Software is becoming a subscription model

, one of the most celebrated Indian successes in the Silicon Valley, is co-founder, CEO, and chairman of the board of Jamcracker, Inc.

In 1994, he identified the potential of the internet and founded Exodus Communications. The company went public in 1998 in one of the most successful IPOs of the period.

In 1999 Chandra was honoured as the Ernst & Young Norhern California Entrepreneur of the Year. The same year he co-founded as chairman of e4e Inc., a global technology holding company and full-service operating enterprise.

He began his career in 1983 at Wipro as a customer support engineer. Chandra was born and raised in Chennai and educated at Madras University. Excerpts from his conversation with Business Standard:

What are the new technology trends in which there is strong Indian delivery capability?

There are three key trends in the market. First, software as service, price as a licence fee and a capital expenditure, is slowly turning into more of a revenue expenditure. Second, software was originally something monolithic.

In a mainframe, you had hardware and software together. Then slowly it got disintegrated into stacks and applications. But the stacks were also developed by the same companies like IBM who said they were so valuable.

Slowly you saw the emergence of the open source movement which said, if it is such a standardised component, why are people paying for it? Why don't people make use of the open source that makes it happen?

That is one of the reasons which is disrupting the whole industry today -- the migration towards Linux and associated components like LAMP (Linux, Apache, MySQL and Python).

Third, the monolithic structure disintegrating into stacks has also triggered the emergence of web services which enables application integration painlessly. How is this new technology going to be embraced and extended? One needs a deep product architecture knowledge and being able to leverage that into not just engineering services but providing engineering lifecycle services.

That is, the customer begins to treat you as part of cost. Customers are increasingly looking at not just the technology edge, but somebody who can reliably, effectively and in a cost effective manner make your lifecycle his lifecycle and help him with the changing business model, not just the technology model.

Software is emerging as a service, on demand, as a subscription model. When I get value I pay; I pay only when I make money.

What are the new technology areas of funding you will be looking at in India?

We feel technology is becoming a continuum. What was traditionally called a vertical ISV is today forced to interact with many eco-systems. What does it mean? The same email that you got on your desktop is available on your mobile.

Earlier mobile was thought of as a separate industry and desktop another. Today your technology is able to expand in a seamless manner from a customer perspective.

This technology is able to run on a variety of platforms and can be consumed globally. Do you see any difference between a customer of salesforce. com being in the US from being in India? It's the same, except that the pricing models may vary, because in India you may not be able to pay the $ 70 per user.

On a shard services platform, how do you create the personalisation and the configurable capability that allows you to treat an individual in his own right rather than as part of an organisation? That's why you see a melding of technology like identity management, web services, software on demand -- all these things coalescing into creating this 'on demand' model.

Which are the new areas of investment opening up in India?

I think India has a phenomenal opportunity. Of software and IT services, software alone is a $ 180 billion industry. Over the next four years, 20 per cent of that industry will start to transform itself into a model that is different form what it is today and which customers can start to consume as a utility computing model and paid as subscription.

You are looking at a $ 36 billion opportunity that is up for grabs in terms of either how salesforce.com is revolutionising things by eliminating Siebel, becoming the leader in the market, or how Netedge is threatening SAP in the mid-sized market.

The untapped mid-sized market which you can access with your ability to create solutions in a packaged form using open sources and vertical domain expertise.

One of our group companies is currently finding that they are able to close a $ 300,000 annual revenue deal without evens seeing the customer. They are being able to package it to a segmented vertical market that is mid-size in nature, willing to commit $ 20,000 a month to you without even seeing you or knowing who you are, based on your record.

This opportunity was not available before. Earlier, you always visualised Wipro, Infosys talking to the global 500. Today the biggest opportunity is the what I call the Unfortunate 500. Today telecom has made everything into a virtual village. Plus, you don't have to learn anything about telemarketing any more in this country. Three years ago that was not the case. That has become a core weapon for this country.

What are the specific Indian capabilities which are emerging and which will stand the Indian industry in good stead?

India is now slowly becoming embedded into the process level. Earlier we understood technology but slowly we are becoming part owners of the process through part understanding of the process.

When you are taking a customer call, doing an e-mail support or doing a back office BPO processing work you are already understanding the process that the customer is beginning to see, what are the redundant ones and what is the core that is required.

So you are able to strip off the 80 per cent which is not required, learn the 20 per cent that the customer really needs, convert it into a 'software as a services model' or a new delivery model, delivered over the net to the world.

By using telemarketing, telesales expertise and using the Googles of the world, you expand your distribution channel and become the next mega global company.

It is the biggest opportunity we have ever seen in this country, not just paid for by the hour but where you will start to get paid for by the Intellectual Property and your ability to translate that IP into the service that the customer can consume.

It will be a new set of companies and not the well known names which we are familiar with today...

Infosys did not understand BPO, so it had to create a Progeon. DNAs of companies can't be changed overnight, that's something we are painfully aware of. That's one reason why an e4e like model helps because you are able to have the benefit of cross pollination.

With this model you don't change the DNA of individual companies but at the same time you can let the new ideas breathe through an innovative, entrepreneurial system within the same umbrella.

Even for salesforce.com, the customer needs all the other services to go along with it. He needs a solution, he is no more a systems integrator by himself, which he was before. Now he expects you to be that solutions provider, wherever you may source the services from to deliver that solution.

How could tomorrow's leaders be emerging?

First, silos of organisations need to be eliminated. You must figure out how you are going to draw upon the expertise of the current silos, but not stifle the innovation. Most of the companies are today slave to some of the existing ones.

For example, you may be a SAP implementation company and are not able to draw upon that expertise to create the next level. So typically, you will either leave that setup and start something. But at the same time you may not have the financial or other muscle to help the customer. If somebody is not a visionary, he is more than happy to say, it is a good idea, take it away, run with it, if required I will take you back at some point of time. It has happened in the US, is happening in India.

The new energy will come out of differentiated business models but being able to draw upon the distribution expertise of the existing models. The $ 50 billion that Nasscom talked about is a reality except that with a little more creativity we may probably be able to overtake not just in dollar terms but in dominance terms. What is today's innovative cutting edge?

The eighties were driven by the core technology innovations of the Microsofts. The nineties were driven by netcentric innovations at the consumer level.

The early 21st century is driven by the delivery of services in a coordinated fashion coming from coordinated sources and e4e will be the future with the model of federated services being delivered to the market.