Packaged software biz reels under stagnancy

India maybe shining but its effect doesn’t seem to have rubbed off on the
Indian pac-kaged software business. This industry, which saw its last do-uble-digit
gro-wth in 2000-01, is now faced with a period of stagnancy.

A recent NAS-SCOM report points out that packaged software market grew by
just five percent in 2003-04 as compared to the fiscal before to clock Rs 2,100
crore in revenue.

In 2002-03, it was estimated to be around Rs 1,996 crore. However, majority
of the ven-dors continue to claim a fabu-lous year-on-year growth. However
partners suspect, that Microsoft, which commands over 35 percent of this market,
may be having little trouble with its growth. While the software major claims
nearly 35 percent CAGR over last five years, it remains quiet on its
year-on-year growth figures.

Some other factors also dri-ving this stagnancy is a con-tinued imp-ortance
gi-ven by IT spenders on hardware, while reser-ving only 20—30 per-cent of
their IT bud-gets for software. A fact further revealed by the Dataquest-IDC
Mega Spender survey, which points that even BFSI–the larg-est buyer of IT–is
spending just about 18 percent on software.

Faced with these challenging times, vendors in this space are now
aggressively targeting the SME segment while partners reeling under shrinking
prod-uct margins are now gearing up for providing services.

Goldie

Mumbai