As before, life for BT entrepreneurs doesn’t get easy!
5. IPR Issues:
It is essential for BT enterprises to ensure that they do not violate any Intellectual Property Rights (IPR) during the course of their product development. The tough part here is the plethora of patents, trade secrets and copyrights that BT entrepreneurs need to be mindful of, even before they commit to a particular product line. Any slackness on this count might result in a vexing dilemma at the development stage - either pay for the rights to use a patented technology or stop development altogether.
A major development is about to make the IPR regime even more demanding for Indian BT firms. Pursuant to its WTO commitments, India is set to usher in the ‘product patent regime’ from the 1st of January 2005 (So far, India had only recognized process patents). As a consequence, BT and pharma firms in India (who have thus far focused on cheaper generics, rather than innovative drugs) will either have to produce off-patent drugs and be satisfied with lower margins, or invest even more heavily in R&D to be able to take on the might of the MNCs in the drug market.
Clearly, the business environment is set to become even more challenging for BT firms, particularly the start-ups.
6. Investor Support:
A major advantage enjoyed by IT, which is not available to BT, is investor support, particularly from venture capital firms (VCs). There is no dearth of VC support for bright ideas in the IT sphere. IT is not capital-intensive, especially in the start-up years, and most firms start showing positive cash flows in reasonably short time spans (sometimes in months).
The picture is just the opposite in the context of BT firms. Start-ups may require Rs. 1 Crore to 3 Crores in just the early stages. And even more daunting for the VC is the fact that long product gestation periods ensure that positive cash flows don’t begin until several years later. The consequence - few VC firms are willing to accept the risks.
