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Enter the MNC

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DQI Bureau
New Update

Circa 1980. Computing was in its formative stages and India very much a Cobol

country. MIS was a relatively new-fangled concept, and a PC on every desk a

mirage in the desert. The PC was a large-enterprise luxury, and even then, one

that few could afford. The desktop gallery had one star name-the Siva PC-which

held sway over most of these enterprises. This was the decade of the 5"

floppy drive, of magnetic tape storage.

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Circa 1990. The new economic policy changed the industrial landscape of the

country. Brands like IBM came to India, while others like Coca-Cola made their

comebacks. Various new MNC giants stepped in, kick-starting a new economic

revolution that was to have a pervasive impact on the information technology

space.

“Any PC buying should be made with obsolescence in mind. Plan for a technology refresh every three to four years and stagger these cycles such that there are no major blows in a single year” 



-Arun Gupta, senior director, business technology, Pfizer

A cursory look at the Indian PC landscape today reveals a pitched battle

between global and Indian giants, a locking of horns characterized by cut-throat

competition and fuelled by fiercely waged pricing skirmishes. HCL is the leading

Indian brand,



with Zenith, PCS, Wipro, CMS, and Accel following closely behind. The line-up
across the board comprises MNC warriors like HP, IBM, Dell, and Acer, with HP at

pole position. With both global and Indian brands contesting closely for greater

market share, the key buying segment-enterprises-and its PC preferences

merits careful study.

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Enterprises Choose



Given the various configurations and the different brands, local and global,

what and how do enterprises choose? The die seems loaded against the desi name

from the word go. Says S Rajendran, general manager, sales and marketing,

consumer products group, Acer India, "There are not too many domestic

brands in the market. In fact, there has been a steady decrease in the number

and market share of the domestic brands over the past few years. It is easy to

convince a CIO to go for an MNC brand. Moreover, today, desktops are becoming

commodity products and the CIO's decision is more often driven by brand."

But the major Indian vendors beg to differ. HCL Infosystems, VP, George Paul

firmly points out that "A CIO opts for a PC that has a mature configuration

that brings best value for money and offers peak performance. BFSI and other

enterprise segments contribute more than 60% of HCL's revenues and some of the

biggest users of HCL PCs are enterprises like National Insurance and Asian

Paints among others."

“HCL PCs pass a wide array of quality benchmarks and these are indeed Made-in-India products for the global market as we source various components from the world leaders” 



-George Paul, vice president, HCL Infosystems

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Meanwhile MNC vendors argue that most global corporations in India go by the

dictates of their parent companies. At Pfizer for instance, it is a global

practice to install the same brand of PC for all of its bases no matter where in

the world they are located. As a result of this policy, in India, 80% of Pfizer's

installed PC base is IBM, with local brands taking in the remaining 20%. With

MNC companies being large consumers of PCs won't this kind of this global

benchmarking in terms of PC buying prove a deterrent for local vendors trying to

put their fingers in the enterprise PC pie? Says Paul, "Yes some companies

do have such a policy, but it is only a short term strategy, which we call a

first generation phase. When these MNCs grow in time and expand, they enter the

second generation. Here, the CIO takes certain independent decisions and he is

empowered to make his own decisions regarding the choice of IT products, and is

not dictated to by his global headquarters."

But with the entry of MNCs in the PC space market dynamics have changed. For

instance certain large enterprises feel that a global brand PC works better.

Says SR Balasubramanian, vice-president, Information Systems, Hero Honda Motors,

"Our experience has been very good with MNC brands. Their performance is

noticeably better. Even the home PCs provided to senior executives are MNC

company products. At Hero Honda, we have around 1000 PCs and most of them are

MNC brands, while local branded PC's are present only in negligible

numbers."

Says Rajendran, "The entry of MNC brands has brought to the fore

features such as compliances, certifications and desktop management that were

not previously delivered by domestic brands. For the buyer, the entry of MNC

brands has seen a qualitative improvement in the products offered in the market

at prices close to those offered by domestic brands." These MNC brands have

been around for some time now and with the recent change in the excise and

customs duty structures, the market is becoming a level playing field. Further,

the MNC brands' market shares are on a steady increase and the fact that there

are only two Indian companies among the top five PC vendors is itself an

indicator as to how the market is moving forward.

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“MNC brands have been around for some time now, and with changes in the excise and customs duty structures, the market is becoming a level playing field” 



-S Rajendran, general manager, sales and marketing, consumer products group, Acer India

The CIOs of the some of the enterprises that opted for an MNC PC product

advance two reasons: technical excellence and support. The reason why the CIOs

of most enterprises prefer a global PC is that it is relatively trouble free and

the components that constitute the PC are from established players. Says

Balasubramnian, "MNC brands do not cause any problems and are almost

maintenance free. They have better re-sale value. Coming with a three-year

warranty, they are the best bet for corporates."

According to NC Raghu Ram, VP, IT, Orchid Pharmaceuticals, "A CIO before

settling on which PC to buy has to factor various parameters like application

software, price, warranty and after-sales support. In my view the key advantage

of buying an MNC PC is that these are technologically state of the art."

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But on the flip side, as Raghu Ram acknowledges, "It takes a longer

turnaround time for replacements or spares of components of MNC PCs to arrive as

these are sometimes not readily available, and in some instances, MNCs are more

process oriented and less sensitive to customer exigencies."

The Early Bird's Advantage



There is a widespread consensus among CIOs that any PC-buying decision is

made primarily on quality parameters, with brand difference coming into play

only as a secondary factor. Reflecting on this, Arun Gupta, senior director,

business technology, Pfizer says, "More that the brand, the key to

optimizing PC investments is in standardizing the environment for end-user

computing: this helps in reducing the support overheads. As to what dictates

preference, Pfizer has global standards that decide on the choice of particular

products, but that apart, the price differentials between local and MNC brands

is marginal, with both offering value for money."

A word of caution is in order: whether buying brands, local or MNC ones,

should not be there forever. Rather enterprises should concentrate on the

technology, says Gupta.

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"Any PC buying should be made with obsolescence in mind. Plan for a

technology refresh every three to four years and stagger these cycles such that

there are no major blows in a single year. Do not invest in a technology that is

more that 12 months old: it may be cheaper now, but it will become obsolete

quicker and impact the support costs," he says.

As regards choice of brands, most CIOs have mixed and varying views. Some

large enterprises favor MNC PCs rather than local brands: for instance, Hero

Honda buys its PCs from IBM or HP. These big enterprises firmly believe that the

MNC PC offers more quality and here, though there are TCO factors, what it costs

the enterprise is not a major issue, since they can afford PCs priced on the

higher side.

Top

5 PC Vendors' (2003-04)

Vendor

Units

Shipped
Market

share (%)
HCL 298,400 34
HP 252,718 28
IBM 140,000 16
Zenith 113,826 13
Dell 80,000 9
Total 884,944 100

Source: DQ Top 20

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Meanwhile, the CIO's preference for PCs is also governed by his past

experience with the PCs already in the enterprise. Chances are that the vendor

who had supplied the enterprise in the past gets a repeat order for upgradations

as well as new PC purchases. This scenario is true for most Indian enterprises,

with the MNC preference factor becoming more pronounced in the country's

global corporations as well as in enterprises with a turnover of more than Rs

1000 crore. Take the case of Ashok Leyland. In total, it has 2,500 PCs, all MNC

brands. The inference here is that large enterprises, like the Pfizers and the

Hero Hondas, will always go for global brands. On the other hand, companies like

Orchid Pharmaceuticals will have a mix of both global and local brands. Orchid

for instance has close to 850 PCs, of which 65% are IBM and HP machines, while

the remaining 35% are Indian brands like Wipro and HCL.

“The key factors a CIO has to consider while buying PCs for his enterprise are: reliability-it should run when switched on, with the ability to run many different types of applications; and cost-the next most important thing. Here a CIO has to look at the

TCO, and with their recent competitive pricing strategies, MNC PC brands are preferred” 



-SR Balasubramanian, vice president, Information Systems, Hero Honda Motors

Multinational PC vendors like Acer are bullish about growth in volumes: Acer

had a growth of 76% during fiscal 2003-04, the highest among MNC PC vendors.

Clearly, MNCs are making big inroads into the Indian PC industry. The

composition of the Top 5 PC vendors list is one clear pointer of this: there are

only two Indian vendors, HCL and Zenith, are in the race with HP, IBM and Dell.

This is an index of the aggressive business plans the MNCs have put in place. Do

the MNCs have an edge in the PC business in the days ahead? Certainly, says Acer's

S Rajendran, "MNC brands offer products that are sold in many countries

around the world — the US and Europe are more mature markets and the minimum

acceptable product standards in these markets are at a higher level than those

applicable in India. An MNC PC, by default, undergoes all the testing and

certification that ensures that the product is ergonomically and functionally in

line with these standards"

Meanwhile HCL's George Paul downplays the MNC vendors' claims to quality.

"HCL PCs pass a wide array of quality benchmarks and these are indeed

Made-in-India products for the global markets as we source various components

from the world leaders. Moreover, enterprises today look only at branded PCs:

this means that only the assemblers will feel the pinch, not local branded-PC

manufacturers."

Notwithstanding arguments for and against local and MNC PCs, the jury is

still out on the question of who wins this round. For, currently, the installed

base of PCs in Indian enterprises is a healthy mix of local and global brands.

In the ongoing year, HCL and HP will wage a tough battle for greater market

share, while players like Zenith and PCS will face increasing pressure from MNC

vendors like IBM and Dell. But all this competition is only going to benefit

enterprises immensely, as PCs with more mature configurations at lesser prices

will flood the market in the days to come.

Shrikanth G in

Chennai

What the CIOs say

Here is what CIOs say about the uppers and downers of the MNC PC

We spoke to some of the CIO's and asked them the uppers and downers of an

MNC brand PC. Here are some thoughts that emerged in the interaction.

Advantages of MNC PCs

  • Technologically state-of-the-art
  • Comprehensive on-line support
  • Higher technological support for remote maintenance
  • MNC brands do not cause any problems and are almost maintenance free
  • Users prefer global brand PCs

Disadvantages of MNC PCs

  • Spares for replacement take longer to procure, as they are not readily

    available
  • MNC PCs are costlier than local PC brands
  • Service in difficult in remote locations and up-country regions
  • Rigid configurations
  • Difficulty in upgrading, with no comprehensive buy-back campaigns
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