Indian dotcom8217; firms facing shakeout

The sector is facing slow growth in the number of users and absence of auditing mechanisms that help market research. Internet Service Providers ISPs also face what they say are high costs of infrastructure provided by state-controlled firms.

quot;There are a couple of reasons why I think dotcom is not for India,quot; said Jason Pontin, editor-in-chief of Red Herring magazine, a Silicon Valley-based publication that specialises in the business of technology.

quot;One thing is that the PC penetration in the country is very low and then there are only about 700,000 subscribers or about 3 million Internet users,quot; Pontin told the annual conference of India8217;s National Association of Software and Service Companies Nasscom.

Ajit Balakrishnan, managing director of Rediff Communications Ltd, which runs the Rediff.com consumer portal, saw things differently. He said India8217;s booming software export firms faced the same pessimism 15 years ago but came out looking good.

Indian protagonists like Balakrishnan say the future is bright because economic liberalisation and cable-television delivered Internet access will improve volumes.

quot;I expect Internet access to become free in the next five or six months and with the development of exclusively Indian content sites on the Internet, we can reach 30 to 50 million users in the next few years from the present 3 million,quot; Balakrishnan said. Rediff earlier this week received Government approval to raise about 74 million through a share issue in the United States.

8220;As systematic usage audits of Internet portal sites were launched, sites with a low user base would close. In the next couple of months I foresee minor road kill.Some people will have to fall by the wayside,quot; said an industry spokesman.

Internet portals and websites have mushroomed in India, and have been in an upbeat mood since last November when leading private ISP Satyam Infoway paid 28 million for a 24.5 stake for a chain of portals owned by IndiaWorld Communications. Satyam and some other Web companies are optimistic, especially about 20 million overseas Indians with huge purchasing power to fuel e-commerce.

Experts said that besides low Internet penetration, Indian Internet firms would also have to cope with fast-changing Internet business trends to satisfy users.

quot;Dotcom is a media business and not a software services business or an engineering business in which India has very good expertise,quot; Pontin said.

Rajshekhar said sourcing the latest Internet technology from outside the country was very expensive for domestic firms while developing the same technology in India was time consuming.

quot;Besides, buying on the Internet is seen as unfulfilling in India as shopping is seen as entertainment unlike in the West where it is a boring chore,quot; Rajshekhar said.