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"We believe that the industry can achieve a growth of 35 - 45%" - Views on News from Equitymaster
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  • Jun 9, 2000

    "We believe that the industry can achieve a growth of 35 - 45%"

    Mr. Manoj Tirodkar, Executive Vice Chairman, Global Tele-Systems Limited, is a busy man. Having built India's largest secure private data network, connecting 20 cities within India, and international gateways in 8 locations, he is now spearheading the E-commerce revolution. Global ventured into E-commerce when India was only being introduced to the Internet. Now as others are only entering the fray, Global Tele is all set to roll out its payment gateway.

    Mr. Tirodkar took time off from his busy schedule to talk to Equitymaster.com on how he sees the Internet revolution taking shape in India and how Global Tele is placed to capitalise on the opportunity.

    EQM: The information technology sector is anticipated to grow at a mind-numbing pace over the next decade. Can you please share your vision for this sector? In which areas do you see growth being the highest?

    Mr. Tirodkar: The growth will be in three sectors - IT enabled services, software exports and, of course, domestic software and system integration. We believe that the estimates are very much on target. We will see explosive growth in all these three areas over a period of next 10 years. Another reason that we see the sector benefiting is that international connectivity will increase dramatically post 2004. The bandwidth would increase and costs would come down.

    We are seeing growth in three major areas. One is call centers. We see that with costs of leased circuits going down, call center demand is going to surge. In the IT enabled services, engineering outsourcing, which will support from offshore activities on the engineering front both from software and telecommunication. Third, again is the area that is not looked at much, research and development oriented outsourcing.

    Conservatively, we believe that the industry can achieve a growth of 35 - 45%. In case of call centers and IT enabled services the growth could be even in excess of 100%.

    EQM: Global Tele has identified four key businesses - E-commerce, networks, software and Internet and engineering services. Please could you share your vision for each of these business groups?

    Mr. Tirodkar: Specifically for our company, our engineering effort is divided into three - enterprise networking, networking solutions for the Internet world and e-commerce solutions for the corporate world (on the networking side). And our focus has been on voice and data over the last three years. We see an explosive growth in data traffic with the advent of the Internet.

    On the software front, we need to make a higher investment in manpower as well as overall effort to compete with firms that have been traditionally in the software development sector. We see explosive growth for ourselves particularly because we have traditionally been involved in intellectual property rights rather than software development. We will now concentrate on software development.

    On the electronic commerce, we think we have a lead. We had a separate company, Global Electronic Commerce, which had begun the whole initiative in 1993. Within Global Tele we have all the application services of which atleast three services will be operational - the payment gateway, the ERP service and the banking and mutual fund related services.

    In the Internet related businesses, I believe we already have a huge lead. This business will grow at over 50 - 60% over the next three years.

    So, our growth perspective is from engineering, software and Internet related network services. Conservatively, as an organization we would be looking at growing 35 - 40% per annum.

    EQM: Where do you envision your company as an e-commerce solution provider for the Indian market within one year from now?

    Mr. Tirodkar: It is important to understand what e-commerce stands for. Basically it is transaction of commerce on the Internet. And it definitely offers a huge area for growth. Large corporations are embracing the Internet. You must have heard of the petrochem and steel portals that are coming up. But how much revenue it will generate for service providers is uncertain to say.

    But on the e-commerce side there are four aspects in the Indian context on the emerging nature of the market. One is the proliferation of the Internet and therefore the data equipment. Thereafter on the e-commerce side, plain vanilla access to the net. Third is of course the content, where you see explosive growth now. Fourth is the dot.coms that you see. An area that interests Global is business to business activity, which we think, will witness explosive growth. But our belief is that revenues will grow slowly. Over the next two years revenues for service providers would be negligible.

    The impact of e-commerce on the economy and the way of conducting business is definitely going to be very profound. It will change the way we conduct our lives - in terms of how we seek information, how we do shopping, seek entertainment and music. There is no doubt about that. But is does not mean that it will immediately have a bottomline impact or a revenue impact for the dot.com and B2B companies. Our belief is that growth is going to be slow.

    In terms of how Global is prepared, I think our investment pattern over the years has given us a lead over our competitors. Our efforts go way back to 1992, when we took a series of software rights. We have also been investing in infrastructure related to e-commerce which we believe is critical. We have several international relationships in software and hardware. But we are not on the dot.com side. We are service providers to dot.coms. Several dot.coms reside on our networks and on our efforts. We will, as our business policy has been, hover around the domain spectrum providing services in the dot.com and B2B area. We will also be service providers in a limited way. So we see explosive growth in the service provision side of our business. In terms of application service providers we think the growth will be relatively slow. The growth would take off once the number of Internet users and bandwidth increases.

    Quantifying the size of the market is going to be very difficult. In India it is estimated that there was Rs 2.5 bn worth of e-commerce last year. However we believe it was much more (if you take into account sales through other electronic networks). But in terms of our e-commerce efforts we generated revenues only Rs 450 - Rs 500 m from this source. But is an explosive market.

    EQM: How will your payment gateway make it simpler for people to conduct transactions on the Internet? Alternatively, what will be the key factors that will determine the success of a payment gateway?

    Mr. Tirodkar: First we must look into the factors why payment gateways are considered to be hot. Everybody agrees that most commerce transactions will move onto the net. When that happens there is a need for an entity to handle such payments. Traditionally what comes to your mind is a bank. What a payment gateway is supposed to do is really to assist the bank in handling payments and to that extent it is important to understand what payment gateways are all about.

    Our payment gateway is a technology that will connect several banks, corporate and users onto a network, which will permit them to exchange payment in an electronic manner. And to a great deal this is not very different from how you use your credit card. You will be able to make payments using a credit card, debit card or any other means that a bank may permit. Now the entry barriers in this business, in our opinion, are very high. There are several reasons for this. First the banks have to agree to form a relationship with the party and this will involve technology checks. Then several corporate have to be involved in the exercise. Our strengths are being derived from what we started to do earlier in automating the processes of many corporate. Now that we have handled their back end solutions, we are now offering them solutions to venture into e-commerce. We hold an edge in this respect. We are focussed in this aspect of the payment gateway business. Our services differ in one key aspect from banks, which are offering payment gateways as a product. They are aiming to enhance their market reach.

    Payment gateways are definitely going to revolutionise the way payments are made in the economy. With number of players entering this service, the key factors that will determine success will be first mover advantage, technology and capability to be neutral in the market place in order to attract more banks and corporates to the gateway. We are superior in a number of ways. We are one of the first off the block and are using fairly advanced technology. Then we are not perceived as a bank but as an entity that is facilitating the entire process. We have worked with a large number of corporate, which will be comfortable working with us as we can provide complete solutions. Banks on the other hand can only transfer money from one end to another.

    Then we have corporate relationships, which will help us in laying out a successful service.

    EQM: There has been a lot of debate on the level of security in transactions conducted over the Internet. How far is this justified? Is there a need for regulation for companies to make explicit the risks associated with e-commerce?

    Mr. Tirodkar: The concern is justified. If you are making payments over an electronic medium then security and confidentiality are absolutely important. In case of Global, we have had relationships with banks and corporate over the years. We understand their concerns and are deploying technology to ensure that their interests are protected.

    There are risks involved in making payments on the Internet. In advanced countries there are laws, which make it mandatory for e-commerce service providers to highlight the risk. The technology has ensured that the risk is minimized when it comes to payment, I can assure you that. In India we have the new IT Bill. But it is for the service providers and the intermediaries to come together to make this thing work. There will be concerns. Therefore at Global we have stayed away from the consumer side of the business because it is difficult to identify a consumer if a fraud takes place. On the other hand, in a B2B transaction there are central business relationships. On our payment gateway, you have to register with us. These issues will be important in the first one to two years.



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