* Lack of planning, technical knowhow cahllenge to IT firms
* Existing govt systems often outdated
* But firms have no option as projects lucrative
By Anurag Kotoky and Manasi Phadke
NEW DELHI/MUMBAI, Aug 5 (Reuters) - Inadequate planning, shoddily maintained systems and lack of technological knowledge are putting speed breakers on the Indian government's ambitious IT overhaul programme and are in turn becoming a major challenge at the execution level.
For Indian IT companies, the government's billion-rupee projects are much needed as they are looking at ways to make good for sagging overseas revnue. These projects hold the key to retaining their profitability.
"The bigger issue is manning the change," says Arvind Thakur, chief executive at NIIT Technologies Ltd , which had recently executed an e-procurement tool for the Indian Ordnance Factory Board that buys defence hardware and equipment for the country's armed forces.
NIIT gets about 7-8 percent of its revenue from government contracts.
"In such a change, you need the involvement of the decision makers and the line managers, who are not necessarily very tech-savvy," Thakur said.
NIIT is not alone. Tata Consultancy Services (TCS) , India's top software services exporter, also believes boosting the technology literacy of the government staff is key to better execution of government projects.
"Unlike enterprise services, government projects tend to have wide disparities in the infrastructure-base and resources distribution," said Tanmoy Chakrabarty, vice-president & head of government industry solutions unit of TCS.
"Also, the impact of public services has a longer gestation period as compared to a corporate environment. This tends to be an integral challenge in project execution," Chakrabarty said in an emailed response.
Farid Kazani, chief financial officer at Mastek Ltd , said the Indian government is rigid about commercial terms of contracts, unclear about the requirements of the project and needs to improve its planning.
Databases are incomplete and employees are not sufficiently trained in handling technology, Kazani added.
"It is quite different from where the other developed nations are," he said. Mastek gets 23 percent of its revenue from the government vertical, most of it from the U.K.
"So most of the times, either we end up with a time over-run or a cost overrun on India projects," he said. "We generally don't face these kinds of problems in the U.K."
Another bigger risk is getting dragged into corruption scandals. A case in point being HCL Infosystems' contract with MTNL .
The Central Bureau of Investigation alleged the contract, part of the corruption-ladden Delhi Commonwealth Games, was awarded at an "exorbitant price" and had probed some officials of the companies.
In a newsletter in May, the National Association of Software & Services Companies (NASSCOM) had flagged several challenges threatening the robust pace of growth in government contracts for IT firms.
"Some projects have failed or been shelved because of flaws at different stages: their conceptualisation, scope definition, vendor selection and poor execution due to shortcomings both on the government and the implementing vendor's side," the industry body said.
HUGE GROWTH POTENTIAL
Initiatives such as the Unique Identification programme, aimed at building a biometric database of the entire country's population, and the Restructured Accelerated Power Development & Reforms Programme, which encourages adoption of IT in energy accounting, are increasing the government revenue pie for IT companies.
NASSCOM expects IT companies' revenue from the domestic market, which was 787 billion rupees in FY11, to grow 15-17 percent this fiscal.
"It's just mind boggling, the amount of government projects coming up," NIIT Tech's Thakur said.
"If you look at the power projects, each project is worth 4-5 billion rupees, and treasury, every state has to automate the treasury, that's worth 20 billion rupees, then look at the homeland security, there is a crime and criminal networking system, I would say that would be another 20-30 billion rupees."
This is precisely the reason why IT companies overlook the hurdles or learn to live with them.
In May, outsourcer Spanco Ltd took over the assets of the Nagpur circle of the Maharashtra State Electricity Distribution Co as a designated distribution franchise.
Although the firm faced a few hiccups during the first month as it took over a system where the maintenance was poor and technology threadbare, Spanco has its eyes set on more such contracts.
"Revamping entire systems is a very significant opportunity because it gives us a chance to do an entire process reengineering and make it more effective and efficient," said Kaustubh Dhavse, senior vice-president - strategy, Spanco.
About seven years ago, NASSCOM had said in a report that the government IT initiatives were small, there was an overall apathy and this was constraining the Indian domestic market, which was a little more than $8 billion then.
Today, the domestic market has more than doubled in size and apathy from the government is waning, but companies believe the segment could yield much more if the implementation glitches are mutually fixed. (Editing by Rajesh Pandathil)
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