Sunday, December 3, 2006

The Indian Enterprise: Hot or not?

Conventional wisdom has it that the domestic enterprise software market should be shunned like the plague. After all, the argument goes, Indian enterprises don't place strategic value on IT, don't want to spend money on IT, are comfortable using pirated software and are too hide-bound to restructure their processes to make them more efficient. Besides, in a place where the relative costs of labor and capital often favor labor, why invest in automation and process efficiency?

The numbers seem to bear the cynics out: India, despite all the hype, is still a tiny market. According to IDC, the entire IT market in India in 2005 was $12.5 billion, with the bulk of that amount ($7.5 billion) going to hardware. Services accounted for $3.5 billion and packaged software just $1.5 billion. The software market is predicted to grow at a annual rate of about 20% over the next 5 years. At that growth rate, the entire software market will be less than $4 billion in 2010.

Hmm.. pretty gloomy stuff. So is there an opportunity? If I were to start an enterprise software company specifically for the Indian market, would I be mad, a decade ahead of my time, or both?