In The News

IT firms urged to go niche

Source: The Edge Malaysia

January 19, 2010

Sudhakar Ram, the chairman and managing director of India-based Mastek Ltd, believes Malaysian IT companies should focus on doing well in niche areas to compete globally.

He says although Malaysia has the talent pool, the local IT industry caters largely for the domestic market without focusing on exporting its products and services.

“It is largely about specialisation. Malaysian companies won’t have the scale to take on the likes of Accenture or IBM. Instead, they can actually make a difference if they develop their own intellectual property (IP) in very narrow areas where they have a very high level of expertise and innovation and bring in new ideas and technology,” Sudhakar tells netv@lue2.0.

“Technology is such a wide space. The software and services market is worth some US$800 billion and within the next 10 years, it will grow to US$1 trillion. It is so huge. If you want to find a billion-dollar niche, you can always find it,” he adds.

For example, he says, there are a lot of opportunities in untapped markets such as banks, insurance companies and brokerage firms.

“The technology is fairly old in many of these large companies. There are lots of opportunities by creating small new technology IPs which can make a difference,” Sudhakar says.

He adds that the US subprime crisis has exposed pervasive weaknesses in financial industry regulation and the global financial system. “We need a huge overhaul in some of these underlying systems and that is a huge market opportunity.”

Mastek, which is an IP-led services company, focuses on the insurance, government/public sector and financial services sectors. It undertakes its IP development in Malaysia through its local subsidiary Mastek MSC Sdn Bhd, which was set up in 1994 and has done a fair amount of work in the insurance sector.

“We own the platform and intellectual property for Elixir, which takes care of all the needs of life insurance companies. This is a significant part of our business,” Sudhakar says, adding that among the company’s large customers in the insurance business are CIMB Aviva, Maybank and Hong Leong Group.

Mastek was established in 1982 by Ashank Desai, R Sundar and Ketan Mehta. Sudhakar was the chief information officer of Rediffusion Dentsu Young & Rubicam prior to joining Mastek in 1984.

Mastek’s revenue for the fiscal year ended June 2009 was over US$200 million.

Apart from finding niche areas, Sudhakar says Malaysian companies should capitalise on their advantage in terms of language diversity. For instance, he says, Malaysian companies have the potential to do business and develop software in China due to their familiarity with Mandarin.

Mastek’s focus has always been developing and owning its IP and doing very strategic applications for governments and corporations globally. Sudhakar describes such work as the “third wave”, where companies bring their own IPs to the table and undertake very complex strategic work for customers.

“Any emerging industry, especially in a developing country, goes through three waves. For example, in the electronics industry, the first wave is where the companies are component suppliers — they don’t make the entire product but make the chips,” he explains.

In the second wave, the companies are original equipment manufacturers. They do not have their own brands but assemble products on behalf of large Western brands. In the third wave, the companies have their own brands.

Sudhakar says India has gone through a similar process.

“In the first wave, India didn’t have the components but we had people. We had contract programming as well. The second wave happened during Y2K. We were doing contract manufacturing on behalf of Western customers, where they would send their stuff to have Y2K remediation done and have all the problems fixed.

“In the first wave, India didn’t have the components but we had people. We had contract programming as well. The second wave happened during Y2K. We were doing contract manufacturing on behalf of Western customers, where they would send their stuff to have Y2K remediation done and have all the problems fixed.

The way forward, Sudhakar says, is for companies to have the best of breed solutions but at the same time, establish strong partnerships.

Reference:
This article appeared in netv@lue2.0, the technology section of The Edge Malaysia, Issue 785 Dec 14 – 20 2009
– Written by Doreen Leong.

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