MULTINATIONALS IN INDIA: Domestic Champions

One are the days of PCL, DCM and ECI–the erstwhile heroes of the domestic
IT market have long vanished or been relegated to history books. Today’s
domestic market is run by MNCs. Look around at any of the IT segments in India
and the frontrunners are likely to be MNCs. Think servers and you think Sun,
IBM, Compaq and HP. Think printers, you have little option but to think HP,
Epson and Samsung. Think networking products and who can you think of but Cisco
and 3Com? Sure, there are some lone Indian rangers, for instance HCL Infosystems
in desktops and TVSE in impact printers, but even their numbers are fast
dwindling. This is a domestic scene that is nearly monopolized by MNCs.

And while this might sound xenophobic, the fact remains that this has
happened… it was literally destined to. It is technology that runs IT and
R&D that shapes its future. In both cases, MNCs have been miles ahead of
Indian companies. The same is true throughout the world, and there’s no reason
to have hoped that India would be spared this trend. However, its interesting to
note that of the top ten players in the hardware-driven IT market of 1984-85,
two still continue to be among the top players in the country–Wipro and HCL
Infosystems (then HCL-HP).

MNC flavor in Top 20

Last year, HP and IBM held the top rankings among MNCs. This year, there’s
been a bit of juggle that’s thrown up quite a different picture. Compaq,
powered by a super performance in servers and desktops, cruised and regained its
1998-99 number one slot. Channel giant Tech Pacific gained a notch to edge out
IBM from the second spot. Ousted number one HP was at No 3, followed by IBM. The
demand in the networking industry saw a rapid climb by Enterasys, up seven spots
to enter the Top 10 league. Given the strong and buoyant growth in the domestic
market, channel majors nudged their way into the overall Top 10 club, making it
a perfect 50:50 split between MNCs and home-grown IT majors.

Compaq had a great year. Along with subsidiary Digital Equipment, the company
notched up an increase of 70% in revenues to regain the top slot. Thanks to an
efficient channel rollout, Compaq also showed large gains in the desktop market,
overthrowing HCL to claim the number one position. Other major gains were in the
PC server market.

Tech Pacific, at number two, continued on its growth trajectory. With a
growth of 47%, the Tech Pacific engines have been consumables, media, CPUs and
motherboards. The business from these segments grew by a whopping 1,000%,
rocketing from a meager Rs 27 crore to over Rs 300 crore. Systems and networking
remained strong, growing by 48% and 41%, respectively, but peripherals showed a
flat line, up just 5% to Rs 594 crore.

Channeling growth

It wasn’t only Tech Pacific that danced to the growth tune. The other two
channel majors–Ingram Micro and Redington–also had a party. A key reason for
this resurgence by channel players was the increasing focus of vendors on a
strong channel set-up. Samsung is the best example–that’s an 18-employee
team managing revenues of Rs 881 crore at a productivity of Rs 48 crore! The
success factor–efficient channel management. Others, realizing the imperatives
of the market, moved into aggressive mode on channel network beef-up.

Another success story in the desktop segment has been Compaq. Its standing
today as the top vendor is thanks to its focus on building a huge channel
infrastructure. The company has built up an enviable 730-dealer network across
the country and the results are there in the numbers. Of course, the cascade
effect has helped channel players like Tech Pacific and Redington. The top three
channel players grew by 66%. Compare that with the growth figures should by
hardware vendors like IBM and Compaq, 57% year on year, and you know who laughed
loudest in 2000-01.

Cisco: The networking giant

Among the top 20 MNCs, however, it’s been networking companies that were
the loudest. Cisco, as is wont, remained the undisputed networking king,
doubling its revenues and surging past nearest rival Enterasys Network. With a
growth of over 100%, Cisco maintained a stranglehold on the router market with
an 84% marketshare and a comfortable lead in the LAN switches market. Cisco was
a distant second in the RAS market after 3Com, but still ended up cornering
nearly a quarter of overall sales. Cisco’s quantum jump also saw its inclusion
in the Top 20 Companies’ list. On the other hand, Enterasys had a major chunk
of revenues coming from the LAN switches market.

Of the 20 MNC companies, the biggest group comprised of networking companies.

Packaged software

Any question leading to the leader of the pack would be a no-brainer–it is
Microsoft and the ubiquitous Windows all the way. With a growth of 42%,
Microsoft continued to hold over 80% of the office market. And do we need to
even talk about the Windows OS marketshare… and this in the face of piracy?
Another immediate winner for the company has been the fresh-from-the-oven .NET
strategy, and products like the SQL server, BizTalk server and Commerce server.
It is highly unlikely that any company would be able to shake Microsoft from its
perch as the badshah of packaged software.

Snapping at Microsoft’s heels is Oracle, with an increased focus on e-biz
and databases. Armed with a $50-million commitment from its parent, it promises
to hot up the action. SAP, meanwhile, slipped three rungs in MNC rankings–in
focus, it moved away from point solutions towards more comprehensive and
integrated solutions. SAP India is now getting favorable response to its
mySAP.com e-business platform and the mysap.com suite, which links CRM and SCM
initiatives of an organization with the ERP backbone.

A key target for all packaged software companies is the SME segment,
especially as corporates appear to have reached saturation point.

Systems: Sun kept shining

While packaged software vendors had a good year, system vendors also raked in
the moolah. The overall server market saw 76% value growth over the previous
year, with Sun making a killing in the last year. The ‘Dot in the Dot-com’
strategy paid off handsomely for the company, giving it the number one server
spot in the RISC space–and revenues of over Rs 373 crore. Among the top orders
bagged by Sun were those from financial institutions like HDFC Bank, ABN Amro
and Citibank. Some others came from ITC and Reliance. HP was the number two
player, with the value proposition coming from mid-range servers.

The bottomline

At the end of all the numbers, its been a great year for IT MNCs in India.
Facing a slowdown and the resultant squeeze across the world, India emerged as a
sweet spot. And so we had a scenario where the same companies that were
retrenching employees worldwide continued to recruit heavily in India. As for
whether the party will continue into the next year, no one can tell. The only
clear signs are that the market is continuing to grow… and with it, will MNCs.