138
In 1992-93, the domestic software industry is estimated to have logged in revenues
of Rs. 5 billion (not including in-house development of software by end-users).
The in-house development revenue cannot be quantified, but according to ball park
estimates, is worth around Rs. 6 billion. The domestic software industry has shown
a CAGR of 33 percent which has been steadily improving in the past few years. The
growth rate in 1992-93 was 56.25 percent compared to 42.2 percent in 1991-92.
With the proliferation of software companies in this country, the domestic industry
is targeted to reach Rs. 30 billion (US$1 billion) by 1995-96.
The structure of the domestic industry in India is a mixture of a few large companies
and a plethora of small and medium-sized companies. The top 15 companies’ exports
account for only 36.8 percent of the total revenue in contrast to the export industry
where the top 15 companies account for almost 69.7 percent of the total revenue.
It is often said that we have too many small domestic software companies in India.
Some analysts have felt that the industry would be better structured if there were a
few large companies instead of the multiplicity of small companies. This view is,
however, simplistic. Size is not really of critical importance as long as the company
is profitable, competitive and well focused. Indeed, some small companies would be
the envy of many larger companies in terms of turnover or profitability per employee.
In terms of size, evidence suggests that small companies tend to be more innovative
and dynamic, especially in the product and services area.
Some commentators point to an inverse economy of scale
—
when companies grow
large, they incur disproportionate managerial and administrative overheads and
the entrepreneurial and technical vigor that made them successful when they were
small is diluted. There is also an apparent increase in the cost and lead time required
to create a new product release. However, size is important only to companies that
are entirely service based, such as system integrators, consultancies etc.
The surest way an Indian company can improve its revenue and profitability is by
becoming a quality company. There is ample evidence, across all industries, to
show that quality companies are able to generate higher margins while remaining
highly competitive.
The domestic software industry in the country has many areas of strength but
none of these have been exploited fully. In order to achieve the target of Rs.2
billion by 1995-96, each of these strengths have to be utilized to the maximum.
The areas of strength include the following:
