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Fresh Colors for the Core

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DQI Bureau
New Update

Liberalization saw MNCs rushing to Indian shores with high exuberance. They

talked of the now ‘unknown’ 300 strong middle class and a market waiting to

happen. Within a year, the exuberance gave way to pragmatism. Most of the

companies realized that the Indian market was unique and had to be treated

differently. What works in the US will not necessarily work in India. Even

companies not hit by the ‘exuberance’ wave have taken this lesson very

seriously. A case in point is Hughes Escorts (HECL). The company recently

launched its DiRECWAY service in the Indian market with a major thrust on the

enterprise segment. However, in the US, the brand is targeted at consumers and

the SOHO segment and is known for broadband Internet access.

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So far, HECL has been a major player in the VSAT business. It will continue

to use communication as its core competency but is sprucing up its service

portfolio. Hughes Escorts vice president for DiRECWAY enterprise Ashish Chaudhry

explains, "While out core competencies remains communication, we are adding

several value added layers to the core." With the launch of DiRECWAY

services, the company wants to expand its target market space, which has been

limited by its VSAT business. The company is now aggressively pushing sales in

the supply chain connectivity segment and is also expanding its coverage in the

SOHO and SME market space. Of course, providing bandwidth is one of the elements

of the DiRECWAY offering. Apart from broadband services, the current focus is on

managed network services, ASP and data centers (see box). Another area that the

company has ventured into is the education business.

The DirecWay Bouquet

Managed

Network Service:


Cost-efficient and scaleable enterprise-wide networking solutions for

organizations spanning satellite and terrestrial media
Broadband Services:

The company hopes to piggyback on DiREC PC and DiRECWAY to become the end

to end broadband service provider

ASP: HECL

has partnered with some companies to offer their solutions on the ASP

model. Current tie ups include Talisma for CRM, Commerce One for

procurement and Intelligroup for e-distribution

Data Center Hosting:

With a data center based out of Gurgaon, the company is competing in the

hosting market space. Also, the company has tied up with Reliance to offer

services out of Mumbai

Education:

Targeted at both companies as well as individuals, the training and

education service uses a blend of broadband satellite technology and

interactive learning technologies

Says Amit Tripathi, vice president for interactive distance learning,

"We are trying to leverage our core competency to service our customers and

give them a value add in terms of education service."

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Of course the big question remains--Can Hughes transition from a VSAT-based

company to a major services and education provider? For one, the services shift

seems more of a survival tactic rather than a value-add to its communication

layer. Given the VSAT industry’s proclivity to steep ups and downs, Hughes as

a market leader, has reflected the same. For example, in 1999-00, the company

grew only by 7% to Rs 96 crore due to the bandwidth crunch faced by the

industry. While 2000-01 was good for the company and it managed an impressive

growth of 42%, fiscal year 2001-02 has not been good, point out industry

sources. Also, as private telecom players lay out fiber networks across the

country and start offering higher and faster bandwidth with high redundancies,

the need for VSATs may diminish. The company is confident that it has a huge

business potential in hand. Hughes Escorts CEO Partho Bannerjee says, "DirecWay

would enable access to a comprehensive, one-stop shop solution–right from

hardware to broadband Internet access and applications. We are confident of

generating over Rs 100 crore of revenue in the first three years of its

operations."

But will the going be as easy? In most areas, the company will face huge

competition from the likes of Bharti and HCL Comnet. While HECL has the

advantage of a 200 plus customer base and is using the same as the starting

point, acute competition and wafer thin margins in businesses like hosting and

data centers will be tough to crack. Moreover, it remains to be seen whether the

broadband offering of DiREC PC will be lapped up by the SOHO and the SME market,

given the cost compulsions. Also, while Indian companies are yet to take on the

ASP model, HECL maintains that its ASP model is doing well and will continue to

do so. In the tough market that exists, HECL’s single advantage will be its

client base and how well it can leverage on the same, will decide if the company

can make it.

Yograj Varma, in New Delhi

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