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.
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.
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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."
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