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February 6, 1999


STPI to focus on small and medium enterprises

Email this story to a friend. The Software Technology Parks of India, an autonomous society set up by the Department of Electronics, is to concentrate on the growth of small and medium enterprises in software.

Most Indian majors in the field started out in the STPI, particularly in Bangalore, before setting out on their own.

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Well- known Indian companies such as Infosys, Wipro, Tata Information Services and Sonata have started under the STPI.

They are still under the STPI umbrella, which does not require that an industry be located in a particular park.

"STPI has acted like an incubation centre and nursery for newborn software units,'' says B V Naidu, director, STPI, Bangalore.

He has been quoted as saying that the second phase of software development has started in India. This means that the growth of fledglings has to be encouraged, as the older generation is growing vigorously. "This is in keeping with the global trend, where the major contribution to software comes from SMEs.''

In the first phase, the industry becomes aware of and is exposed to global competition and succeeds in creating a niche for itself. Now is the time for the next generation. Naidu says there are 800 software units under the STPI umbrella in India. They represented the hardcore, contributing the highest amount in turnover, foreign earnings and technological progress.

The total exports of this sector in 1997-98 was Rs 35 billion, of which Rs 20 billion has come from Bangalore, which has 260 units under STPI.

Going by last year's figures, multinationals have contributed Rs 7 billion on export earnings, whereas the true value of the software is much higher abroad.

Multinationals maintain only cost centres here, unlike Indian corporations, which have headquarters here and draw up the final bill here.

The contribution of MNCs last year was 30 per cent of the total exports, while that of the Indian majors was nearly 57 per cent. The remaining 13 per cent were contributed by the small and medium scale enterprises.

In number of units though, the SMEs constitute 56, as against 30 multinationals and 14 Indian majors.

For the past seven years, the SMEs' contribution towards foreign earnings has been the least, going against the global pattern.

SMEs would have to contribute more if the Department of Electronics' target of Rs 70 billion for software exports this fiscal (almost double last year's) is to be achieved.

The DoE targets were $10 billion worth of exports by 2002 and $50 billion by 2008. "The target is very aggressive,'' Naidu points out.

He says that he is not against Indian companies taking up data processing or customising software for others abroad. "This means earning and reaching targets. Besides, MNCs here, and those seeking data processing services, constantly exposes Indian companies to world standards and market awareness.''

The data processing stage is necessary until India is in a position to provide software products. Naidu says that software products cannot be produced in a vacuum, with no domestic demand.

The Indian market has not yet grown to the extent where software companies are challenged to come up with satisfactory solutions.

India can successfully contribute only when such domestic growth takes place, he said.

"Let us not forget that Bangalore is already in the hi-tech league and that a small number of companies are concentrating on providing products'' that are licensed.

He added: "Not many people are aware that there are 14 companies in Bangalore that make chip designs for companies such as Texas Instruments, Synopsis, Sanyo Semiconductors and National. Also, another, quite sophisticated, hi-tech area where 26 Bangalore based Indian companies are active, is telecommunications. Nearly 54 (companies) are into systems software.''

Naidu says Bangalore has kept pace in terms of technology, something no other Indian centre has been able to do. He says that Andhra Pradesh, despite Chandrababu Naidu's efforts, has a long way to go before it comes anywhere near the export figures or the technological level of Bangalore.

The focus on SMEs naturally leads to concentration on secondary towns like Mysore, where an STP has been opened. The easy global connectivity that is provided by the STP's Earth link should attract software companies to Mysore.

The Indian scene is also conducive to the growth of SMEs, as major Indian corporations have started outsourcing less technical jobs.

This should be the trend for the next few years as the majors specialise in hi-tech production.

The STP model has been successful and is expanding this year, with offices in Mysore, Mohali, Mangalore, Visakhapatnam and Jaipur.

The advantage of an STP is ready infrastructure, technical services, Earth link and training. Most of the paperwork could also be done quickly with STP assistance.

- Compiled from the Indian media

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