By Alec Klein
Washington Post Staff Writer
Tuesday, March 6, 2001; Page E05
First America, now India.
AOL Time Warner Inc., expanding its global reach, plans to invest up to $100 million in the Indian high-tech center of Bangalore over the next five years to build on its overseas software business, the company has confirmed.
The Indian Ministry of Commerce and Industry approved the New York-based media conglomerate's proposal, which calls for investments by iPlanet E-Commerce Solutions, a joint venture between network-computing giant Sun Microsystems Inc. and Netscape, AOL's portal, Web-browser and software unit. Under the plan, AOL will open a Netscape office in Bangalore and hire dozens of engineers to develop e-commerce services and software targeted at corporate markets. AOL said executives were not available for comment.
AOL's investment in India comes as it is stepping up efforts to expand internationally, penetrating markets throughout Europe, Latin America and Asia. Already the No. 1 Internet access provider in the United States, with about 30 million subscribers, AOL is gaining ground in such far-flung locales as Britain and Brazil. Last year AOL added 2 million subscribers outside the United States, giving the company more than 6 million members in foreign markets, including users of its discount CompuServe service.
India represents a largely untapped market for AOL as it joins other big U.S. companies that are increasingly looking to outsource computing work to developing nations offering strong talent pools and cheap labor. In the past five years or so, about two-thirds of Fortune 500 companies have begun to outsource computer-related work to India, according to the Indian Embassy in Washington.
AOL's investment in Bangalore follows its first foray into India last June, when the company announced a deal to distribute a co-branded version of AOL Instant Messenger to customers of Satyam Infoway Ltd., India's leading private Internet access provider, with more than 160,000 customers. AIM, the market leader in instant messaging, with more than 80 million registered customers, allows Internet users to send text-based notes to one other that appear on their computer screens as pop-up boxes almost as fast as the messages are sent. AOL does not yet operate a local Internet access service in India.
Internet use remains in its fetal stages in India, the most populous nation on the globe after China, with more than 1 billion people. The percentage of consumers who use the Internet remains in the single-digit range, according to Indian officials, but urban centers are getting wired fast.
"There is a huge market," said Navtej Sarna, a spokesman for the Indian Embassy. "We're increasingly getting wired up in terms of usage of e-mail and Internet services."
In India, only about two out of every 1,000 people have a telephone, which remains an obvious hurdle to expanding regular dial-up access to the Internet, but there is a substantial middle-class core of potential adherents, and cybercafes are popping up in urban locales with greater frequency.
"It might not seem like an attractive market," said Navi Radjou, an analyst with Forrester Research Inc. in Cambridge, Mass. "But the urban middle class is roughly 100 [million] to 200 million people."
