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