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FEB. 25, 2007
 Cover Story
 BT Special
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Trading with ASEAN
In the recent Indo-ASEAN summit, ASEAN was, for the first time, on the defensive. India has agreed to bring down its negative list of imports to 490 items in the free trade agreement with the 10 ASEAN nations. But India’s step towards free trade was not matched by the ASEAN nations, as more than 1,000 items still figure in the negative list of the ASEAN. In 2005-06, India’s total trade with ASEAN was at $22 billion (Rs 99,000 crore), against just $7 billion (Rs 31,500 crore) in 2000-01.

Exchange Deal
Indian markets are on a roll. Global stock exchanges and financial institutions’ interest in the Indian stock exchanges goes to show the long-term growth potential of India Inc. The year has started on a positive note. The NYSE and three global financial institutions have each picked up a 5 per cent stake in the NSE. The deal will open exciting vistas in global co-operation for the NSE, and at the same time could improve the fortune of smaller exchanges in the country.
More Net Specials
Business Today,  February 11, 2007
India's Hottest Software Product Companies
An Indian Windows Vista may take years in coming, but here are 10 home-grown software product companies that could make it big.
In India's glorious software story, there is a sad chapter. While India by now is top of mind in software services, there's no software product-like an SAP enterprise resource planning (ERP) package or Microsoft Windows-that enjoys instant recall globally. The reasons are fairly simple. Developing a software product demands investment upfront and high-decibel marketing, without any guarantee that the product will fly. Besides, it has always been said that to launch a software product, you need to be in the US or some other first-world nation, not India. As a result, while the Indian it software & services industry will log Rs 1,32,750 crore in revenues (domestic and exports) end of this financial year, an overwhelming 79 per cent of it will come from services. Yet, there's evidence that things are changing. A handful of Indian companies are bravely developing products in the belief that a world that has accepted their service offerings will also accept their products. Business Today spoke to a variety of industry experts to identify the 10 software companies that could make it big. Here's the list they are betting on:

3i Infotech

CEO & MD, V. Srinivasan
Revenues: Rs 445.1 crore*
Employees: 3,500
Flagship Product: Kastle: A universal banking product that covers origination, servicing and collection of funds
Funding/ Listing: Listed in April 2005, raised $70 million (Rs 315 crore) in
Aug 2006, via an FCCB issue to fund M&A deals
* For nine months ended Dec. 31, 2006

Since its first tentative steps into the products market six years ago, 3i has become the fourth-largest player in the Indian products market, according to Dataquest, a trade journal. Not bad for a company that began life in 1993 as ICICI Investor Services and went on to become an it services firm (ICICI Infotech) six years later, before adding products to its portfolio. What helped? To put it simply, it bought its way into the products market, buying small firms such as Datacons, FDG and Stet and, in the process, moving into anti-money laundering, insurance and mutual funds markets. Today, half of its revenues come from products. "We are closely focussed on financial services and we offer products in every niche in this market," says V. Srinivasan, CEO & MD of 3i. Instead of trying to take on established players in this market, 3i has focussed on tapping unexplored markets (such as Africa) and tapping unexplored product niches too. To get into more developed markets such as the US, 3i is again banking on acquisitions. "We yet have around Rs 54 crore from two FCCB (foreign currency convertible bonds) issues of $50 million and $20 million in March and October last year," says Srinivasan. If you can't beat them, buy them.

Infosys Technologies

VP - Global Head (Sales & Marketing), Merwin Fernandes
Revenues: Rs 391 crore* amounting to 4.83 per cent of Infosys revenues
Employees: 2,400
Flagship Product: Finacle: A universal banking solution
Funding/ listing: Listed. An SBU of Infosys
* For nine months ended Dec. 31, 2006

For a company that has become India's best-known software brand, success in the products arena has been slow in coming. Its first core banking solution was implemented in 1992, and until 1998, Infosys CEO, Nandan Nilekani, was hopeful of getting 40 per cent of the company's revenues from products. That never happened, since Bancs 2000, as Ver 1.0 of the banking product was known then, never took off. In contrast, iFlex, spun off from a Citigroup tech arm, took such a commanding lead with its Flexcube that in 2005 us-based it major Oracle was prompted to acquire it for an eventual consideration of around $1.5 billion.

However, Infosys went back to the drawing board and relaunched the banking product as Finacle. Last year, Finacle fetched $81.86 million in revenues ($86.74 million or Rs 390 crore in the first nine months of 2006-07)-around four per cent of Infosys revenues. "The important thing today is that Finacle is growing faster than products from competitors such as iFlex and Temenos, though admittedly on a smaller base," says Merwin Fernandes, Vice President and Global Head of Sales & Marketing for Finacle. With the replacement market for core banking solutions projected to touch $34 billion (Rs 1,53,000 crore) in 2010 (compared to $13.9 billion in 2004), Finacle should have a lot of room to grow.

IBS Software

CEO, V.K. Mathews
Revenues: $50 million (Rs 225 crore)
Employees: 1,500
Flagship Product: AIRES - Passenger reservation and inventory management solution
Funding/listing: Privately held

A decade ago, IBS started operations as the sole offshore it services provider to (the now bankrupt) Swissair Group and then added Emirates to bolster its focus on the aviation market. Two years on, when 9/11 hit, IBS nearly went belly up. Rather than shut shop, IBS decided to lean on its domain expertise in travel and tourism industry to build three different it solutions: aires, iCargo and iLogistics. The industry expertise was primarily driven by V.K. Mathews, who headed the technology operations for the Emirates Group before relocating to Thiruvananthapuram, Kerala (and later to Bangalore) to set up his software products shop. "The airline industry globally, in the last 50 years, has cumulatively not made any profit. Though it is a problem for the industry, it is also a great opportunity for companies like IBS to come up with it solutions that will help airlines come out of this economic disaster," says Mathews. To try and match the marketing muscle of its larger competitors, IBS has jointly developed its passenger reservation system aires with Travelport, the holding company of other well-known travel firms such as Galileo, Orbitz, Gulliver Travels and eBookers. It also plans to raise capital to fund growth. "We see a clear opportunity for IBS to attain leadership position in the next 3-4 years," says Mathews. Keep an eye on IBS.


Chairman & CEO, Srini Rajam
Revenues: $8 million (Rs 36 crore)*
Employees: 200
Flagship Product: DSP solutions for portable media players
Funding/listing: Raised $11.5 million from GTV & Bank of America Equity Partners
*BT Estimate

Bought any Taiwan or Korea-made portable media player or digital camera of late? If yes, then you might already be using some of Ittiam Systems' products without knowing it. The company, whose name is inspired by Descartes' most famous one-liner in philosophy, 'I think therefore I am', has by now provided its software product stack to more than 2 million devices.

It's no mean achievement. Six years ago, when Srini Rajam gave up his job as the head of Texas Instruments in India at the behest of venture investor V.G. Siddhartha of Global Technology Ventures to start a product company, the business environment was far from ideal. The dotcom crash was followed by the telecom crash. However, Rajam turned adversity into an opportunity, and imposed financial discipline on the company from Day One to emerge as a player of repute in the digital signal processing (DSP) space. For the third year in a row, it has been voted the world's most preferred provider of DSP-based intellectual property in a survey of DSP professionals. Rajam's ambitions, though, are higher. "Even though we have become profitable, I am not happy with the scale we have achieved," says Rajam. "We had hoped to be a bit farther along the road at this point in our journey, but we are working hard and I think this model will work." Rajam, however, says that he thinks Ittiam has made the right bets, including, most recently, building products for IP video phones, imaging and video.

Ramco Systems

Vice Chairman, Managing Director and CEO, P.R. Venketrama Raja
Revenues: Rs 194 crore*
Employees: 2,000
Flagship Product: Enterprise Series - ERP package targeted at primarily small businesses
Funding/listing: Listed in April 1999
* For nine months ended Dec. 31, 2006

If the software products business were to be won on size alone, the Chennai-based Ramco Systems would have been kayoed in round one itself. This company, which focusses on providing enterprise resource planning (ERP) tools for a range of businesses, is minuscule compared to its multi-billion dollar MNC rivals such as sap, Oracle and more recently Microsoft. If it has survived, it has done so by targeting smaller companies and the domestic market to grow its business. Its small customers needn't buy its products such as Ramco ERP OnDemand. They can simply use it for a fee. But Kamesh Ramamoorthy, Ramco Systems' coo, says that cost isn't the only reason why customers prefer Ramco. "We provide a powerful software application assembly and delivery platform that not only address the functional requirements but also enhance the IT capability of our customers," says Ramamoorthy. Having established a stable base for its existing product base both in India and overseas, Ramco is now looking to build a business services repository in a few verticals and ramp up the delivery of its products on a subscription model. It has taken Ramco 18 years to get this far. The road ahead won't be as arduous, but it won't be easy either.

Sasken Comm. Tech.

Chairman & CEO, Rajiv C. Mody
Revenues: Rs 339.69 crore*
Employees: 2,504
Flagship Product: NA - Solutions at the heart of millions of cellphones in use globally
Funding/listing: Listed in August 2005
* For nine months ended Dec. 31, 2006

Being a software products company isn't easy. Just ask Sasken Communication Technologies. Founded by Rajiv Mody in a garage in San Jose, California, way back in 1989 as Silicon Automation Systems, it arrived in India (Gujarat) as ASIC Technologies, moved to Bangalore a year later, and when investors such as New Enterprise Associates, Nokia Venture Partners, and Intel Capital pumped in $22 million, it reincarnated itself as a telecom solutions provider. "This was clearly a risky move when we made it but it seems to have paid off handsomely over the last couple of years," says G. Venkatesh, Sasken's Chief Technology and Strategy Officer. Today, Sasken's products are shipped with millions of phones worldwide. For instance, its modem software has been slapped into some 55 million handsets globally to date and its application suite installed in more than 8 million high-end or smart phones. "Sasken is driven by the philosophy of connecting the dots in the communications value chain. Operators are rolling out new services and solutions as they want to exercise larger control over this value chain," says Venkatesh. Achieving this involves resolving multiple paint points such as interoperability issues. Pain points for telcos, but opportunity for Sasken.

Subex Azure

Chairman & CEO, Subash Menon
Revenues: Rs 172 crore*
Employees: 1,200#
Flagship Product: RocWare - Operational efficiency and service agility software suite
Funding/ listing: Listed but in the process of raising $200 million (Rs 900 crore) through sponsored GDR
# This includes 300 employees from its recent acquisition Syndesis
* Does not include Syndesis revenues

Sometimes, persistence pays. Back in 1999, when competitors were eating Subex Systems' (as it was called then) breakfast, lunch and dinner in the systems integration business, its founder Subash Menon went against popular advice into software products, although he stuck to its area of expertise, telecom.

As it turns out, that was the best decision he could have made. In the seven years since, Subex has made seven acquisitions worth $323.5 million, including a $164.5-million (Rs 740-crore) purchase of Canadian company, Syndesis, just last month. As a result, Subex's bouquet of products has expanded from telecom fraud management (Ranger) and billing solutions (Concilia) to revenue-enhancing solutions such as Moneta and Optima.

"Until the Syndesis buy, we were offering only operational efficiency tools to our customers-that is, help to reduce cost. With this acquisition, we will be able to provide service agility and thus help increase their revenues," says Menon, 41. Thanks to the acquisitions, 32 of the world's top 50 telecom players are now Subex customers.

Tally Solutions

MD, Bharat Goenka
Revenues: Rs 120 crore
Employees: 850
Flagship Product: Tally 9.0 Accounting package
Funding/ listing: Privately held. Mukesh Ambani CMD of Reliance Industries is a major investor

There are only two kinds of companies in India when it comes to accounting software," says Bharat Goenka, Managing Director of Tally Solutions. "Those who already use Tally and those who will shortly." He isn't exaggerating. Tally enjoys a 90 per cent share in the domestic market for accounting software.

Expanding reach and cutting price from Rs 22,500 per installation three years ago to Rs 10,000 currently has helped the 20-year-old company curb piracy. Around that time too, Tally forayed into Middle East and Africa, and claims to now have 2 million users in 92 countries. Now, it's looking at ERP solutions for small businesses and another one for the retail industry. Things must be headed in the right direction at Tally, since Reliance Industries' Mukesh Ambani recently picked up an undisclosed, personal stake in it. "Tally's turnover must be rounding off error for him, but it is my good fortune that he has taken a personal interest in it," says a grateful Goenka.


CEO, Dan Vetras
Revenues: N.A.
Employees: 260
Flagship Product: Talisma CIM - Multi-channel customer interaction management solution
Funding/listing: $79 million* (Rs 355.5 crore) from Oak Investment Partners and SeaPoint Ventures
N.A.: Not available *BT Estimate

With competitors such as SAP, Siebel and on one hand, and Kana, eGain and LivePerson on the other, you'd expect the Bangalore-based provider of customer relationship management (CRM) and customer interaction management (CIM) solutions, Talisma, to be hemmed in. You would be wrong. "We have trebled our customer count to over 800 worldwide now, and we expect to add 50+ customers (big and small) every quarter," informs Girish Krishnamurthy, Managing Director (Asia Pacific), Talisma, which was spun out of Pradeep Singh's Aditi Technologies in 2000. To compete with the larger players, Talisma's executives say, the firm focusses on ease of implementation (measured in days, not weeks or months, they say) and domain expertise. The company, which is headquartered in the US but does almost all of its R&D in Bangalore, relies on word-of-mouth and search engine-based marketing. Despite its rapid growth in recent years, Talisma recognises that it faces many challenges. Attracting and retaining talent apart, Krishnamurthy says, "there are issue of expanding our bandwidth and entering new markets such as travel and tourism and, inevitably, BPO."

Tejas Networks

CEO, Sanjay Nayak
Revenues: Rs 250 crore*
Employees: 350
Flagship Product: Optical Networking Products
Funding/ listing: Raised $49 million (Rs 220.5 crore) till date through investors like Mayfield Fund, Intel Capital, Sycamore Networks, Battery Ventures
*BT Estimate

There could not have been a worse time to start a software product company, that too from India," grins Sanjay Nayak, who co-founded Tejas Networks with one of Silicon Valleyer's posterboys from India, Gururaj Deshpande, just a year before the telecom nuclear winter of 2001. Tejas had stepped into optical networking solutions just as the global telecom industry was coming crashing down due to overcapacity and ruinous auctions of 3g spectrum. Few thought the Bangalore-based company would survive.

For one, global majors such as Cisco, Huawei and ZTE had entered the segment, offering solutions at rock-bottom prices. Yet, Tejas, whose products help telecom carriers build converged networks that support both traditional voice services and data services, has a 25 per cent market share in the segments it operates in. It also ships boxes to other international telecom infrastructure providers, although Nayak won't reveal names. "Once we are able to build a brand internationally, we will sell under Tejas name," says Nayak. With some big investors backing the Rs 250-crore Tejas, it's now just a question of scaling up and challenging global rivals on their turf.

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