Look inwards

The unprecedented fall in the prices of IT shares in the Indian stock markets and continuing bad news about the slowing down of the US economy tend to present a gloomy picture. This need not be the case. Software exporters have been the glamour boys of the Indian IT industry for the past few years. Now they are being brought down to earth. 

This shows how unrealistic our investors are. Even in a market driven by perception rather than on fundamentals, the share prices were unrealistically high. It is time for good pickings for value investors as the setbacks may be temporary. The wake up call from the US market will help the software industry to refrain from putting all their eggs in only the US market and look for opportunities elsewhere.

Considering the case of our textiles industry, till early this decade, the garment industry was totally-export driven. The good products were rarely made available in the domestic market. Competition from other nations made it hot in the export market. They looked inwards and the domestic garment industry with a plethora of branded apparel has gained a lot. Today, the textile industry is able to even export branded products and for many of the key players, the domestic
market provides a cushion during bad days and also the ability to test market innovative products and services.

The software industry too can do a similar thing. Even as they covet potential markets such as Germany, Gulf, Japan and Australia, equal efforts should be devoted to developing the domestic market. Software products and services account for just about five percent of the domestic spends.

While Internet has perked up hardware sales, it is limited mainly due to non-availability of suitable applications in many other areas, due to low PC penetration in the country. If software companies give some more attention to develop relevant applications and make software fun for a large number of Indians, they will be able to tap a significantly large market within the borders of our nation and among our neighbors.