“Supply chain management makes a lot
of sense than
manufacturing at too many locations.”

–Paul Blinkhorn, Director
(PC Products Group),
Compaq Computer Asia-Pacific Pvt. Ltd

Being responsible for the Asia-Pacific
market, Paul Blinkhorn has the challenging task of ensuring the # 1 position for Compaq in
the region. He has already claimed the # 1 position for his company in countries like New
Zealand during his tenure as country manager there. Blinkhorn was in India recently to
launch Deskpro 1000, a product specifically targeted at the Indian market, packaged with
the right price/performance and system features. Blinkhorn is betting that Deskpro 1000
will be the horse on which Compaq India will ride to capture the top slot in the Indian PC
market.

In a conversation with DATAQUEST, Blinkhorn
dwelled on the intricacies of doing PC business globally as well as locally. He also
talked of the Indian market and Compaq with inputs from Abishek Mukherjee, MD, Compaq
Computer India Pvt. Ltd. Excerpts:

Compaq has publicly stated its goal
of becoming the # 1 PC company in the country. Do you have any plans to have a
manufacturing plant here in India?

The key to Compaq is not where the product is built. The key is to bring it to the
customer. From the place where the product is built to the various locations to its
distributors’ warehouses and then to the customer, and it ends with customer service. So
we have to make sure that we have a world-class supply chain. Our Singapore manufacturing
facility provides the entire spectrum of products for this region. Supply chain management
makes a lot of sense than manufacturing at too many locations.

The question of manufacturing has risen in
every market at some point in time. But the issue is not manufacturing, but to provide the
customer with the availability.

But you do have a manufacturing
center in China.

Yes.

Your volumes are increasing in
India. You will still say that the volumes do not justify locating a plant here?

I don’t think it is matter of volume which dictates that you should have a manufacturing
facility at a region. What we should focus is on what the customer wants, like Total Cost
of Ownership (TCO). If you look at some of the dynamics of business today, some
manufacturers are going out of manufacturing, while others have chosen to specialize in
manufacturing. We have proven that we are good in both manufacturing and distribution. Now
more and more, it is the supply chain which is becoming important than manufacturing, and
it has to be made more efficient.

The new paradigms which have started are
the Build-To-Order (BTO) and the Configure-To-Order (CTO) models, wherein, we keep more
and more components in inventory. You look at the entire supply chain, the industry is
moving into the BTO and CTO models. These sorts of efficiencies are going to provide
better availability and better products. So, with increasingly more inventory being kept
at the channel level, manufacturing of the core product can be done anywhere. We are
looking at these kind of initiatives, like BTO and CTO, rather than manufacturing.

Hewlett-Packard has already
announced a CTO strategy for India. Whereas you are still considering the possibility.

I am not specific about what competitors are doing in this market. Probably, they are
looking at regional sub-assembly. Multiple touches to the product means more cost. What we
are looking at is faster delivery at lower cost. Compaq has manufactured and sold 10
million PCs. So economies of scale work for us. The Singapore plant has some efficiencies
in manufacturing and delivery to this region. We have to add the BTO and CTO things to the
Singapore plant.

Mukherjee: A BTO/CTO model
is not known whether it will work in India. I do not know the rationale for them to locate
a BTO or CTO plant in India.

Now that you have made your
objective public, how do you plan to take on HCL, the current # 1 company?

Mukherjee: We are aiming at very high numbers. HCL, if it grows at a
rapid rate, will remain # 1. DeskPro 1000 is just one initiative in the direction of our
objective. We have the retail channel in place, with stores in majority of the cities of
India.

Your primary distributor, Unicorp,
is facing some financial problems.

Mukherjee: Unicorp doesn’t have a serious problem. Our channels in India
are stronger than ever. Our product range is also strong. We think the home market is on a
boom and Presario too is going strong. Except for HCL, Wipro, and Zenith, everybody sells
Compaq. Wipro can’t sell Compaq. But everybody wants to sell our servers. Our servers are
the best in the market, and I am not boasting. Everybody wants to sell Compaq servers.

What about PCL? The company is
getting a revival package.

Mukherjee: It would take a long time for PCL to come back into the
market.

The Indian market is
price-sensitive, and the price point is well managed by the local companies and the gray
market. In this scenario, how do you plan to garner marketshare?

Mukherjee:
Worldwide, the marketshare of top 4-5 companies is
on the rise. If you look at the reports of any of the research agencies, like IDC, 70
percent of the marketshare is controlled by the top 4-5 vendors. This will happen in India
also. In India, we had everything-brand, channel, support, product quality, except price.
And the question before every MNC is whether they can compete with the local brands who
have a distinct price advantage. But with the Deskpro 1000, I am optimistic about
competing with the local brands on price point.

HCL and GIDs are the only strong
competitors. Others are just not there anymore. GIDs may grow at a higher rate than the
market and hence gain more marketshare currently. We are not competing with GIDs head on.
The battle is now between us and the Indian brands. In the MNC category we have won.

Blinkhorn: Today is a
historic date in India for Compaq. The lower end of the market is getting compressed. We
have historically set the compression, and the launch of Deskpro is the first step. Let
the product be the determinant. Deskpro 1000 is a fully-functional PC with the attributes
of Compaq reliability, three-year warranty. Compaq has partnerships with Intel and
Microsoft from the conceptualization of the product components. Microsoft products are
tested on Compaq systems. What we bring to the market is a bullet-proof product. The
market is recognizing that TCO is the real issue. We have already built all the
manageability features in the desktops.

Compaq has surged into the
leadership position due to its focus on costs, and a resultant per unit price advantage,
something that its competitors have learnt now. How much lower can you go in terms of
costs?

We are focusing on lowering TCO continually. The initiative will manifest itself in many
ways. Last year we launched the NetPC along the Microsoft’s ZAW initiative. Deskpro is
another product range which again lowers TCO. Software manageability is also incorporated
into our systems. TCO is a our banner, which we led with intelligent manageability. We
won’t leave the banner for somebody else.

What other competitive edge does
Compaq have, apart from cost benefits and timely delivery?

Our competitive edge has been to come out with products early in the market before anyone
else. In 1986, we introduced the first 386, and we had a 12-month lead over our nearest
competitor. Even today, we lead in launching the latest products. Compaq has a broad range
of products. Supply chain is very important, and we have a very efficient supply chain.
Ours is an optimized distribution model. These are the differentiators which distingushes
Compaq from its competitors. The Deskpro bundles the savings from efficient logistics
management, which gets manifested with the price tag.

How would you compare Compaq’s
supply chain with Dell’s, the latter having the least cost of distribution and logistics?
Do you think you have a long way to go when compared to Dell?

That is a good question. Dell has a different model from Compaq. We think our strength is
to partner and bring the product to the customer. Products have to be sold and serviced.
Dell’s model can work for one region, not for the whole world, like ours. Compaq has
nothing to defend on its model. We are selling more than Dell and HP put together.

Can the model be improved?
Yes. If we can hold the inventory with the channel, significant benefits can be reaped.
That is the BTO and CTO model which we are currently working on. The reality is that our
model is efficient and has helped us to become # 1. Deskpro is a case in point. The
customer also understands how much skills the channel partners have. Channel distribution
is doing everything, from sales to service and support, very well required to do business.
We have completed a study on the SME segment. The dependence on the supplier of the SME is
more, as the SME organization looks for a solution from the channel distribution. We know
who our channel partners are. We have the distribution in place. VARs provide the solution
to SME’s business problems.

HP has announced that, in India,
the company will price its systems 5 percent less than Compaq. What do you have to say on
this?

It is not only in India, it is worldwide that HP is following this pricing. Our pricing in
relation to our logistics is probably the best in the industry. If HP wants to make a
loss, it’s their problem. They don’t have the brand, the reach, and the support like
Compaq has, and which is critical to the customer. And this will help us maintain as a
leader.

Compaq leads in every product
segment in PCs, except notebooks….

Notebooks is the only blemish which Compaq has, and we are working toward becoming leaders
in that too. We are leaders in every other product line.

Concerning the proposed acquisition
of Digital, Compaq seems to have no synergies with DEC, except for a tiny bit of NT
overlap that both have. Yet the two companies have been talking about synergies. What are
these?

Firstly, let me provide the party line. The proposed acquisition is limited by the
approvals needed from the US Stock Exchange Commission and the shareholders. And all this
is in process. The primary beneficiary are our customers. This also applies to Tandem.
Tandem brings with it a lot of its own qualities. The synergies will be known only after
two-three months of the merger.

L SUBRAMANYAN and
SIVAKUMAR V,

in Delhi.

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