IT's a new marketplace

Smaller Indian software exporters have gone where big players have not

Some time ago, India's software exports had an obvious destination: the US. Then came the China season, with all big players rushing to set up shop there. Now suddenly, they're looking everywhere else.

But guess what: they've been beaten to it by smaller players, with individual revenues in the Rs 100-1,000 crore range, that had little option but to go where no biggie had gone before.

These are markets that have largely been overlooked by TCS, Infosys and Wipro, busy as they were meeting throbbing demand in existing markets.

Small and midsized exporters "" often called "Tier II firms" "" are not all that small with their revenues added up. In fact, they account for a good 24 per cent of the Indian IT industry, by recent NASSCOM data. And they learnt quite a while ago that bagging contracts is that much easier without Tier I companies in the fray. This is so in such markets as Japan, West Asia, Australia and Latin America.

Yet, these companies are not all doing the same thing. Here's a quick rundown of what they are up to.

The Opus way...

Pune-based Opus Software Solutions has found markets in East Africa, South East Asia and West Asia, and it remains a livewire act in search of business in odd corners of the world. It's all about developing new markets, says Ramesh Mengawade, managing director, Opus, who gets two-thirds of his revenues from emerging territory.

"The rest follows." He has taken his business to 35 countries in all, including Malawi, Uganda, Kenya, Ghana and Tanzania, Philippines, Indonesia, Thailand, Iran, UAE, Qatar and Oman. "Foremost," he says, "we have no serious competition to fight off, and secondly it gives us a much wider market to look at."

Looking to touch the $200-million mark with third party processing deals and another $8 million from application and services, Opus is actively scouting for customers in Australia, North Asia and Latin America.

Life is live, most of the time, but expansion isn't all that quick either. Mengawade's point: "We need to have at least five customers in these markets before we start our operations."

The Nucleus Software way...

According to Vishnu Dusad, managing director of Nucleus Software, "The US has no longer got a monopoly over the software exports industry based in India. Nucleus is proud of its solid client base in emerging markets such as Asia, Middle East and Europe." To him, it's a game of serving diversified customer needs, admitting that he would get American business too if he could. "One has to balance out the business prudently, in order to tap new markets."

The banking and financial solutions provider has five wholly owned subsidiaries "" in Singapore, US, Japan, Australia and Hong Kong. The Philippines and Japan are particularly strong markets for the company. Commitment is the name of the game in such places, and that means language adaptation and acquisition of local marketing skills. Nucleus Software's revenues for the financial year 2003-04 touched Rs 80 crore, on which it made Rs 9 crore.

The 3i Infotech way...

3i Infotech Limited (formerly ICICI Infotech Ltd) has a strong presence in enterprise-class software solutions, information security consulting, IT infrastructure and disaster recovery solutions spread across 30 countries.

With eyes on Central Asia (Kazakhstan), East Asia (Indonesia, Malaysia, Thailand and Singapore) and West Asia (UAE, Saudi Arabia and Bahrain), says Amar Chintopanth, CFO, 3i Infotech: "In a solutions based environment, the sales cycle varies between five to six months. Based on our order books, we would approximately peg growth at 25 to 30 per cent from these markets."

Striking the right balance between expanding geographically and delivery systems is important for Chintopanth. 3i recently acquired Innovative Business Solutions, a consulting service provider in enterprise application integration, business intelligence and IT security for $3.6 million. "This will augment our geographic reach and customer base, and also arm us with niche consulting skills," in the CFO's words.

The ISG Novasoft way...

A part of the K K Birla group, ISG Novasoft (ISGN) pegs its growth on Singapore and Australia as markets. "While new markets' contributions are relatively small (single digit percentage of revenue) today, we expect them to start contributing significantly in the next 12-24 months (double digit percentage)," says Krishna Srinivasan, CEO, ISGN. The company is expecting revenues of $17-20 million this fiscal year, thanks to its pricing strategy, localisation drive and brand building efforts.

The company has also acquired a majority stake in GMACCM Technology Europe Limited (GTEL), a software solutions company based in Ireland, from GMAC Commercial Holding Corp.

Srinivasan expects a scramble up the value chain, even as low-priced software competition emerges strongly from new players in South East Asia and Eastern Europe.

"Non-traditional markets, be they vertical or geographic, are indeed harder to crack. So, begin with a clear 'Go to Market Strategy' with clear expectations to invest. Have a charter customer to motivate and break through the unique requirements. This customer ultimately will serve as anchor," he advises. The Newgen Software Technologies way...

This New Delhi-based business process management, document management, workflow and imaging solutions provider has its presence in more than 20 countries. Emerging markets, to it, are the future "" home as they are to 85 per cent of the world's population and more than a third of world economic output. "Unlike the developed world, which faces an ageing crisis" says Diwakar Nigam, managing director, Newgen, "the demographic profile of the emerging markets is very favourable."

At present, 40 per cent of the company's revenues comes from the domestic market, and the balance from West Asia, Africa, South-East Asia and Japan. "But we see a larger turnover from the international market in the coming years," says Nigam, adding, "Right now, we have mastered the low cost services model, but for high value services it's still a long way to go. Thus it makes sense that we establish ourselves in a fresh market and work up the value chain."

Newgen's market access strategy is a little different too. Instead of pricey acquisitions, it prefers alliances with local firms that have a feel for market requirements which it can fulfill. Understanding the market, as in any business anywhere, is crucial to success.