Not A Four-Letter Word Anymore

smaloffice.jpg (21821 bytes)If Home computing was for years the
future-potential thing, a solution looking for a problem, then 1997-98 was the year it
took off. It did so at the best of times, and at the worst of times. A relatively
recessive year for the Indian industry, which meant that corporates weren’t buying PCs.
Infotech India, used to staggering growth, faced the prospect of just about making it to
double digits. Then came an unlikely white knight. Not the now-traditional savior,
software exports; that segment had some help this year.

So how did overall PC sales growth make it to 33 percent, when corporate and government
buying grew at some 25 percent in unit sales? Home buyers, of course. The Home market
bought 66 percent more PCs in the year 1997-98 than it did previous year. So it’s easy to
grow on a small base? Perhaps, but this time round the numbers were large enough to affect
the whole industry figures. IDC (India) estimates that 106,500 PCs were bought by Homes
last year, almost a quarter of total PC unit sales. This does not reflect the large number
of PCs that moved from offices to Homes-either as new purchases via the office, or older
PCs bought cheap. These office-to-home PCs also result in revenues in this segment:
through add-ons, peripherals, upgrades, and CD purchases.

The Home and Home office segment, once a victim of overestimates, hype, overpriced
hardware, and other conflicting forces, has begun to define itself more sharply for the
vendor, shattering many myths. Vendors who realized these earlier have products that fit
there, and sell well.

Why do Homes buy PCs? The top reason is to carry work home, which is also the reason so
many PCs move from offices to homes (and don’t get counted in Home PC sales). Edutainment
is a major post-purchase application, but for the real volumes of PCs, the former is the
driver.

All those SEC-A families will buy Home computers-those 1.3 lakh Aptivas and Aspires,
right? Wrong. With the work-at-home driver, volumes don’t happen there, just as office PCs
aren’t fancy high-end multimedia machines. Most of the initial purchases are low down on
the brand scale, though often bristling with current specs.

small.jpg (20670 bytes)Then are these cheap, trailing-end PCs, comparable to
office desktops? No; the Home leads in technology usage: Pentium MMX, Windows 95, and CD
drives-all this entered the Indian home a year ahead of the office. The Home user tends to
upgrade more often, adding things like CDs or modems or printers ad hoc (often with
unplanned purchases). The office follows a much more carefully-planned purchase cycle, and
rarely upgrades more often than once a year. So the average Home user ends up spending
more per PC than the office does. The basic Home PC is just the first step on a family’s
IT purchase journey.

How do you convince the Home to buy a computer? There are many Homes out there who are
convinced, but still aren’t buying. This still isn’t a consumer product: buy, plug-in,
play. There are too many specs and options, too few financing options, and a crisis of
confidence in vendors’ bonafides and intentions. The top questions faced by industry
professionals are: Which PC? Branded or assembled? How do we service it, who will support
it? How can we pay in installments? What to do in case taken for a ride, and it doesn’t
work, or it has the wrong specs?

One of the things missing from the Home market is adequate packaging. This isn’t
necessarily branding, though that’s a part of it. A package shrink-wraps a single
well-defined product with specific specs, and service and warranty. A TV buyer goes into a
shop and asks for a BPL FXR 21, or an Akai 25, and knows she’s getting the same product
her cousin in another city got. The Home PC buyer struggles with main cache and video RAM,
disk drives, and monitor options. The majority, without access to expert advice, simply
give up.








Home Segment Snapshots 1997-98
PC Shipments (units): 106,500
Growth Over 1996-97:60%
PC Installed Base, March 1998 (units): 230,000*
Average PC Price At Purchase: Rs 45,000
Printer Sales (units): 90,500
This excludes a much larger
number of PCs, old and new, that move from offices into homes.
Source: IDC (India)

There’s the over-quoted BeanStalk example: the
then HCL Frontline’s MR had projected 25,000 sales in its first year, and its marketing
and publicity spend was in proportion. Finally, sales closed for that year at one-tenth
that number, and other companies backed down from the ‘exaggerated’ Home market. This was
a pioneering effort, and so wasn’t as disastrous as it sounds; but the BeanStalk wasn’t
one clearly-defined package, and it wasn’t aggressively priced.

Compaq came a lot closer with its Presario 2110. It was a
good brand with an aggressive price; but most of all, it was a package with clear specs
and everything the Home user needed-from sound to internal modem. Over time, it lost sight
of that edge a bit, and came out with a series of follow-up models with varying specs. But
that Cyrix-based lineup still sells well.

Share
Of Assembled PCs
Home buyers are buying fewer and fewer
national brands. Thanks largely to Intel’s GID program, the regional player is stronger
than ever.
 1996-97 1997-98 998-99 (estimated)
Home68%82%83%
Small Office39%72%73%
Source: IDC (India)
Note: Assembled PCs include units shipped from regional players and GIDs.

What is needed is a TV-like package: clear specs with
no options, pre-configured, aggressive price, and backed by a clear warranty and service
policy. Call that package a Presario, BeanStalk, Aptiva, or whatever. Freeze the specs
intelligently, for six months. Ignore Intel when it tells you that there’s a new chip you
must use or else. A P200 or MediaGX with 32 MB and 1.2 GB, CD, sound and modem card, and a
good 15" monitor, make an excellent Home package at Rs 40,000-60,000. That can absorb
a Rs 3,000 TCP/IP Internet account too, and Win 98, and a few CDs. Don’t highlight the
detailed specs, just the package and its main features. Make it sound friendly.

In the absence of such a clear consumer-product PC, backed
by a major branding exercise, the only yardstick is price, and the brand names will always
lose out. Home and Small Office buyers moved away from brands last year, buying almost 80
percent of their computers from smaller players or assemblers. Now, how many homes buy
their TV sets from assemblers and regional brands? Or refrigerators?

India’s big consumer market is sometimes overestimated, but
the infotech industry has barely begun to tap the market that does exist. It’s a large
population, used to buying consumer durables. PC vendors haven’t quite begun to think like
BPL, Videocon, or Akai. Or use strategic tie-ups to leverage such companies’ existing
channels. And that’s a pity, because if we jump from the projected 800,000 PCs to the
‘magical’ million mark by March 1999, it’s not going to be thanks to the corporation or
government, but to the Home buyer.

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