India-Singapore IT ties stay strong

Things may be quiet on the IPO front, but the Singapore-India connection is heating up in other quarters, judging by the recent intensification of activities in the IT arena.

Within last week alone, Frontline Technologies Corp. Ltd. bought a S$12.9 million (US$7.7 million) stake in Indian IT solutions provider and outsourcing company Accel ICIM Systems and Services Ltd., while local supply chain company ECnet Pte. Ltd. was acquired by Indian company R Systems.

Piyush Singh, managing director of research company IDC Asia-Pacific, said by investing in or partnering Indian companies, Singapore companies will be able to tap the growing domestic IT market in India. At the same time, Indian IT companies will be able to gain more access to several regional markets and specialized expertise by partnering with Singapore firms.

“The Indian IT industry is clearly on a high growth path, riding on the back of a booming economic environment and a huge offshore outsourcing tidal wave,” he said.

Frontline Technologies’ investment in Accel will give the company a 42 per cent stake in the 1,200 staff company with 40 offices and over 100 outsource service locations in India.

Frontline’s customers include ICICI Bank, Intel, Bharti Tele-Ventures.

According to Steve Ting, executive chairman of Frontline, the investment “will provide Frontline with an immediate and established presence in the booming Indian market.”

For the moment, Frontline has no plans for other investments in India as Frontline intends to use Accel ICIM as its vehicle for any future investments, said Ting.

According to studies by McKinsey, the Indian IT industry in 2003 was worth US$12 billion. This represents a 31 per cent compound annual growth rate (CAGR) between 1999 and 2003. This growth is expected to continue to US$70 billion by 2008. Software and IT services are expected to account for about 40 per cent of the total market.

Singh said that for Singapore-based IT companies, there is a great opportunity to ride this wave on several fronts:

— By investing in or partnering with Indian companies and thereby participating in the global offshore outsourcing opportunity.

— By setting up offshore operations in India or utilizing third-party resources based in India, to improve their operational efficiency and increase their global competitiveness.

— By tapping the growing domestic IT market in India.

At the same time, the Indian IT companies can gain more access to several regional markets and specialized expertise by partnering with Singapore-based firms.

“This is a win-win situation for both sides,” he said.

At the same time, Indian companies are also eyeing the potential and expertise of Singapore companies. ECnet’s acquisition by R Systems, which provides core global outsourcing services in IT, consumer finance and back office support to vertical industries, will allow the Singapore company to tap on R Systems’ expertise on enterprise solutions and its pool of 800 employees.

At the appropriate time, ECnet will extend its presence into the United States and India through R Systems’ strong client reach, said Peter See, president and chief executive officer, ECnet.

Conversely, R Systems can develop a supply chain management practice and penetrate Asia’s manufacturing industry through ECnet clientele.

Singh expects that the trend of growing partnerships between Singapore- and India-based companies to flourish in the coming years.

In earlier developments, companies like Encore Technologies and EG Innovations were set up in Singapore to commercialize technologies developed in India.

Encore, for example, is a joint venture between India-based Encore Software and Singapore-based holding company Time2Talk. The company is playing a key role in productizing the Simputer based on technology developed in India. EDB helped provide seed funding for the company under its Startup Enterprise Development Scheme (Seeds).

Local companies have also been investing in India. SingTel, for example, has a 28.5 per cent stake in Bharti, India’s leading mobile phone player while SembCorp Logistics has a supply chain management business in India.

Still, despite the growing number of IT investments in India and the popularity of Indian funds, no Indian company has listed here this year according to the Singapore Exchange Web site.

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Jim Love, Chief Content Officer, IT World Canada

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