Telecom Software: For the Focused

If the Indian software industry’s condition was bad, that of the
telecommunications software industry was worse. A worldwide cut in capital
expenditure by telecom service providers slowed down the equipment industry
considerably. With their inventory running high and new technology offerings
finding fewer buyers, many companies put the cap on further investments in
product and technology development. Many of these major equipment providers and
service providers being the clients of Indian telecommunications software
providers, the industry couldn’t help being affected.

The trend of cutting down on manpower and outsourcing the current necessities
to software companies did bring some relief but the overwhelming cut in
contracts was still far too uncomfortable for an industry used to three-digit
growths. The Indian telecom software and services industry market was worth Rs
4,670.6 crore during fiscal 2001-02, compared to Rs 4,034 crore in 2000-01. This
industry includes sales and development of software products, embedded software
and protocol stacks. It also includes services–software applications
development, software integration and management and software consultancies.
However, IT-enabled services, content, and enterprise applications and sofware
provided to telecom companies are not included in the analysis of this industry.
Growth during the past fiscal was only 15.7 percent.

Major Highlights

Software vendors derisked themselves from over-exposure to the telecom sector In spite of reduced project work, top telecom software vendors grew their revenues on account of long-term and better value-realization from key clients. Examples are MBT and HSS

It is interesting to note that Wipro, the top telecom software vendor in the
country, grew 51 percent despite telecom’s reduced 31 percent share in the
overall revenue, compared to fiscal 2000-01’s 42 percent. What is also notable
is that those companies that focused on telecom alone did considerably well.
Mahindra BT (MBT), Hughes Software Systems and Axes Technologies showed 32
percent, 18 percent and 105 percent growth respectively. This means that the
high-value telecom projects were still forthcoming. And those who sweated to get
those with focus on telecom were rewarded.

But there were those also who clearly suffered on account of the global
telecom slowdown. The latter half of the top ten vendors had players like Sasken,
whose protocol stacks did not measure up to the current trends in demand (showed
negative growth of 23 percent); Satyam Computer which suffered a negative growth
of 23 percent; and Future Software which simply did not know how to sail in
troubled waters, registering a negative growth of 15 percent. Similarly, the
plight of the lower rung of the telecom software industry was equally bad if not
worse. The number of projects thinned out.

Exports Oriented

The telecom software industry in 2001-02 was still highly polarized towards
exports. Domestic sales accounted for approximately 3 percent of the entire
industry revenues, compared to 1.6 percent in the previous fiscal. Nonetheless,
this converted into sales value, the domestic telecom software industry grew
over 100 percent, from Rs 66 crore to Rs 140 crore. The improvement is on
account of the slackening export growth and the pleasant expansions by Indian
telecom service providers, mainly the mobile operators.

Things to watch out for

Bad run for telecom software is expected to continue at least in the first half of this fiscal Systems/software integration and consultancy services to telecom service providers is an opportunity for Indian software companies The trend of outsourcing telecom R&D to development centers in India is likely to continue.

Opportunities

Large telecom equipment vendors like Siemens, Lucent, Ericsson, Nokia,
Nortel, Motorola are in many cases themselves integrating the systems/solutions
that they sell. This may be a niche market, but it is highly promising
opportunity to be tapped. This is simply because of the fact that the equipment
manufacturers are now seeing the benefits of sticking to core competencies. They
are likely to outsource more and more of the consulting/integration business.
This means more business for independent Systems Integrators (SIs). The
opportunity is even more evident in the trend where service providers deploying
the large telecom systems and complicated solutions are increasingly demanding
for best of breed.

Telecom Software Vendors
	Computer Associates		Lucent Technologies
	Compaq		Nokia
	Comverse		Oracle
	CSC Intellicon		SISL
	C-DOT		Suntec
	Ericsson		SEMA
	Hewlett Packard		Tata Infotech
	IBM		TCS-CMC
	Kenan		Usha Communications
	Logica		Wipro

Development centers is yet another opportunity. Many telecommunications
vendors are setting up their own software development centers in India. Among
these are big names like Motorola, Cisco, Lucent, Hughes, Ericsson, Nokia,
Tellabs, Alcatel, Siemens, Huawei. The size of investments are still not in
comparison to the hardware centers in China, but all the same these are
significant investments, the investors taking up large spaces in satellite towns
in metros and other commercial hubs. And guess what the trend is? Indian
software houses are increasingly providing the manpower to fill the multi-floors
of these giant buildings. This trend is likely to continue and further there are
chances of outsourcing more functions at these centers to Indian software
companies.

Nareshchandra Laishram