GIANTS RANK 2: 'HPQ' India: Indian IT’s New Force

This is an entry-at-birth into Dataquest's Top 5 IT groups. Actually, Compaq

was already in at fourth place last year, but the new group goes right up to

number two.

Even if the merged entity turns in current-year revenues of less than the sum

of the parts, this group of five companies would probably hold its position. And

while the company rankings in Top 20 Vol 2 will cover HP and Compaq as they were

last year, as separate companies, here we present this picture of the entire

group as it stands today.

Post-merger warm-up



The long battle between the HP board and the Hewlett-Packard families may

have given the company time to prepare. It looks like the world's most

criticized merger could be beginning to work. Analysts agree that post-merger

HPQ India has retained the better managers and product lines. The systems brands

are from Compaq, as were five of the seven directors, including president Balu

Doraisamy (an old Digital hand since 1982, pre-Compaq-merger).

SNAPSHOTS Compaq made up half the pie. As did systems revenues. Digital helped push exports up to 17% of group revenues HPQ brought in its directors–and systems brands–mostly from Compaq Compaq and HP India each saw 300-crore bonanzas–from services, and consumables HPQ now has few brand overlaps, printer dominance, systems strength, and a big gap now plugged by Compaq: services

Compaq rules...



The "HPQ group" in India now spans systems, peripherals and

services, including exports and back-office ops. Exports look healthy: 51%

subsidiary Digital GlobalSoft had the healthiest growth in the group, and the

ISO Global back-office ops have also been going strong. The dominant member, the

young, 1997-born Compaq India, has had spectacular growth, holding fourth place

in the DQ Top 20 for two years now. Its systems revenues dropped only -3%

against the industry average of -8%…but domestic services jumped 32% to nearly

Rs 300 crore, including SI, NI and outsourcing.

HP India had no such luck with services or systems. But its Rs 300-crore

bonanza came from printer consumables.

Peripherals was flat: better than the domestic industry growth average (HP

dominates the non-impact printer market). This is actually a good picture for

the merged entity. Few big brand overlaps; complete market dominance of

printers, now some systems strength, and a big HP big gap plugged by Compaq:

services. Half the group's revenues came in from systems.

Competitors ahead: HCL, IBM and white-box players on the PC front, Sun and

IBM in the servers front, and marginal pressure from Samsung and Canon in

printers.

Compaq's hardware brands stay on with an HP prefix–Proliant, Presario, Evo,

iPaq, while HP's Brio and Pavilion are out. Storage retains both HP and Compaq

products, making up a substantially wide range. Servers (Compaq Alpha and HP-UX(

will converge to the Itanium, by 2005. Compaq also brings in the Tandem Himalaya,

now called HP NonStop.

Digital GlobalSoft



The it’s-different-here HPQ India merger had a precedent: Compaq-Digital,

1998. A very strong systems brand in India, DEIL's PDP, Vax and Alpha servers

powered the railways and VSNL to data shops. Digital faded away globally--stayed

on as a distinct entity in India. Digital India de-merged from Compaq, as its

only 51% JV anywhere, turning to software exports.

Renamed Digital GlobalSoft in September 2001, this services exports success

story (it topped Top20 software companies growth, at over 75%) complements

Compaq India's domestic systems strength. Digital is a solutions house for

enterprise customers, versus HP ISO's more engineering and IP oriented work on

HP projects, and thus will probably remain a distinct subsidiary, post-merger.

HP ISO



Like HP India, the India Software Operation "virtual R&D

center" also started in 1989, but as a 100% export house. It now has 1,500

developers in Bangalore and Chennai, working on HP technologies such as HP-UX

compilers and tools,  CoolTown, IA64 compilers, and on PA64 and IA64 Linux

development. With finance and telecom, e-services and other teams, ISO works for

HP customers (it helped move Amazon.com to Linux last year) and is now looking

at the Indian services market too.

Compaq outsourced, in 1995, to BFL software, its only offshore development

partner outside its own facilities in Houston.

The Compaq India Development Center at MphasiS BFL, Bangalore, has a hundred

engineers working on projects such as Digital UNIX, Open VMS, networking and

storage products.

HP Labs India



This is HP's seventh lab in the world, set up in February at HP ISO,

Bangalore, and headed by Dr S Ramani, a Dataquest lifetime achievement awardee

in 2000. Focus: products and technology for markets such as India--simpler and

cheaper devices for emerging economies, economical small-biz IT tools and apps;

and low-cost access devices. It also works with HP's global e-Inclusion program,

a global "business initiative with a social mission to bridge the digital

divide"-for instance, the HP iCommunity project at Kuppam, part of the AP

government's e-seva project.

HP Global



Since September 2000, the little-known HP Global e:Business Operations Pvt

Ltd has done back-office work for HP's global finance operations-with 700 people

in Bangalore. That includes transaction processing for debit and credit records,

vendor payables, fixed assets tracking, etc, with more processes in transition.

It also handles freight cost management and order processing for "certain

geographies".

This company did not declare revenues (it operates as a cost-center), so our

revenue estimate of Rs 70 crore is based on the Dataquest norms for BPO work -

remittances of 10 lakh per employee.

TEAM DQ