India could build e-business of up to $1.5 billion by 2004 in the business-to-business (B2B) and business-to-consumer (B2C) form of commerce and, by 2008, the value of e-business in India could expand to around $10 billion. E-businesses are defined as those that operate through the Internet, allowing electronic exchange of information, goods, services and payments. These were some of the major findings outlined in the recently released Nasscom-McKinsey report.

The report states that 0.3 per cent of household income of the country's population that is online is likely to be spent on the net by 2004, rising to 1 per cent by 2008. The report also outlines a list of 'should haves' that cover areas such as the absence of a regulatory regime and cyber laws, and good telecom infrastructure.

The study says the Indian software industry could grow to $50 billion by 2008 if the Indian government brought about dramatic improvements in its telecommunications infrastructure. It expresses the hope that bottlenecks to e-business growth in the country will soon be removed.

Telecom must improve
The study recommends key improvements in three segments of the Indian telecommunications infrastructure: local loops, development of an Internet backbone, and creation of international telecom gateways. Companies in India pay twice as much for telecommunications services as their high-tech competitors overseas.

The report says that the software industry could provide India with 2.2 million new jobs, attract foreign investment worth $5 billion and account for more than 7.5 percent of India's gross domestic product. But in a country that produces only 70,000 engineers every year, finding, training, and retaining 2.2 million software engineers presents a major challenge.

The business potential extends to areas like connectivity, online retailing and portals/communities targeting NRIs. Globally this business is likely to touch $1 trillion by 2004 and will impact both developed and emerging markets according to the report. The B2B transactions would account for 80 per cent of this, with B2C transactions making up the rest.

Internet-based supply chain solutions, standard software packages, improvement in transaction times, cost, and quality would be the prime factors for the growth of the B2B segment. With respect to advertisement revenues on the Net, the report states that ad revenues will form about 20 per cent of B2C revenues in 2008.

The growth of the B2C segment would depend on increased household penetration, secure payment mechanisms, discounted offerings and personalised and easy access to information.

According to the report, in 2008, the Indian software industry will be worth $87 billion, with exports worth $50 billion, the rest of the turnover coming from the domestic market.

Outlining India's potential, the report states that Indian companies have different business models, characterised by factors like customer relationship management, infrastructure support, and product innovation. As in any business arena, early movers will gain significant advantage in e-commerce too.

Seven steps
The study recommends seven steps for India's IT industry to thrive:

• build a base of world-class "knowledge workers";
• create a favourable regulatory environment;
• create Indian-based multinational IT companies;
• build a world-class telecommunications infrastructure;
• develop an entrepreneurial tradition;
• create brand-name recognition for Indian IT products; and
• expand India's IT market to create new market niches.

The study also suggests that Indian companies should begin developing management skills needed to develop direct relationships with customers so that they can add more value to their products, as different from the current practice where overseas offices support domestic "software factories".