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The Rediff Business Interview/Arjun Malhotra

'E-commerce, e-servicing set to boom in India'

His tryst with the Indian IT industry began 25 years ago, even before the information technology revolution hit the Indian shores. He co-founded HCL, which catapulted Indian information technology sector into the global arena.

During his 25-year-long stint with HCL, he took over the international operations of the group to set up HCL Technologies America, and came back to India to launch the largest joint venture of the time HCL-HP. His stints in Australia, New Zealand, Hong Kong, and the United States gave him an international perspective, which saw him quit HCL and launch TechSpan, an Internet consulting company, in 1998, which focuses on the e-business integration market.

Meet Arjun Malhotra, chairman and chief executive officer, TechSpan. Headquartered in California, TechSpan's $12 million venture was led by Goldman Sachs and Walden International Investment Group. He shares his views on the Indian IT industry with Neena Haridas.

What prompted you to get into the business of e-servicing?

In the IT industry, time is the most important factor. Companies worldwide realise that the 'time-to-market' is the critical success factor, more than cost. People are willing to pay more money if you can service them in time. First, we must understand what e-servicing really means. We play the role of incubators for new concepts, ideas and technologies, for companies we like to call e-babes. Thus, we provide solutions for emerging dot-coms or other technology companies.

We work mostly for companies in the United States. These firms turn to Indian companies such as ours to provide them with solutions. They do not really care where you operate from so long as the solution reaches them in time. The growth rate in e-servicing is over 100 per cent per annum, compared to the 25 per cent growth rate in traditional business. Which is why we have entered this niche area.

Why is it that Indian companies are still only 'providers' of solutions. Why don't we ever come up with any products?

Well, I think India will stay in the service market for a long time to come. There is nothing wrong with that. Developing your own product requires a different approach which is not there in India. There is a need to change the prevailing mindset for that. For instance, most of the companies in India, even sometimes technology companies, run pirated software. There are no guilt pangs on this account. The problem in India is that Indian IT companies are all marketing driven-and not product development-driven, which is why we are more service-oriented. There are some entrepreneurs who are making their own products, but they have not been very successful.

Indian IT minister Pramod Mahajan after his visit to China has claimed that Chinese IT companies are keen to set up shop in India - both software and hardware. Is there really much for India to gain from Chinese technology?

I don't think so. India cannot learn much from China -- our software and hardware engineers are some of the best in the world. What we could probably learn from the Chinese is how to spread IT rapidly so that it reaches the common man. We have not done all that well on this front. China has beaten us at the pace of adapting to new technology.

Do you mean to say that India's self-proclaimed IT revolution is more hype than reality?

No. I don't intend that. We, however, misjudged the pace at which IT would revolutionise life in India. People here have not been able to adapt to technology as fast as the government or for that matter the industry expected them to. In India, parents enrol their children in computer courses because they fear that otherwise they will not be 'relevant' in this world. It is not because they themselves have adapted to new technologies.

The government and the industry expected the community to adapt to Internet and computers and at a particular rate but that did not happen, which is why the business-to-consumer businesses in India is not picking up all that well.

This, nonetheless, is not true of business-to-business: here the acceleration has been better and this is the area where India's IT industry will gain momentum in the future.

In India technology is still not a strategic weapon for corporates. It still considered as tool to reduce manual labour. The infrastructure has not been laid out as yet, which is why IT is yet to touch the rural and semi-urban areas. The challenge now is to complete the technology cycle as fast as possible. If we don't move faster, the more cycles will we have to complete.

How different is the Indian market from the US?

The difference is in the approach towards technology. In the US, cost does not matter as long the work gets done in time. People adapt to new technologies and requirements very quickly, but in India adaptation takes longer. Here technology companies are still very commercial in nature, whereas in the US it is the techno-commercial people who deal with technology.

In the US, time is the most important factor. People there are willing to accept a not-so-perfect product as long as it reaches them in time. Here, people still spend a lot of time attaining perfection and in this process they lose out on business. In a sense, traditional strengths as the ones India has tend to turn into weaknesses.

How long will it take for Indian companies to adapt to change?

I really can't say how long it will take, but as long as they change quickly the better for them. In the United States, it takes about six months for a company to change to a new technology. In India it takes about a year or two - if it is a tech-savvy company.

With dime-a-dozen dot-coms cropping up in India, how long will it take for the market to settle?

I think the market is already settling down. For instance, the venture capitalist funding is already getting more rational. Every dot-com is not being funded or the VC puts the brakes on them after the first phase of funding. It is not that just big dot-coms will survive -- there will be lot of mergers and consolidation. But the smaller ones will also survive through niche marketing -- they will cater to a smaller group of customers and stay in the business.

For instance, it is not that only Tatas and Birlas are running businesses in India. There are other smaller companies, too -- in fact, tiny companies too. It will be the same in the dot-com arena, too.

What do you see happening in the India IT industry in the next two years?

A. There will be lot of businesses happening through the Net. People will start selling and buying through the Net. The e-service industry will become more organised and will bring in more wealth to the country. The IT industry will become more dynamic and more business models will develop.

But then there are also certain things that will not happen in India. For instance, exchange of products such as crude oil, tobacco, etc. The same way that the government now buys off all oil and tobacco and then sells it, a system will develop by which it can be done through the Net. However, in India it will take a longer time to achieve this level because of the red-tapism involved in the country. There are too many government regulations.

What are your future plans for TechSpan?

We expect to end 2000 calendar with $76 million and end 2001 with $133 million. We are also planning to come out with our IPO on the NASDAQ soon. We also expect to continue in the business of e-servicing.

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