This trend, which began sometime in the middle of the calender year 1999, is catching on now. The latest entry into this league is the corporate bigwig, Reliance Industries. News is out that the petrochemical giant is on a prowl to acquire small, profitable software companies as a port of entry into what has become the hottest business in the world. For starters, the company is setting up a venture capital fund with an intial corpus of an estimated Rs 250 crore. While cash-rich Reliance Industries can afford to take the M&A route to get a foothold in the software business, others have followed the more traditional route of setting up software development/training centres.

In May this year, Delhi-based heavy engineering firm Cranex Limited chalked out a diversification plan according to which the company would, henceforth, focus on software development (the software unit now functions as a separate profit centre within the company). An manufacturer of hi-tech cranes for the defence and high-priority government projects, Cranex Limited has been hit by the recession in the capital goods industry and to keep the factory running accepted orders at unremunerative prices, resulting in falling profits. The foray into software, kicked off after a mop-up through a preferential offer, soon found the company negotiating with US companies for E-commerce related activities. There are rumours in the market that Cranex may ultimately hive off its cranes division to focus exclusively on software.

Goldstone Engineering, a power cable manufacturer, decided to shift focus to the infotech sector early this year. The foray began with an investment of Rs 7 crore and the software arm commenced operations after taking over KLG Softech, a profit-making software development firm. Since then, the software outfit has entered into business alliances with Forte Software Inc, James Martin & Co, C-DAC and CMC Ltd. The foray into the software business was due to the lower realisations in thes telecom equipment business. Currently, the software arm contributes less than 20 per cent to total sales, but should go up to around 45-50 per cent in the next 1-2 years. It is believed that the sofware arm, at present a subsidiary of Goldstone, will be merged with the parent in the future.

Delhi-based floriculture firm, Indo Holland Agro Exports has recently begun operations in the information & techniology sector with a training centre and a software development centres. The foray into software was a result of the prolonged and severe crisin in the floriculture industry, the world over. Media Video Ltd, a market leader in television games, has also decided to jump the software bandwagon by diversifying into software, multi-media and animation in strategic alliance with foreign firms. The company has entered into an alliance with a Taiwan-based group for exports of semi-conductors. A tie-up with a big IT company is also on the anvil for supply of computer accessories. With the new software alliances expected to come into operation by May next year, Media Video has set a turnover target of Rs 70-80 crore for the financial year ending June 2000, with a net profit of Rs 5-6 crore.

The shift in business profile to software is understandable. For one, the IT sector is estimated to grow at a CAGR of over 40 over per cent even post-Y2K. Besides, being a major forex earner, the sector is relatively insulated from the vagaries of the domestic market. Improved cash-flow, low capital employed and easy acess to cheap funds (through the equity route) are the other major benefits of a software foray. No wonder, that the lure of the software tag refuses to fade.