Why are Indian companies not venturing into next level of techology such as cloud storage, cyber security?

BANGALORE: In a country with the requisite expertise, it’s surprising that few have ventured into the next level of technology such as cloud storage, cyber security and software-defined networking.

But a few startups have bucked the trend and profiting from it. Take for instance, LucideusTech, founded by 23-year-old Saket Modi. The two-year-old company is one of the few Indian players in the cyber security space and works with companies like IBM, Microsoft and KPMG.
“The barrier to entry is very high. Even if you’re a world-class hacker, organisations will not trust a startup,” said CEO Modi, who built credibility by giving seminars on ethical hacking and cyber forensics across India.

His cyber security firm in New Delhi works with about 415 enterprises to develop security products and hacks into their systems to detect vulnerabilities in codes. The company is soon going international and has tripled its revenue since last year.

“It’s very lucrative. Companies will pay a huge price for gaining momentum in this space,” said Ravi Gururaj, chairman of Nasscom Product Council.

With the internet of things becoming a global phenomenon, the security software makers have a chance to build software in uncharted territories. The market is pegged at $95.60 billion (Rs 5.8 lakh crore) in 2014 and will grow to $155.74 billion (Rs 9.5 lakh crore) by 2019, according to research firm MarketsandMarkets.

These core technologies power the next generation of computing and lay the foundation for enterprises. But the dearth of Indian companies is glaring.

“There are very few companies. This is the best kept secret in the industry,” said Jay Pullur, founding member of software product thinktank iSpirt. Pullur, also the CEO of Hyderabad-based Pramati Tehnologies, said iSpirt talks to global MNCs regularly and have been told that such companies are easy acquisition targets.

Also the market size and opportunity in these technologies have been more than validated.

Take software-defined networking as an example. In simple terms, SDN will do to networking, what cloud did to servers—eliminate physical data centres and virtualise the hardware aspects of networking, untying software from legacy hardware.

So why are there so few entrepreneurs?

It is not the lack of expertise. Bangalore hosts the development centres of at least two Silicon Valley-based companies in SDN—Avni Networks and Versa Networks.

“We aren't using our India team for mundane development tasks, like maintenance and bug fixes—a big mistake of many larger companies in tech. Quite the opposite,” said Kumar Mehta, CEO of Silicon-Valley based Versa Networks. The two-year-old company has received $14.4 million (Rs 87.5 crore) in funding from Sequoia till date.

“The India team is working on the core solution, writing code around the clock with their Silicon Valley peers,” said Mehta, a former employee of Juniper Networks.

Last year, research firm CB Insights said deal activity jumped 75% on the back of large acquisitions by Juniper Networks and VMWare. Between mid-2012 to 2013 to SDN-related startups have raised nearly $416 million (Rs 2,500 crore) across 35 deals.

Cloud storage is another largely unnoticed area. “We are going behind a huge market opportunity, storage is normally 40% of overall IT infrastructure cost. With the whole IT segment is moving towards cloud, the target addressable market size of over $20 billion,” said Felix Xavier, 42, cofounder of Cloudbyte, who holds an MBA from Madurai Kamaraj University.

Three-year-old Cloudbyte has raised around $10.5million so far from Nexus ventures, Fidelity ventures and KAE capital and has more than 30 customers across India and US.

For the longest time, large companies have held dominion in core technologies. But with new innovations, startups could become agenda setters.