India Grapples With e-Business Bottlenecks: Study
Even as the Indian software industry grapples to buck the tech slowdown
trend, the nation is groaning under the weight of infrastructure
bottlenecks that are bedeviling its plans to capitalize on India's enormous
wealth of talent and resources.
Though the information technology industry has managed to register for
the first time globally with its low-cost, high-quality enterprise, it is
constrained on its home turf.
A blow-by-blow account of the kind of barriers holding up the
Internet virtual as the engine of socio-economic growth in the country has
been vividly captured by a joint study conducted by NASSCOM and the
Boston Consulting Group during the first of half of this year.
The study bunches India with other Asian nations that face bug hurdles
to e-commerce adoption. It laments the limited Internet access among
customers and small and medium enterprises, as well as a lack of reliable
payment gateways.
"Current level of Internet usage in India is low among both
businesses and individuals," the report says. "The number of Internet
users has
barely crossed the 5 million mark across the country. Current penetration
of PCs
and other devices to access the Net for individuals is less than 1 percent.
Penetration of telephones is limited to less than 3 percent of the
Indian population of over 1 billion."
Similarly, poor telecom and communications infrastructure for reliable
connectivity is thwarting India's IT industry and government from
facilitating extensive e-commerce adoption, the study says.
The report also points out that the existing telecom infrastructure is
unreliable. Internet connectivity is very slow and access costs are
still very high. Businesses cannot influence these external factors, the
report indicates, and they may need government intervention.
Some major global telecom investors see opportunity in the poor penetration. Telecom equipment maker Motorola, which has cut several thousand jobs
worldwide in its semiconductor business, plans to not only expand its
Indian
operations, but turn it into a hub for software development, support and
chip design activities within the Asia-Pacific region.
Motorola India has so far invested $150 million in its Indian operations.
It
plans to significantly grow its workforce in India from the present 900
employed in software and semiconductor design operations, top company
executives informed.
Motorola India recently bagged an order worth $200 million from state-owned
telecom major Bharat Sanchar Nigam Ltd (BSNL) as part of the latter's
preparation for launching services as the third cellular service provider
in
circles outside Delhi and Mumbai. The deal is expected to fetch Motorola
50 percent growth during the year.
The company claims to have captured 40 percent of Indian cellular
infrastructure market already. It is also hopeful of picking up
significant
contracts from Bharti Enterprises for supplying GSM equipment as well
as from Reliance Infocom for supplying the CDMA infrastructure for
basic services.
Meanwhile, Motorola India Electronics Ltd., (MIEL) the wholly-owned
subsidiary of Motorola Inc., is investing $40 million to set up its largest
design and software center at Whitefield on the outskirts of Bangalore for
providing end-to-end solutions in converging technologies. Being the first
offshore software development center of the U.S.-based parent company's
global
software group, MIEL designs semiconductor chips and develops solutions and
systems for communication providers.
The campus, which covers more than 500,000 square feet, will focus
on developing the next generation wireless communication products,
including
GPRS, WAP applications, and advanced electronic systems, a company
executive
said.
The first phase of the new technology center, with an area of 150,000
square
feet and worth $12 million, would be complete by 2003. By 2005, the
second phase will add another 350,000 square feet to house
2,500 design and software professionals.
But some outside investors are less confident in India's status as a telecom and Internet player. Bangalore-based Sasken Communication Technologies Ltd., a player in telecom
software services, has suffered a jolt as global networking
major Nortel Networks has reportedly suspended a $10 million project
alliance with it. Industry analysts say this move is aimed at cost-cutting
by Nortel.
Nortel and Sasken have been working closely since 1990 mainly in the
wireless technology area. Sasken is said to have been supplying the
project with a team of almost 200 engineers. According to sources, the
development might impact the bottom line of Sasken by about $8 million
to $9 million.
In India, Nortel until recently had five key outsourcing partners through
ODC (offshore development center) model-Wipro, infosys, TCS, BPL Innovision
and Sasken. Nortel is currently Wipro's largest customer, which accounts
for
nearly 8 percent of the company's software export revenues. According
to sources, the status of Nortel's other projects signed with the
Indian companies are to be determined.
The report also points out that the existing telecom infrastructure is
unreliable. Internet connectivity is very slow and access costs are
still very high. Businesses cannot influence these external factors, the
report indicates, and they may need government intervention.
The study also points out that multiple gaps in the current legal
and regulatory framework have been inordinately delaying
decision-making at various levels.
For instance, the Indian Contract Law is not covered under India's IT Act.
The legal jurisdiction of contracts involving international
parties is not defined. What's more, the IT Act does not clarify all the
issues regarding taxation of electronic transactions, and is silent on the
issue of protection of intellectual property rights such as patents,
trademarks, and copyrights in the Internet space.
"Similarly," the study says, "safeguards to
protect privacy of personal and business data collected over the Internet
are not in place, and industry incumbents are concerned about the security
and confidentiality of their data. Transactions cannot be completed online
due to a lack of convenient online payment solutions as information flow
between banks is still not completely online."
In order to reverse the trend and catch up with the global movement towards
e-commerce, the study says the government needs to make these external
factors a top priority for a quick adoption of e-business by Indian
companies.
"Delay in e-commerce adoption in trade intensive industries could cause
them
to lose their competitiveness," the study says. "The government urgently
needs to address the key factors that can turn around the situation for
better.
It has to first resolve legal and regulatory issues for e-commerce
transactions,
and accelerate development of communication infrastructure."
--Reported by Newsbytes.com, http://www.newsbytes.com