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Indian firms chase brick and mortar companies as dot-coms fail

Indian IT corporations are frantically chasing business from brick and mortar firms, a trillion-dollar-opportunity globally, after getting burned funding dot-coms on the information highway.

"The channels available for e-enabling brick and mortar companies are many such as e-fulfilment, e-procurement and customer relationship management," Anand Sudarshan, chief operating office of Planetasia.com, an Internet applications provider, said.

"It is the biggest opportunity. Worldwide the whole market is estimated at about a trillion dollars," Sudarshan said.

The switch in focus will be made largely at the expense of dot-com firms, which have lost much of their investment sheen in recent months.

Infosys Technologies announced last week that it was planning to cut down its exposure in the Internet sector.

The announcement came with the news that EC Cubed Inc., a US-based provider of e-commerce services in which Infosys had made a strategic investment, had filed for liquidation during the quarter ending December.

"Dot-com and venture funded clients enabled us to garner expertise in niche technology areas. We leveraged this opportunity to provide high-technology solutions to large corporations around the world," Infosys deputy managing director S Gopalakrishnan said.

"However, given the recent conditions in the capital markets, we intend to reduce our exposure to this segment. We aim to work more selectively in this space, with adequate de-risking measures in place," he said.

Prompted by India's software boom, thousands of dot-com entrepreneurs raced to set up shop in the late 1990s.

Venture capital firms are believed to have pumped up to $500 million into new companies who came knocking at their door, of which an estimated $300 million went down the drain.

Mithali Ramesh, general marketing manager in the Internet division of another software leader, Wipro, said traditional companies would be the future cash cows for software firms.

"The dot-com rush has thinned down considerably. Corporations and venture capitalists are now wary of putting their money in pure start-ups as most of them have folded," she said.

"In the dot-com world people are still talking about earning revenues. But the future trend is for e-enabling brick and mortar companies. In this sector one can break even fast. That is where a lot of people will get in," Ramesh said.

However, Muneesh Chawla, senior vice-president of IL and FS Venture Corp Ltd., said dot-coms were bound to make a comeback in the long-term, as computer penetration and technology changed.

"But in the interim period we will see a minor shift of funding pattern. The emphasis will be on e-enabling brick and mortar companies, technology development and services," Chawla said.

"The dot-com hype has died down and lot of money has been lost. The e-enabling business is a large opportunity," he said.

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