As a native of neighboring island state of Sri Lanka, Sanjay Kumar, the president and COO of Computer Associates, had always been well aware of India’s software potential. He knew of the skills there, and he had seen many US firms source quality software products and services from India. But what bothered him was that while the world’s second largest software power had many world class companies, there was not a single world class software product. After several visits to India during 1997, Kumar learned that while many Indian programmers had the inclination to develop products, local funding for software start-ups just was not there. So, in December 1997, CA took the bold move of becoming more than just another US software giant setting up a software development center in India. It became a venture capitalist, and earmarked $100m to invest in Indian software startups over the next five years. The firm calls it software incubation or being in the right place at the right time.
By Bharati Singh
India is ready to build software products, and move up the quality ladder from being a provider of cheap software manpower. The missing ingredient is a class of local entrepreneurs willing to fund start-ups. CA now plans to step in and rectify that, says Kumar. There is no question of CA’s seriousness. In recent months, CA has announced three alliances in India, including a $100 million deal with distributor Onward Technologies. Most of India’s software industry has been funded largely by capital from the founders and owners of Indian companies. There has been very little in the form of investment from investment funds or portfolio investors. CA’s plan is to find 10 to 15 small companies developing products that can eventually be sold through CA’s international distribution network. Even if one or two of the products developed become hot, it would be well worth CA’s effort, Kumar says. CA’s general manager for South Asia, Ian Hughes, says the company wants Indian software programmers to come up with new products based on the US company’s three main products – the Unicenter system management program, Jasmine (an object database) and OpenIngress (a relational database). We want to widen the functionality of these products and use the software incubator program to do this, he says. CA is currently reviewing about 35 proposals it has received from Indian companies. It hopes to announce a list of about 12 soon, and invest in the chosen ones by the year-end. We expect the program to start bearing fruit within a year or so, Hughes says.
Fillip
CA has India’s software establishment all excited. Says Dewang Mehta, executive director of the National Association of Software and Service Companies (Nasscom), we have always tried to encourage the proliferation of garage operations, similar to those that continue to blossom in Silicon Valley, but the idea has been slow to catch on. CA’s weight behind this will give the whole concept a fillip. Intel says it now plans a similar program of investment in India. Several Indian cities are vying to become the country’s ‘Silicon Valley’. They include Maharashtra, Bombay, and the clear leader, Pune. But in spite of all the talent in India, CA will not find there are thousands of companies to choose from. Small software companies in India rarely, if ever, concentrate on developing products, and normally start out checking written lines of code for errors. Only later do they try to move up the value chain. Even among India’s largest software companies, there is little emphasis on developing products. And, without an outsider driving change, it is unlikely that will change in the near future, given the large amount of Year 2000 and European Currency Union conversion work that Indian software firms are involved in. The problem that CA will encounter is that Indian companies and software developers have grown accustomed to writing customized software. The concept of creating one product that everyone can use is not well understood, says an IT analyst at
investment bank Goldman Sachs, who asked not to be identified.
Computer Business Review
