'Recession Set Premise For Vendors To Look At Their Own Backyard'

Asia Pacific’s enterprise software market revenue is forecast to reach $ 22.1 billion in 2010, posting 10.2 percent growth, according to Gartner. Biztech2.com finds out from Asheesh Raina, Principal Analyst, Gartner, where India stands in these numbers and why.

What do you think will be the main reason for growth in software spending in India?

The reason why Gartner is predicting this growth is because this market is an amateur market. We are still working on basic technology and there is a void, which needs to be filled in. Indian companies are now entering the global market in a big way. They cannot afford to be left behind.

Also, as companies start realising this fact more and more, they become more aware of the kind of investment they need to make as far as their IT infrastructure is concerned. This they have started doing in a big way. At this moment, IT is one of the areas that companies are spending huge time and effort on.

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Even the SME sector, which is growing in the country, is putting a major part of its earnings in making its IT infrastructure robust and is thus, becoming quite tech savvy.

Why has the volatile economy impacted the application software segment more than the infrastructure software segment?

It has impacted both more or less in the same manner actually. The only difference is that the impact on the application software segment was felt more strongly because there was no change in the pricing strategy of companies like Oracle and SAP as far as ERP, CRM and such other solutions were concerned. This resulted in a steep decline of their demand.

The reason why there was no immediate change in prices was because these companies allocate a specific budget for these solutions for a financial year and go through a cycle. By the time they got down to altering their pricing strategy, the recession had already hit deep and made a mark in history.

Apart from this, it is safe to say that both the segments have been hit equally badly.

The Gartner report related to APAC software spending says ‘China and India continue to benefit from a large domestic customer base and government stimulus packages, as well as relatively low market penetration’. Please explain what ’low market penetration’ means.

I will explain by giving the example of Internet penetration here. For people like you and me, working on the Internet has become something of a second nature. However, the percentage of such people is quite less compared to the potential that this platform offers. Bandwidth is still an issue and so is the fact that remote areas still do not have access to the Internet. This leaves a lot of potential customers out of the reach of companies. In South Korea, for example, there are Internet kiosks everywhere. People grow up with such technological benefits there, which is not the case back home.

Therefore, this low market penetration provides one more opportunity for companies to exploit and grow their business.

Do you think companies are realising this potential?

Like I explained earlier about the various opportunities that India as a country presents, this potential has been realised by companies and the government as well. It’s not as if they have suddenly woken up to this reality, it’s just that they have more resources and more inclination to work towards this direction now. This recession made companies realise that there are ample of opportunities in their own country. We have seen companies working with the US market take a U-turn and give their own backyard the attention that it deserves. This was initially the focus of legacy companies only. The marketing strategies of vendors have changed and are now more focused on the domestic market.

Various public-private partnerships are also an indication of the potential of the Indian market. For example, TCS and the government of India have come together to provide passports to citizens in a fairly smooth and easy manner. Examples like such will become more common in the future.

Why does Gartner feel that data integration tools and virtualisation software will have the fastest CAGRs in the next five years?

As far as data integration tools are concerned, the reason for the growth of this segment will be the explosion of data that we are seeing these days. The integrity of this data is of utmost importance. For example, let’s take the Unique Identification project into consideration. The data that needs to be generated for this kind of application will be huge and one has to make sure that the data is not replicated, which can give wrong analysis. Similar kinds of applications will need to be deployed by institutions like banks as well. In case of retail as well, they need to have clean data. So that with proper analysis, they can target their customers well and also provide proper customised services.

As far as virtualisation is concerned, this technology is defining a new paradigm of growth in the IT sector. It reduces the space required for the entire IT infrastructure and makes optimum use of this infrastructure. This means less expenditure for a company, which is what they are always looking to achieve anyway. Also, the fact that the cost of licences comes down, doesn’t hurt anyone.

Gartner also predicts that Web conferencing and project and portfolio management (PPM) are slated for high growth. Which factors do you feel will drive this growth?

The CAGR of PPM will increase for the simple reason that in developing countries like India and China, there will be a lot of focus on infrastructure development. Primarily, engineering and construction companies are the ones who use PPM. However, we have seen that apart from these traditional users, there are others who seem to be interested in this technology and are deploying it as well. Companies developing new products will use this product to improve their resource allocation.

Web conferencing is an effective way to save money. Companies, instead of spending money on travel to different locations, are turning to Web conferencing to conduct meetings and such other collaborative tasks.