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-Ajai Chowdry, CEO, HCL Infosystems

He is the man who firmly believes that India has the

potential to become a hardware powerhouse. He was also part of the IT hardware

taskforce set up by the Prime Minister of India; and believes that it's the

easy financing option and availability of content that would drive PC

penetration in India and not just the low cost PC. Nevertheless, under his

stewardship, HCL Infosystems has been able to bring the 'branded PC' segment

close to the sweet spot—the sub 10k level. Ajai Chowdhry, one of the

six founder members of HCL, has beeen a key force behind HCL Infosystems, the

company whose reins he took over as chairman in 1999. In an interview with

Yograj Varma and Subhendu Parth, Chowdhry shares his views on the road ahead for

domestic hardware manufacturing and HCLI

Do you see HCL Infosystems focusing more on the

channel business or will it still remain essentially a hardware company?



I look at things very differently. For me, whether it' channel or direct

or manufacturing—at the end of the day it's business. Now, if I look at the

core competence of this company, it is about taking products to customers.

Whether the method used is through dealers or direct is irrelevant. The second

issue is that the core competence of this company originally was “direct

selling” or hardcore sales as you may call it. Over the years, when we went

into PC retailing and PC selling we understood the PC distribution game. That is

what really brought to us the concept of taking distribution to the next level.

Nokia happened to be a product in that space and we developed a good

relationship with them. We have grown the business together. That is the way I

look at this-at the end of the day it's still taking the product to the

customer.

With laptop prices nose-diving in the country, can we

expect HCL repeating the Nokia success with Toshiba?



Well the PC market is nowhere close to the phone market today in terms of

numbers. So I think we are still two to four years away from that level. And

that is the reason why I have spent the last 8 to 10 months in getting the

market creation to happen in the PC space... Also, while lot of people feel that

India has missed the manufacturing bus in electronics and hardware, I don't

believe so. I believe that the bus is just starting! The logic, as I have always

stated, is that if you create a large domestic market, the manufacturing

automatically happens. I have proven my point, when the large domestic market

was created; a whole bunch of cell phone manufacturing came to India. And it's

not that they are just going to do screwdriver technology here, they are

bringing their complete ecosystem. That is the momentum that I want to see India

get into.

Where do you see hardware manufacturing heading in

India?



I am very bullish on hardware manufacturing in India. Today my single point

agenda is to try and see how the report 'roadmap for domestic IT in India'

gets implemented. The government has already set up several sub committees

within the department of information technology (DIT) to actually take forward

and implement pieces of that. We are now seeing some momentum in the areas that

we have talked about in the report. The first thing that the report talks about

is the need to bring manufacturing to India and create a very good policy for

electronics manufacturing in the country. The government has recognized this and

the National Manufacturing Competitiveness Council has come out with its first

paper on industries identified for promoting manufacturing in India. The list

also includes IT hardware. Hence,  for the first time-after a long

time-it has been recognized that hardware manufacturing is a requirement.

Do you believe we do not have as much bargaining

power as China in terms of attracting investment in manufacturing in India?



You have absolutely hit the nail on the head. China has done a much better

job than us in terms of bargaining. But I think there is a lot of realization on

this front in the country today that we can also play in the space. If you look

at three years ago, everybody, including the government, used to ask why we need

to have manufacturing when we can do everything with services. When I take

someone to my facility in Pondichery, I often get the feedback that this is

assembly and hence what was the value add. People don't understand that

engineering is a value add; testing and integration is a huge value add as the

same is not done by some low level production guy but engineers. So there is a

lot of value add that goes into manufacturing in India. In fact, with the

success of auto manufacturing in the country, the realization that design,

engineering, testing, integration are huge value adds of India has hit

everybody. There is now a very clear thinking in the government and bureaucratic

circles that manufacturing is a requirement for a large country like India.

Also there is a realization that it's not prudent to

import a whole bunch of manufacturing products into India. It may be okayÂ

for a country like Singapore, but it's a mistake that we have made for a

country like India to stay away from manufacturing.

What should be done for increasing PC penetration?



Couple of things...firstly, I think that breaking the Rs 10k barrier for a

PC is not that critical. What is more important is financing of Rs 10k. It's

the availability of easy financing, which would increase home buying. Secondly,

let's get broadband at homes. I think that it is imperative that we should

bring PC plus Internet at a monthly rate between Rs 400 to Rs 600 to get the

ball rolling. This is the area on which the government is now working.

What about the other key component-the content?



Content is some thing that the government alone cannot take care of. To my

mind, the industry also has to play a key role on this front.

Well... similar initiatives have been talked about in

the past, but nothing much has happened. What makes you so upbeat now?



If we look at education, the government has already formed a committee for

ICT in education. The Ministry of Human Resource Development (MHRD) and the

Ministry of Information technology (MIT) are working on it together. The vision

is to take ICT to every school in the country.

Is there a definite deadline to achieve it?



At the moment it's not concluded but they are definitely working on it as

a mission mode project, which is exactly what we had suggested in the report.

Fortunately the MHRD, the department of education and the committee agree on

this as the single most important agenda and the sub committees are expected to

submit their report by December. Post this, the recommendations would move into

the government decision-making process of implementation. Conceptually they are

looking at a 2-4 year time frame to bring all schools under the ambit of this

project.

Can you elaborate on this? Is this initiative all

about IT education in the schools or is it about IT-enabled education?



In fact both-IT education and IT-enabled education are part of the

process. At the moment there is a very serous issue about IT-enabled education

in schools because IT education in itself does not make much of a sense at the

primary level like class 2, 3 and 4. While IT education should certainly be part

of the curriculum at the higher levels, at the primary level it should be used

as a tool to impart basic education. You will see a lot of effort being made

towards this end. Then you look at the IT-enabled rural India program.

Within this, the government has come out with the program

for 100,000 CSCs that they want to be in place within two years from now. This

means there would be a lot of action taking place in rural India, and that is

exactly the reason why we developed the rural PC. We knew that there would be

couple of areas where rural would be key. One, through organizations like ITC

and HLL; two, through a series of NGOs like the Swamiathan and Nasscom

Foundation; three, government related CSC projects; and fourth, panchayti raj

projects. Suddenly, there has been a lot of movement for IT in rural India

during the last six months. Then we have the health related projects. The

government has already formed a committee for tele-medicine. While there have

been some issues about standardization on this front, I think the momentum would

soon pick up. In fact, the DIT has already created two white papers defining the

standards and the direction of tele-medicine in India. While all of these may

not happen simultaneously, each of these would add to the demand generation.

Then there is this other area of affordable computing for

home where I have always maintained-despite the fact that HCL has launched a

sub 10K PC-that the value that is delivered to the customer is more important

than the price of the product. I have always maintained and even suggested in my

presentation to the government that we should not worry about the price too

much. Sooner or latter competition and technology would be able to handle the

issue. What we need to focus on is making financing easy. To me that is more

important than the product price.

What about generating demand for the SMBs?



The SMB market is completely under computerized. Only 17% of SMBs have

computers today, which is very pathetic. Unfortunately, we are not seeing much

action on this front either. We had actually suggested that the only piece that

would drive these guys, things that have driven the SMBs globally towards

adopting computers, is the availability of SMB-oriented vertical applications.

Besides, we need to give incentives to these people to buy computers. Singapore

did both-they made available applications online and also made 100%

depreciation. So that actually motivated people to buy. Corporate don't need

depreciation as a trigger to buy computers, they know the value that they can

get out of it. But it will certainly motivate SMBs to buy. That is why I believe

that it's an important move that the government needs to make.

But don't you think a bigger motivator would be the

need to comply? For example, in Singapore it is mandatory that all taxes be paid

online.



I had suggested that as a sideline in the report. But now that you have

mentioned it, let me tell you that there are a couple of such area that can

rightly drive PC purchase in SMBs. TIN is one such area. Another thing that can

be followed is the China route of golden taxation. VAT was an ideal opportunity

to move towards utilization of computing because in the VAT regime, you cannot

claim MODVAT if you do not have the bill. Hence, the whole chain has to have the

bill. What the Ministry of Finance just needs to do is to make it mandatory for

bills to be generated using computers. What this would mean is that all data

would essentially be online. This would cut down on manipulations and other hera

pheri. This automatically will trigger the biggest pull for IT in retail

segment. Today, only 2% of retail is organized and there are nearly 700 mn

retail outlets, which can be the biggest chunk of IT purchase market. So if you

make VAT compulsory and link it with computer-generated bills, the whole SOHO

market will be driven towards adopting computing. Then we need to address issues

like making quality drugs available. We can do this by RFID tagging them and

tracking it from manufacturing to end delivery. This will make it essential for

every chemist and the whole supply channel to have a PC. These are the things

that need to be done to motivate people and business to buy PCs.

So what is stopping the government from adopting these

means?



I don't know. Actually, I mentioned this in the report in “sideline”

because when we were working on the same and I presented this to the government,

they asked me not to do everything at the same time. They said we should attempt

to bite few pieces at a time.