Hardware in the Hinterland

Despite metros continuing to show maximum potential for IT spending, their

growth is beginning to slow down. Hardware vendors will have to therefore focus

on smaller towns and cities for expansion. Commercial sites that are coming up

in smaller cities should fuel this growth.

Smaller markets



The existing IT market is currently heavily dependent on the four metros

apart from big cities like Hyderabad and Bangalore and all vendors are targeting

the same set of customers. IDC India recently finalized an index to guide

hardware vendors, detailing which towns and cities they could focus on for

marketing and expansion. IDC had also recently mapped the IT potential of around

400 different cities in the country. Now market potential refers to the

aggregation of realized sales and untapped or unrealized sales of the market.

With newer boundaries for market players getting defined there would still be a

latent market untapped.

The existing IT market is heavily dependent on the four metros apart from big cities like Hyderabad and Bangalore. The problem here is vendors are targeting the same customers

The cities were classified as PI, PII, PIII and PIV, on the basis of

population. A market potential index (MPI) has been compiled for 392 cities,

based on 38 factors under three broad heads–financial, infrastructure and

demographics.

In the PI category (with population above 4,000,000), the index for five

cities is: Mumbai (100), New Delhi (97.6), Kolkatta (57), Chennai (48) and

Bangalore (43). In the PIV category (1-5,00,000), cities like Secundrabad (5.9),

Kozhikode (5.7), Ulhasnagar (5.4) and Durgapur (4.8) show the maximum potential.

Similarly, in the PII category the highest ranking was for Ahmedabad, with MPI

of 36, while Meerut had 4. PIII, on the other hand, had Trivandrum with 13 at

the top and Bikaner at about 3.5. The lowest MPI was of Dimapur (0.7).

With metro markets beginning to mature, hardware marketers would need to move

into unexplored markets and come up with plans to gain an early-mover advantage.

The smaller markets defined as PIII and PIV earlier posed immense opportunity

for every and any type of vendor. First-time or new buyers who would invest in

hardware typically dominate the smaller markets. Since the business sites would

initially invest slowly, average spending per site would be low. These sites

are, however, most likely to go up the value chain as more such sites would get

automated. The average spending on infotech and related products in such markets

is most likely to go up in the future. In these markets, PC penetration is found

to be lower than metro markets and growth of IT spending is not as steep.

Metro market: Dominated by Delhi, Mumbai



The larger towns have already seen significant IT deployment. "Most of

the IT spending in the big cities will increasingly come from software and

services. And when hardware vendors focus on new towns, the ranking of cities

based on MPI will give them a better idea about where to invest," says IDC

India’s manager Utpal Ghosh. The other significant finding of the MPI was that

the metro markets are expanding their boundaries and engulfing smaller markets

in their vicinity. Hence the smaller markets close to metros are coming into

limelight. Similarly, the growth of industrial hubs is also making towns in

close proximity a promising market. Ulhasnagar and Vashi around Mumbai and

Gurgaon and Noida around Delhi are such examples.

With the last financial year being a rather forgettable year for most

vendors, any promise from newer centers would only be a welcome ray of light.

Amit Sarkar in New Delhi