws up a whole new big market.

CIOL: What are the projections of various applications in India vis-a-vis APAC region?

SI: When you consider the APAC region, be it Korea, Australia or Singapore, they are far advanced primarily because of the telecom infrastructure. The speeds as well as the performance of the telecom infrastructure is taken for granted.

When that is done, in three to five years from now, I see India becoming probably the biggest market given the number of businesses in India. The Indian SMB business is the sum total of the business that adds up in Australia, Korea, Singapore or even Malaysia. From a size point of view, the potential is huge. In five years from now I see India actually beating all these markets.

CIOL: How focused are the BFSI and retail segments in India?

SI: When it comes to the retail sector in India, other than using point of sale terminals, they are not using other applications and services available. They are not doing any inventory management nor are they looking at merchandising. They are not even looking at supply chain management on the retail side. The retail sector in India is even now an unorganised sector. I don't see much of these things getting into India.

As regards solutions for BFSI, it is used by second and third tier people for HR or some other non-critical applications with branches in different places. The biggest users of these solutions in India would be the medium sector - in the areas of manufacturing, services industry and others.

CIOL: What are the factors that are hampering the on-demand software growth in India? Steps to tackle the same.

SI: Basically, the software vendor who is offering a host of demands should be able to guarantee security. While security will be a big issue, availability of the tools and being able to price that at an attractive price point is a challenge. Availability, connectivity and attractive price point plays a major role for any end-user who feels that along with internet and other tools he can go in for other applications at an implemental cost.

I don't think people have taken the leap of faith in terms of putting such applications and marketing it. It is early to say what are the right price points for India. Looking at the volumes and the potential market, which is so high, the vendors can price it much lower than the international market and still make loads of money.

CIOL: What are the evaluation parameters for on-demand solutions?

SI: As long as it meets 80 percent of your needs and it has a good price point and ease of use, you can deploy it quickly. Ultimately it is a question of how easy it is to use and how often it is available. There should be no changes that needs to be done to the business environment. Instead of using a software in your local server, you are using it at a hosting company, that's it.

CIOL: How do you assess the growth of on-demand software market in 2007?

SI: The APAC market is growing at an alarming speed. The four countries are growing at the rate of 30 to 50 percent per annum. However, India will get started with the whole process probably in late 2007.