'The IT industry's growth has been lopsided'

Q&A/BHASKAR PRAMANIK

The rapid growth in India's IT industry has been a source of both wonder and concern. Can it be sustained? Where can future growth come from? Where does the balance lie in the open-source versus proprietary software.

Bhaskar Pramanik, managing director of Sun Microsystems India, subsidiary of the $12.5 billion Sun Microsystems, one of the champions of the open source ideology, discusses all this and more in an interview with Business Standard.
Excerpts:

The Indian IT industry has grown tremendously, and the feel-good factors have only added to it. How do you view this development?

The sector is extremely dependent on one market "" the US, which recently accounted for over 65 per cent of total Indian software exports. The UK came in second with a 14 per cent share. Large parts of the world remain under-exploited by Indian firms.

For example, France (0.58 per cent), Germany (2.58 per cent), Japan (2.5 per cent) and China (0.05 per cent) represent important markets where much more can be done.

Taken from the perspective of industry verticals, market growth over the last few years has been lopsided. Financial services (35 per cent), telecommunication (15 per cent) and manufacturing (12 per cent) accounted for the largest shares of software and business process outsourcing (BPO) revenues.

Important verticals such as healthcare (3 per cent), retail (4 per cent), utilities (2 per cent) and government (1 per cent) remain to be developed as growth markets.

Given this over-dependence on a single market, how do you think the Indian IT sector should develop from a global perspective?

The development of the Indian information and communication technology (ICT) sector is unbalanced across major lines of IT services. Software and services accounted for nearly 65 per cent ($ 4.95 billion) of Indian exports. IT-enabled services, including BPO, and R&D services came in next with 19.4 per cent ($ 1.49 billion) and 15.8 per cent ($ 1.21 billion), respectively.

From a global perspective, India has a significant presence in only two of the 10 major IT services "" custom application development and application outsourcing. Recently, India had a global market-share of around 14 to 16 per cent in these two service lines. However, these service lines account for only around 10 per cent of the global IT services market.

In other major IT service lines "" such as systems integration (accounting for 22 per cent of the global IT services market), IT outsourcing (18 per cent), packaged software installation and support (13 per cent), and hardware support and installation (13 per cent) "" India's market share is less than 1 per cent. While most leading Indian ICT companies are poised for rapid growth, few have invested in creating their own intellectual property (IP).

The revenue potential of native IP is illustrated by comparing the revenues per employee of Microsoft (approximately $ 5,60,000) and Infosys (approximately $ 59,000). If we have to see exponential growth in this industry, we should increasingly focus on this crucial aspect in an attempt to upgrade ourselves.

What do you think the Indian government should do to get more traction into this sector?

India currently spends a small fraction of its GDP on IT "" about 1.1 per cent "" when compared with the US, which spends 5 per cent of its GDP on IT, or France, which spends 2.7 per cent. The level of hardware penetration in Indian businesses is also low.

At an aggregate level, the entire segment of hardware, peripherals and networking comprises around 22 per cent of the total Indian IT market. As a benchmark, hardware constitutes about 85 per cent of China's IT market.

With state governments taking initiatives towards e-governance and facilitating citizens' interaction with various government departments, there is bound to be growth in the IT industry.

Coming to the ever-raging debate on proprietary and open-source platforms, which do you think is ideal for today's customer?

Our business philosophy is open standard and open programming interfaces, which increase the value of Net-based solutions and create a large market for all players. It is a myth that one should stick to a single platform.

Total independence is still a dream in today's IT world. One should clearly understand that any enterprise cannot survive on just Linux. Inter-operability is the key and vendors should look at providing solutions that are compatible and more importantly, scalable to enterprises.

Given this, what is Sun's strategy to grow its market in India?

Our focus is clear. We ensure that network solutions are available to anyone, anywhere, anytime, using any device. Our solutions encompass a range of network servers, data storage systems, engineering workstations, desktop appliances, micro-electronics, software systems, service-delivery applications, cross-platform technologies, consulting and support services.

We are making significant investments in transferring technology and developing skills and services to help Indian organisations deploy the Internet for business advantage. Our iForce initiative addresses a company's business objective by helping reduce risk and time for the implementation of solutions that help lower the cost of ownership and increase the productivity of their assets.

In partnership with the department of electronics, Nasscom and CMC, we have invested in setting up India's first Java competency centre in Hyderabad. Our India competency centre, which is the first in Asia, provides core competency in support of Sun's engineering operations such as Solaris Operating System, network security and so on.