SOUTH INDIAN MARKET: Crucible Of Value Creation

Growing software exports from Bangalore, Chennai and Hyderabad mark the South
Indian IT market where metros have become saturated. So, vendors and partners
alike are exploring the market potential of B and C-class cities where business
is on the rise. 

Computer-related services is the latest buzzword in the South In dian market
(SIM), which has gone through a learning curve during the recent economic
slowdown. However, with their innovation and host of services, channel partners
have ensured that the market remains a crucible of value creation. 

At a time when India’s channel business is undergoing a metamorphosis,
partners in the South Indian market (SIM) have become a very important part of
this process. Today’s channel is being driven top-down by national
distributors, as well as large regional players. Fly-by-night operators have
become only an exception.

Even the components trade, earlier the mainstay of grey market operators, is
changing colors with just memory modules still coming in through illegal
channels. The mantra of this transformed market is: Create value and earn higher
margins.

Source: 'Stastistical Year Book of Indian IT and Electronics Industry 2000-01' by Electronics and Computer Software Export Promotion council (ESC)

‘Simbly’ South

The size of SIM is expected to be around Rs 20,000 crore, compared to the
estimated total Indian IT market of Rs 64,200 crore. Says Sujit Singh, Country
Manager, Apcom Computers, "The SIM should make up nearly 30 percent of the
total IT industry revenues."

In the meanwhile, software exports from Tamil Nadu have taken off well and is
expected to have touched anywhere near Rs 4,000 crore for the financial year
ended 31 March 2002. Tamil Nadu’s contribution to the national software
exports has been

increasing steadily and it is now the No 2 state in this segment after
Karnataka.

Fast catching up is Andhra Pradesh where the chief minister Chandrababu Naidu
has ensured that his state is the first one to  introduce a policy for
IT-enabled services in the country. This enthusiasm for IT even at a
bureaucratic level has had a cascading effect and the demand for computers has
gone up. "We sell more than 8,000 machines per month in the AP
region," says LR Gandhi, MD, Computer Valley.

Pulla Reddy of SP Software strongly believes that AP has become a hot
destination for hardware as well as software business and he foresees further
improvements in this region. Next to Hyderabad, Vizag has seen a lot of changes
over the past two years. "In due course of time, I’m sure Vizag and then
Vijaywada would develop as hot destinations for IT business," adds Pulla.

IT in God’s own country

The establishment of a landing point for South Africa Far East (SAFE) optic
fiber cable at Kochi by Videsh Sanchar Nigam Ltd (VSNL) and the resultant
scramble for establishing gateways by Internet service providers have thrown up
huge opportunities for telecom players, small ISPs and cable operators for
providing the last-mile connectivity. Kochi is the only landing point for $600
million SAFE, a submarine fiber optic project in the subcontinent.

At present, it is only BSNL that is able to provide connectivity throughout
the state. And with VSNL effecting a tariff reduction of 70 percent for leased
line connections in Kochi, the city is set to become a major IT destination in
South India.

Attractive upcountry

The recent market slowdown has forced vendors and partners alike to focus on
developing business in smaller towns. "We realized that geographical
expansion had become need of the hour to achieve our growth targets," says
Vinod G, MD, Arcamax Computers Systems Pvt Ltd.

The recent Autodesk Inventor Series launch, which was held across eight
cities demonstrated the fact that there is a lot of interest among smaller towns
towards IT. "The overwhelming response in each city has generated valuable
leads for our channel partners to follow up," says Abel Tan, Channel
Director South Asia Pacific, Autodesk. According to him, measures like
conducting workshops, joint customer visits, participation in tradeshows, and
running special promotional programs have helped vendors and partners drive
sales in B and C-class cities.

Says Anil Kumar Singh, GM, Lampo Computers, "There has been a lot of
support from vendors to penetrate smaller towns. It will take some time before
benefits become quantifiable. But with metros reaching saturation points, B and
C-class cities alone offer hope in the market."

Points out Gandhi of Computer Valley, "There was a time when except for
Hyderabad there was no other place for IT activity in the AP region. But things
are changing fast. New places like Vijaywada, Vizag and Guntoor are coming up
very quickly and are on the right track as far as PC sales are concerned."

Source: 'Statistical Year Book of Indian IT and Electronic industry 2000-01' by Electronics and Computer Software Export Promotion Council (ESC)

R Dhamodaran, Territory Manager-South, IBM India points out that cities like
Cochin, Coimbatore, Trivandrum, Vizag and Mysore are showing significant
interest in IT. This only means that within two to three years time, one can see
greater activity even in smaller towns.

Hyderabad-based SP Software Limited markets aggressively a range of products
and services that are suitable for B and C-class cities. "We are focused on
developing the market potential of B and C-class cities and are making inroads
in that direction," says Pulla Reddy.

IBM is also very focussed on its business in upcountry markets. "There
definitely are huge opportunities in this market and we are confident of meeting
our plans," adds Dhamodaran.

The South Indian IT market evidently stands out for the fast-growing software
exports from Bangalore, Chennai and Hyderabad, and greater penetration of B and
C-class cities by the vendors and partners alike.  

SUNILA PAUL in Bangalore, with inputs from ZIA ASKARI, Hyderabad and GOPI
KRISHNA, Chennai