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.
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.
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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.
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."
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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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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."
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.
"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) |
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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 |
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.
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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