Websites as small but a significant market space in India: A forecast

P. Vigneswara Ilavarasan (p.vigneswara@iimrohtak.ac.in) Indian Institute of Management Rohtak Arpan Kumar Kar (arpan.kar@iimrohtak.ac.in) Indian Institute of Management Rohtak

Abstract: Due to a sudden change in the regulatory guidelines in India, a surge in the webspace requirements is anticipated among companies based on paid-up capital size. The objective of this guideline is to enhance the transparency in the corporate governance and signal the growth potential of the firms to the investors from India and abroad. This article explores the potential market size of website creation and maintenance for the 6.5 lakh companies, for whom this regulatory guideline may impact more.

This paper can be cited as follows: Ilavarasan,P.V., Kar, A.K. (2012). Websites as small but a significant market space in India: A forecast, Business Frontiers, 2(1), 1-6.

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Websites as small but a significant market space in India: A forecast

Ilavarasan & Kar

Websites as small but a significant market space in India: A forecast

Background discussion
Recently, the Ministry of Corporate Affairs (MCA) advertised in all the national newspapers with a request to all firms with paid up capital of not less than Rs. 10 crores or having more than 100 members to create and maintain a website. The advertisement suggested that the firms may use website to provide information on the firm and its industry (risk, concerns, core competencies, etc), details of the governance structure (details of the board of directors, promoters, code of conduct, etc), details of past audits and financial details, and other information important for investors and mechanisms for complaint redressal, on their websites. The web presence of firms enhances transparency in the corporate governance and signals the growth potential of the firms to the investors from India and abroad. The websites also impact the businesses positively through improved visibility on the web, corporate branding, additional sales channel, cost savings in communications and promotions, improved customer service and relationships. The present article presents a snapshot of opportunities possibly arising from this much needed suggestion to the web-site developers and web-service providers.

Effect and feasibility of this guideline

In coming days, we foresee a splurge of new websites being developed and maintained for the lakhs of private firms who do not have any such web-sites as of yet. Even for firms with existing sites, which may not be fully functional or updated regularly, adherence to these guidelines will see the revamp of their presence on the web. This will create a significant market for the small and mid-sized IT and ITeS firms. Then pops the question: so what is the potential market size of website creation and maintenance?

Understanding the landscape

Based on the paid up capital size, all the private firms can be classified into five clusters as per the RBIs classification. Now, although the current suggestion is more directed towards firms with a paid up capital exceeding 10 crores, smaller players with lesser capital would
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Websites as small but a significant market space in India: A forecast

Ilavarasan & Kar

also benefit from web presence by following the suggested simple guidelines. Nonetheless, this could also be an indicator of the guidelines to come, even for the smaller players. Using the changes in number of firms reported by the MCA from 6,52,453 in 2007 to 7,52,595 in 2010 and assuming that average five year YoY growth rate of 5%, the number of firms is estimated to be 6,54,581 in 20111. Please see the Figure 1 for the distribution of firms. It appears that more than half of the firms are falling under the range of 10 crores rupees.

Figure 1: Distribution of companies in India on paid up capital on 2011 Note: Total firms 6,54,581

The cost implications with potential requirements

As a customer, the firm can opt for one of the varying options in creating the website. A typical comparison of different web-plans which are offered by the service providers is provided in Figure 2. While the classification nomenclature and the offerings may vary across service providers, a typical set of offerings across different plans is presented in Figure 2, which serves an illustrative example only.

As per the 55 Annual report on the Working and Administration of the Companies Act, 1956 for the Year st ended 31 march, 2011. Tech term used is Companies at work as on 31st March, 2011.

th

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Websites as small but a significant market space in India: A forecast

Ilavarasan & Kar

Figure 2: Range of options for website offerings The website requirements for firms will also differ across the various categories. The technological needs of a Rs. 250 crore company and a Rs. 5 crore company are not same. For example, the number of domain specific Email IDs required for their employees, webspace requirements, database requirements, bandwidth requirements, website uptime, expected traffic, and hosting requirements would be significantly different. For example, a company which has 250 employees may need a premium plan, so that every employee may have his professional email ID, whereas a smaller firm with 50 employees may find a professional plan suitable. The needs of the firm are also dependent on nature of direct customer interaction, integration of supply chain, and nature of information dissemination. Using a conservative estimation, the demand pattern which has been estimated in this study for these services, is presented in Table 1.

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Websites as small but a significant market space in India: A forecast

Ilavarasan & Kar

Table 1: Percentage of different category of firms as per website offering

Size of Firms / Website services

Less than Rs 10 Crore Rs 10 Crore to Rs 15 Crores Rs 15 Crore to Rs 25 Crores Rs 25 Crore and above

Free
80 50 20 1

Basic
18 35 60 55

Professional Premium Business

3 13 15 35 0 3 5 8 0 0 0 1

The costs domain name booking and hosting charges range from zero to Rs. 15000 per year depending on the nature of content in the websites. Similarly, the annual maintenance plans also vary from being as low as Rs. 5000 to higher amounts, depending on the Service Level Agreements. The firms have option of hiring firms only one time to set up the websites for which the costs vary.

Figure 3: Market projection for website creation and maintenance. Note: Revenues are in crores.

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Websites as small but a significant market space in India: A forecast

Ilavarasan & Kar

The potential market size

The revenue to the service providers will come through two streams, one from setting up new websites for the firms who are yet to have one, and another from maintenance of the existing websites. Based on a modest forecasting, only 30% of firms incrementally use the services in coming years, the growth of revenues from each source is estimated to be Rs. 142 Cr in 2013 and Rs. 300 Cr in 2015 (Figure 3). This market might be seized by the small and medium sized IT/ITeS players which in turn will open up exciting prospects for web designers and internet based entrepreneurs. Although the market size is small as compared to the established industries, the slice of the cake is attractive enough for growth. Also the experiences of managing websites will come in handy while exploring the foreign markets for similar jobs. ###

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