* 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* Existing govt systems often outdated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 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
"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
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
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
"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
(Editing by Rajesh Pandathil)