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Software: Wireless opportunity - Views on News from Equitymaster
 
 
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  • Feb 11, 2002

    Software: Wireless opportunity

    The past few decades have been marked by inventions in computing that have changed human society dramatically. In the seventies, it was the commercialisation of integrated circuits that made smaller computers possible. Thus, the PC was born in the eighties and computers entered the home. Their use was no longer restricted to business and academics. And then came the ‘Third wave’, the Internet, which dominated the nineties.

    The Internet had the transfer of information central to it. Consequently, computing and communication merged to give rise to a broader domain of information technology (IT). IT changed the way people communicated, did business and entertained themselves. These inventions at one end of the value chain trigged demand for a host of services that bought in vast business opportunities for developing economies like India. Ergo, we have an US$ 8 bn (Rs 384 bn) industry that has in many ways come to be the face of modern India. However, considering the fact that industry is going through a tough time the question is from where will the industry derive its growth going forward. The answer could be mobile Internet, the theme that is likely to dominate the first decade of the 21st century.

    There are two primary reasons for a strong demand to for these services. Firstly, the fact that access to Internet on the move would be invaluable for business as it would improve the speed of information flow with in an organisation. The information captured would be truly real time. This would give rise to interesting business opportunities. Just imagine how useful real time access information is to companies that are involved in logistics. FMCG companies can cut their inventories and a plan more efficiently as a result. Also, the benefit of having access to a world of information and services right in your home has just been extended.

    Secondly and more importantly, the enormous amounts that have been spent by mobile phone operators in Europe and US. According to industry estimates, more than US$ 100 bn has been spent on radio spectrum for high-speed third generation (3G) mobile networks. These companies are not very likely let their money go down the drain. Only way they are likely to earn from their investments is that the technology becomes popular and the use is widespread. One of the positives for the companies is that gradually the devices that can work on 3G are being available. Products that are a combination of the PDA (personal digital assistant) and mobile phone are likely to gain popularity in the near future. Thus, giving a push to the use of 3G technologies.

    This means a significant opportunity for the Indian software industry. The next generation networks that will be built will need to communicate with legacy networks. A lot of software has to be written that will help the legacy networks communicate with the next generation networks. This has been one of the traditional strong hold of Indian software companies focused on the communications space. Companies like Wipro and Hughes Software Systems (HSS) that have a very strong presence in the space provide software known as protocol stacks that help networking devices to talk to each other. Both the companies are working on 3G. Hughes currently has about a 150 people working in the domain, while Wipro too is said to have a large team working.

    Also, if customers are willing to order for goods or trade stocks through their mobile devices the corporates need to get their systems in place. This means that the enterprise systems that had to be extended to the Internet will have to go one step further. Also, in the future there will be a demand for a host of applications that will be specific to 3G. However, it will take sometime before demand of this nature translates in strong cash flows, as the initial effort is likely to be directed at getting a proper 3G infrastructure in place.

    Another area that offers an opportunity is that of billing. The billing systems that are in place are incapable of handling 3G systems. This is due to the fact that the customer in the future is likely to be billed based on the quantity of data rather than the time used for, as is the case currently. However, the Indian software industry does not have much of a presence in this domain. Companies like Amdocs (US based) are the leaders.

    As the demand situation improves the Indian software industry could see a strong surge in demand for services and solutions in the 3G space. Thus the revenues from this area are likely to grow very rapidly to contribute significantly as was seen with revenues from e-commerce in the past.

     

     

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