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Future beckons the thinking machines - Views on News from Equitymaster
 
 
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  • May 12, 2001

    Future beckons the thinking machines

    For quite sometime now the mantra for success has been "out of the box " thinking. However, as the new millennium dawned, heralding the unprecedented use of technology by mankind, the old paradigm changed to thinking "inside the box" or rather thinking "by the box".

    In retrospection the evolution and successful acceptance of technology has always been directly proportional to the ability of the technology to improve the quality of human life. On one hand computers made calculations undemanding while on the other networking made communications across the globe effortless and cheap. The question is how can technology make life even more uncomplicated? The answer is by making the boxes (machines) think and therein lies the new mantra of success (at least for the technology companies).

    Just imagine how many machines does a person use in his or her daily routine? The list includes, TV, microwave, phone, computer and a car just a name a few. How easy would life be if all the machines could think and communicate with each other? This would mean a lot more convenience and of course the luxury of hands free operations.

    Product categories
    Segments Products Comments
    Web Devices WebTV Products designed to access the Internet.
    Many devices will also do other tasks--especially
    as technology advances.
    Web Pad
    Web Companion
    Web Terminal
    Communication Devices Email Station Products designed for all types of communications.
    Nearly all devices will access the Internet and may
    do entertainment and computing tasks.
    Web Cellular
    WebPhone
    Web Video Phone
    Entertainment Devices Web Set-top Box Products designed to deliver, store and manage
    entertainment--TV, video, music and games.
    Nearly all devices will access the Internet and will
    make the products interactive.
    Web Digital TV
    Web Game Console
    Web/Personal DVR
    Digital Jukebox
    Computing Devices Web PDA Products designed to provide PC functionality for mobile,
    low-cost and simplified applications. Most devices will
    also access the Internet and may do entertainment
    and other tasks.
    Palm Computer
    Data collection IA
    Internet PC (IPC)
    Thin Client
    Other Devices Electronic Book Products designed for new functions as standalone
    products or as built-in functions in existing products
    Car IA
    Learning IA
    Kitchen IA
    Medical IA
    Other IAs
    *IA=Information Appliances

    Technology companies are spending millions is trying to make the boxes think and communicate. This is possible as a small microprocessor is embedded into the system. Therefore, products that have a microprocessor in built like washing machines, air-conditioners are commonly referred to as embedded devices. At the heart of the microprocessor, like any other, is an operating software known as the embedded software.

    Till now the demand for information that has been driving the Internet economy has been dominated by the corporates. The man on the street has not been able to do much with information other than communicate. Yes, a person can buy shares on line but can the same person turn on his/her microwave using the Internet? The "tangible" extension that embedded systems add to information technology has opened a whole new world of opportunities. The value proposition has changed.

    The next wave of demand in the technology industry will continue to be driven by the need for information access and the most important product category will be appliances. Client appliances will include smart cards, game consoles, intelligent cell phones, set top boxes, hand held computers and home appliances. Server appliances include storage, web, intranet, device control, and home network servers. Another development that has boosted the usage of embedded systems and will continue to do so is wireless access to the Internet. This effectively means that these appliances, using technologies like Bluetooth, can be communicated with from anywhere.

    According to IDC, the market for information appliances will grow from a mere US$ 915 million in 1997 to US$ 14 billion in 2001, a compounded annual growth rate of 93 percent. Technologically, advances in embedded software and systems, real time operating systems and microprocessors will drive this the demand.

    Segment 2000 2005 CAGR 2000 2005
    Web IA 0.8 14.6 80.7% $228 $225
    Communication IA 2.7 26.0 56.9% $208 $186
    Entertainment IA 1.1 15.4 71.3% $462 $313
    Computing IA 3.9 13.2 27.5% $386 $351
    Other IA 0.1 4.1 129% $443 $390
    Total IA 8.5 73.3 53.8% $293 $243

    Traditionally devices have been controlled by hardware but increasingly with technological developments software is being used as it offers more flexibility and better response times. This has caused the fast burgeoning demand for embedded software from verticals as diverse as automotive, consumer electronics, industrial automation, medical devices, military & aerospace, retail automation and telecom/datacom.

    The world market for embedded operating systems, services and solutions is estimated at US$ 46 billion in 2000-2001 and US$ 65 billion by 2002-2003 accor

    (Rs m) DQFY01 MQFY01 Change
    Wipro 816 1,034 26.7%
    Infosys 607 424 43.0%
    HCL Technologies 1,515 1,721 13.6%

    Revenues from embedded systems

    All the major Indian software companies seized the opportunity. The major players in embedded software segment are Infosys, Wipro, HCL Technologies and Hughes Software to name a few. For the fourth quarter of fiscal 2001 all these companies have shown a strong growth in this segment despite a down turn in the US economy.

    The embedded software is a quite different from enterprise applications software business and is very difficult to implement, as it requires fairly high technology know-how. This translates into the simple fact that the entry barrier is very high in the area. The Indian software majors have the first mover advantage. Therefore, they seem the likely contenders to dominate this area for quite some time to come.

     

     

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