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In the last two years, the telecom software scene in India has changed drastically. Both qualitatively and quantitatively.

The Numbers

The total size of the telecom software industry in India recorded touched Rs 4,100 crore in 2000-01. This includes the export of telecom software as well as the domestic sales. However, while the export revenue includes embedded and system software, domestic sales means only the software sold to Indian service providers, like OSS/BSS and network management.

The size of the Indian telecom software market was Rs 66 crore. That is about 1.6 percent of the total industry sales.

The lion’s share of the total sales of course, was exports. Exports accounted for as much as 98.4 percent of all telecom software sales. Total revenue from exports touched Rs 4,034 crore in 2000-01, thus registering a growth of 90.64 percent in rupee terms over the previous year’s sales of Rs 2,116 crore. This was close to NASSCOM’s projection of $900 million.

This was roughly 2.1 percent of the telecom software sales globally. By 2003, this figure is likely to go up to 3.6 percent. This is calculated on the basis of NASSCOM’s estimates for the telecom software exports from India in that year. The apex software industry body puts it at $2.5 billion.

In 2000-01, the V&D100 companies accounted for as much as 72.8 percent of the total industry sales. The No. 1 company, Wipro itself accounted for 18 percent of the total sales.

The telecom software exports as a percentage of total software exports, was 14.23 percent. Again, this was extremely close to NASSCOM’s earlier projection of 14.4 percent. This is a growth in telecom software’s share. In 1999-2000, telecom software accounted for about 11.5 percent of the total exports. By 2003, telecom software will account for almost one-fourth of India’s software exports.

What is also important is that the shares of telecom software in the exports pie of big Indian software houses are higher than the industry average. TCS, Wipro and Infosys got 19, 42, and 17.7 percent of their revenue respectively from telecom software. This shows that telecom is higher on the value chain than other areas.

Expectedly, services accounted for as much as 96-97 percent of the total telecom software exports. However, there is a mix in the type of service provided by different companies. While services in telecom vertical was a healthy contributor for companies like TCS, Infosys and Cognizant; Wipro Technologies got its entire revenue (almost) from its R&D services, with telecom service practice contributing in a very small way.

Pure-play companies like Subex and Usha Communication Technologies got almost 100 percent of their revenue from their products, and services centered around the products. Wipro also got some (though a much smaller) part of its revenue from its products. TCS launched a few products for service providers in 1999 but continued to get the almost the entire the revenue from services.

The Value Game

As the world of telecom is fast moving from proprietary systems to open standard based systems, a lot of intelligence of networks has shifted to software. The phrase "telecom software", that till very recently, meant applications run by telecom service providers on their computing platforms—like billing & customer care, network management and traffic monitoring—has assumed a much broader meaning.

Telecom software today broadly means anything from embedded software to content. However, for our analysis, we have not taken into account the content-based applications.

Broadly, the telecom software can be classified into three areas, not always mutually exclusive. They are—embedded software, system software, and application software that is used by service providers.

Based on the positioning of Indian companies and MNCs developing software in India, one can classify the nature of development work into four categories—development of software for technology systems; the service provider onsite practices including development and integration; product development and services centred around products, . While most of the big software companies have focused on the first two areas, a new breed of small companies are developing products as well. The large software companies like Wipro and TCS also have flirted with products, but primarily on the application space.

The hot technologies till a year back were IN, SS7 and other software for TDM switching. The current favorite is the entire wireless gamut—WAP, GPRS/EDGE, UMTS—where most of the Indian software companies are focused. A small but extremely important segment is the telephony based applications, software patches for VoIP, VoIP/TDM integration. Routing/MPLS is another small but hot area in the telecom software scene in India. The emerging areas seem to be service management, software broadband aggregation platforms. The leading companies in the forefront of technology development are Wipro Technologies and Hughes Software Systems.

Almost non-existent a couple of years back, a new breed of telecom software product companies are now targeting the emerging application areas like IP QoS, broadband aggregation, wireless-IP integration, etc. Notable names include Amoeba Telecom, BayPackets Technologies, and Mantra Broadband. The successful Indian entrepreneurs in the silicon valley are the catalyst behind this trend.

Strictly speaking, these are not telecom applications. But mobile data applications will also emerge as a major area. This is where small Indian companies can enter.

Usha Communication Technology, Infozech, and Wipro are the only companies with some known OSS/BSS products. While it is difficult to believe that many Indian companies will be successful in the OSS/BSS product arena, this segment creates two opportunities. Almost all the major OSS/BSS companies will come to India and set up facilities. Also, integration of these solutions, especially in Asia-Pacific markets, will create another opportunity for Indian companies.

The V&D 100 Telecom Software Companies