Eyeing packaged software implementation

Packaged software implementation can be one of the major growth areas for Indian software companies. It can give a tremendous boost to the software exports industry which has been adversely affected by margin pressures. Many companies are moving towards expanding their expertise in this segment, but much remains to be done, says Abhinav Singh

Although most Indian companies offering services have developed expertise in the processes which go along with PS implementations, they could not capitalise on the initial gains like the global Big Five did, says Murali Raghavan

At a time when the Indian software sector is reeling under immense pressures from a combination of factors, including the global economic downturn and declining margins, it is high time it starts concentrating on fresh opportunities to boost its bottom line. Nasscom figures reveal that the implementation, customisation and support of packaged software (PS) applications can provide immense growth for Indian software companies. PS implementation is one of the biggest segments of the global software industry, accounting for 13 percent of the global IT services market. Although in 2001-02 PS implementation and support accounted for around 5 percent of India’s software exports, Indian companies have less than 1 percent share in this segment in the global market. Indian players face many challenges in this sector, and are facing them with confidence. However, it will be a while before they achieve large-scale success in PS implementation and customisation.

Challenges

Need for domain expertise
In order to increase their penetration in the PS implementation segment, one of the most critical challenges which Indian companies face is to develop domain expertise in various industry verticals. It is of utmost importance that Indian companies understand how different industry sectors function, and their respective requirements with regard to implementation of ERP, SCM and CRM packages. It has become necessary for IT companies to have specialists who talk the language of different industry segments. For instance, in a manufacturing firm it is important to understand how a software package can streamline manufacturing processes. All this can be achieved only by having industry-specific know-how.

Convincing offshore customers
Once a software company acquires domain skills and expertise in different industry segments, it needs to convince offshore customers about its implementation capabilities since the offshore market is already flooded with large MNCs who have made their mark in this space. Says R K Veeraraghavan, general manager, MindTree Consulting, “Indian players need to demonstrate that they will be able to provide cost-effective, quality services to their offshore customers that will match the services of the best MNCs.” Indian companies are facing the challenge of scoring over their competitors in making a thorough assessment of the processes needed to run a business in an industrial vertical, and then implementing an appropriate tailor-made software package needed to run that business. As Murali Raghavan, head, SAP practice, TCS, says, “Most Indian companies were not into strategic consulting earlier. This involves an assessment of business processes in an industrial vertical, the selection of the software, etc. Although most Indian companies offering services have developed expertise in the processes which go along with PS implementations, they could not capitalise on the initial gains like the global Big Five did.”

Stiff competition
The concept of PS implementation is not new. Companies across the world have been doing it for years. Observes Viv Penninti, co-CEO, Mascot Systems, “Indian companies are facing stiff competition, especially from large US-based MNCs offering competitive services as a business retention strategy.”

Global uncertainties
The recent spate of uncertainties in the form of the Iraq war and the global economic downturn has had an effect on this segment. Raghavan remarks, “The uncertainties have had an effect on offshore customers as they do not want to avail the services of foreign players, and prefer to confine themselves to domestic players operating in their respective countries. This has compelled Indian software companies to work extra hard to convince offshore customers about the quality and the credibility of their services when compared to the domestic players in their countries.”

Strategies

Demonstrate domain capabilities
In order to increase marketshare, Indian players are working hard towards leveraging their domain expertise across industry segments. Companies like MindTree and TCS have specialised teams having domain expertise in segments like manufacturing, finance, healthcare and retail. These teams have non-technical as well as technically skilled personnel who work together during the course of the implementation process. The non-technical members meet customers, explain their services, and help in building a business case and picking the software package that’s best suited to the customer’s requirements. Then they provide feedback to the technology team, which carries out the actual implementation. People in many industry segments aren’t aware about the latest in PS. Therefore the role of the non-technical team with vertical-specific domain knowledge is significant. TCS, for example, has separate teams for implementing different software packages. It has 1,800 people for ERP, around 500 for CRM and 200 for SCM.

Indian players need to demonstrate that they will be able to provide cost-effective, quality services to their offshore customers that will match the services of the best MNCs, says R K Veeraraghavan

Bank upon advantages
Indian players are working hard to leverage the advantages they have. Some players say they have been very successful in delivering their services in short time-frames, and their implementations have scored in terms of quality of services as compared to their foreign counterparts. Explains Raghavan, “Indian companies have a highly-skilled workforce possessing functional domain expertise, while foreign companies face a dearth of highly-skilled manpower in this segment.” Indian companies are also banking on their low cost of services to win more clients.

Tie-ups with PS vendors
Indian companies are working towards having effective tie-ups with a large number of PS vendors. This helps them in winning a customer’s confidence. MindTree and Mascot have tie-ups with SAP in the ERP space, TCS has tie-ups with SAP, PeopleSoft and Oracle in the ERP space; with Siebel, Clarify, PeopleSoft and SAP in the CRM space; and SAP and i2 in the SCM space. Logix Microsystems has tie-ups with SAP and Siebel.

Major global markets
As in the overall software exports scenario, the US market is the biggest one for PS implementation. The European market, particularly Britain, comes next. The Asian market, Japan in particular, and the Latin American market, are among the fastest growth areas for PS implementation.

Targeted verticals
Although these days PS implementations run across verticals, the banking & finance, manufacturing, retail, healthcare, travel and hospitality verticals are going in for PS implementations in a big way.

Future
Some Indian players have done well in this segment and have given tough competition to foreign players. TCS won a huge contract worth $100 million in this space from GE Medical Systems of the US. As part of the contract, TCS will be providing expert services in different phases, and implementing Oracle iERP for the organisation in 32 countries, the first phase of which has been successfully completed. Bangalore-based Mascot has done 150 successful implementations till date. MindTree and Logix have also done a large number of implementations abroad.

These are but a few examples from some of India’s software service companies, but more needs to be done by them in this segment. Playing the domain expertise card will go a long way in helping Indian companies spread their wings. Notes Sanjay Soni, managing director of Logix, “The only way to tap this market is to establish a local presence in the country where the Indian companies are interested in working, and building client relationships slowly and steadily.”

The domestic market for implementation work is yet to pick up, and this has compelled Indian players to look for opportunities abroad. With profit margins shrinking, and the need to look for newer opportunity areas growing, P S implementation practice is poised to be a growth engine. It remains to be seen how the Indian players go about tapping this vast opportunity.

PS implementations by Indian companies, listed by verticals