'India needs to deregulate telecom further for ASP biz to boom'

Sanjay Kumar, the newly-appointed chief executive officer of Computer Associates, the third-largest software company in the world, is bullish about India, especially the Indian ASP (application service provider) market. CA has four joint ventures with Indian companies. In the next six months, Kumar plans three more such partnerships to cater to the growing Indian e-commerce market. He has also increased the allocation to the Indian incubation fund to $130 million.

The Sri Lanka-born Kumar had effected a global recast of CA to increase focus on its core business as well as the high-growth technology markets. As a first step towards this, the company has spun off its ASP business into an independent subsidiary, iCan-ASP. The outgoing CEO, Charles Wang, who will continue as chairman, will focus on new and emerging business areas, while Kumar will focus on CA's core business areas.

In an interview with Ganesh Ramamoorthy of NetScribes, Kumar spoke about his plans for the Indian market.

What are the main reasons for the recent restructuring at CA?

The restructuring has been done mainly keeping in mind the shareholder value. As the dynamic nature of the technology industry creates ever increasing opportunities for growth, we are committed to leveraging these opportunities to create value for shareholders and exciting new opportunities for our employees.

The realignment reflects our emphasis on driving CA to be more efficient and customer-focused and to heighten awareness of CA's core strengths and innovations. We will seek to balance strong revenues from our core businesses with increased value from the new ventures that we will launch in the rapidly-evolving technology industry.

As a first step in this strategy, we have formed iCan-ASP to service the ASP infrastructure market. Next, we will spin off the desktop accounting business, ACCPAC, and other businesses over time. Focusing on our fastest-growing businesses is part of CA's continuous evolution in a dynamic marketplace.

What could be the implications of this recast for the Indian business?

There won't be too many immediate implications. The management structure remains the same and our customers will not see any difference in the way we function. The business will continue as before. However, in the next months, you'll see more activity in Asia. Asia, and particularly India, being one of the high growth markets, will get more focus. In the Indian office, for instance, the staffing levels will be increased to support our sales activities here.

Please elaborate. Do you mean acquisition of Indian software companies?

No. I don't mean acquisitions or anything of that sort. We are not looking at acquisitions in India right now. What I mean is that you will see more joint ventures and venture fundings happening in India. We have lined up at least three joint ventures within the next six months and the number will go up by March 31, 2001.

The Gartner group recently painted a very negative picture about the Indian ASP market. What are your views?

The global ASP market is large and growing rapidly. That is the main reason why we have formed iCan-ASP. This new company will focus on offering new and innovative technologies for providing applications through the Internet, wireless and broadband communications. We have retained Credit Suisse First Boston and Morgan Stanley Dean Witter to advise on these activities. The joint venture with Satyam in India is mainly to focus on the growing demand of the Indian ASP market segment.

Gartner might have painted a very negative picture about the Indian ASP market, but I will differ with their predictions in the long term. The ISP business is looking up today. And with the growing proliferation of Internet and acceptance of e-commerce among the Indian business community, we see a tremendous opportunity in India in the small and medium enterprises (SMEs) segment.

This segment does not have adequate infrastructure for conducting e-commerce today. But when they start conducting business online, the need for critical e-commerce applications will grow. But since these critical applications are typically out of the reach of an SME, an ASP that can provide these applications on a rental basis at a reasonable cost, will be very much in demand as this will help reduce the total cost of ownership for e-commerce applications for SMEs.

So in a about a year-and-a-half, the market will be ripe for ASPs in India. The joint-venture with Satyam will then be in a position to provide SMEs with simple, cost-effective access to advance e-business and back-office applications, plus implementation expertise and support.

CA had instituted a $100-million venture fund for Indian start-ups. Can you give us a status update on what the fund has done till date?

The venture fund has been pretty much successful. About 50 per cent of the fund has been exhausted. And I expect the total funding to go up by another $30 million to $130 million by 2003. The funds have basically been invested in incubating and developing businesses that focus on high-end technology areas and for developing e-commerce applications on UniCenter and Jasmine II. Till now, we have put the funds in our joint ventures. We pay for their training and technology requirements. Our future fundings will also focus on our joint ventures.

Can you give us more details about the three joint ventures that you are talking about?

I cannot give you all the details about the joint ventures because we are still at the final stages of the talks. But what I can tell you is that the joint ventures will be mainly to address the growing ASP, Internet infrastructure and applications development for telecom software market in India. All these ventures will focus on using CA's core technology, UniCenter TNG and Jasmine II for applications development.

Will the recent spin-off of CA's ASP business into a separate company, iCAN-ASP, have any impact on the joint venture that you have with Satyam in India for the ASP business?

Technically, there will be no immediate impact. Since the management structure will remain the same, the business will continue to be under Venkat Subba Rao (MD, India). Even otherwise, it is Satyam that is in charge of the joint venture, while we will provide the technology support. The solutions for the ASP market will be developed using Jasmine II and UniCenter TNG.

What are the main hindrances to the growth of the ASP market in India?

The most important aspect necessary for the growth of the ASP market is telecom infrastructure. The success of an ASP will depend on a reliable and efficient backbone infrastructure. But that is lacking in India right now. While the government has definitely taken various measures to set right the situation, more deregulation is required in this sector to build a good infrastructure.

The Internet service providers, who form the next important factor, are currently looking up in India. With the recent announcements made by the government to meet the bandwidth shortage, private ISPs will have an increasing role to play in the ASP market.

Currently, it is infrastructure that drives the cost of the ASP business. But as and when the infrastructure becomes available, ASPs will be able to provide better quality service to their customers at a lower cost. The joint ventures in India are meant not just to build solutions for the ASP market but also to help build a state-of-the-art infrastructure that will help small and medium-sized enterprises get the benefit of lower communication costs.

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