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August 7, 1997


The Five-Year Plan

LG Software has a gameplan to be #1 in India

LG Software Development Centre (India), the Indian arm of the $73-billion South Korean conglomerate, LG Electronics, is gearing up to become the number one software company in India in the next five years.

Already in its first year of operations in India, the software centre has notched up a turnover of around Rs 300 million and is eyeing a growth rate of 120 per cent by 2000. "Our target is to be the largest software company in India, both in terms of revenues, profit and employee admiration," Lalit Ahuja, regional managing director (India), has said.

The Bangalore centre, Ahuja said, would become the company's global software development hub to cater to the emerging markets in the US, the UK and Europe. The parent, LG Electronics, currently focuses on the US market where it has around 25,000 employees.

Its largest investment so far is coming up in the UK with a facility for manufacturing consumer electronics goods and semiconductors.

As the Bangalore centre is the only one of its kind for LG outside South Korea, "We have a steep target" plus "a strategic financial muscle" for investments in IT and R&D.

The company plans to invest $40 million (some Rs 1.44 billion) to expand its operations in the country by setting up development centres in Hyderabad and Calcutta, besides Delhi.

Next year, these software operations are to be spun off into two divisions. The unit that will come under the Software Technology Park scheme will continue to be an export-oriented unit and the other division will cater to the domestic market in the country.

"By the year 2000, we expect 15 per cent of our revenues to come from our operations in India. The company plans to generate a good part of its revenues from non-LG customers."

"Since LG Software India caters to the requirements of its US and UK operations, there is a need to enhance our systems integration capabilities," Ahuja said.

For this "We plan to forge strategic alliances with Microsoft, Compaq, HP, Sun and Qualcomm under an agency arrangement in India." These alliances will be extended to the US and European countries whose IT operations will be serviced from Bangalore. "We also plan to launch several hi-tech consumer electronic products, hand-held PCs and network PCs through these partners."

Ahuja said LG Software would not get into conventional IT services like the 2000 and client server applications. Instead, it would set up a virtual enterprise comprising a consortium of local IT companies to outsource its non-core software areas.

"We have initiated an LG partnership programme and contracted development work worth $50,000 to Future Soft, BFL and Wipro with three more companies on the anvil." In this way, around 35 per cent of LG's requirements amounting to several hundred million dollars would be outsourced from local companies in the years to come.

"Since all major IT companies are getting into Y2K and client server applications, there is a void in the market for high-end solutions and applications. And this is the gap we hope to fill by focusing on Web technology and electronic commerce."

In the electronic commerce market, the company plans to develop solutions for 'cyber malls' to enable Net-based financial and other transactions.

According to Ahuja, LG has plans to enter the Internet service providing market in the country. This is to be routed through LG Internet Services Co, which is currently doing a feasibility study of this market.

Also on the anvil is a business unit with Microsoft to provide Internet-based solutions around MS technology to Indian users. A semiconductor design centre is to be set up in Bangalore. "We have already outsourced two projects to Arcus Technologies and NCore," Ahuja said.

The parent, he said, proposes to bring in seven to eight of its group companies into India with a $700-million investment in the next three years. LG Construction, for one, would be building a world class facility for the Bangalore centre.

According to Ahuja, LG Electronics is targeting a five-fold growth in the next seven years and expects to post a turnover of $385 billion by 2000. Currently, 35 per cent of its revenue is from non-Korean countries, a trend it hopes to reverse.

- Compiled from the Indian media

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