Peripherals: UPSs Powering Growth

The visible face of the UPS industry is the organized sector, dominated by

players like APC, Numeric, DB Power, Eaton Power, GE, and WeP. However, the

Indian UPS industry also has elements that are on the margin, yet exercise a

predominant role in the market. This is the unorganized sector thatÂ

comprises  several hundred

players across the country serving in regional pockets. The distinction between

these two sectors has in no way affected the growth of the organized sector. The

UPS industry is doing better than ever before. This sudden boom is explicable.

Like any other  peripheral, the

UPS's market fortunes are closely linked with the performance of the PC

industry. With the desktop PC business clocking growth in excess of 24%, one can

be sure that the UPS sector is heading for another successful year.

This spurt is unlikely to be a temporary burst. A look at the Indian power

landscape has enough pointers to indicate that the UPS market is all set to

thrive in this part of the world, with healthy growth rates y-o-y. New power

initiatives driven by the government and private players have vastly improved

the power scenario. Yet, most of the Indian states continue to reel under

scheduled and unscheduled power blackouts. Steps towards liberalization have not

aided the overall short supply of power which is presently 10%. Moreover, the

quality of the power has also been an issue. For instance, the voltage

fluctuations are a major cause for concern. Nevertheless, on an optimistic note,

the UPS industry is witnessing a healthy growth. 

Ground Realities



The performance of the UPS industry in India over the last two years reveals

the market segmentation across different KVAs. For instance the entry to mid-end

UPS market, which is the most competitive is the space that is addressed by

largest numbers of vendors- both organized and unorganized. This segment power

back capacities typically starts at 500VA and goes up to 5.1KVA and is targeted

at SOHO to mid-end enterprise consumers. The higher end of the UPS market starts

from capacities of 5.1 KVA and goes up to 4,800KVA. In the last few years the

UPS market is more aligning towards established branded players as the consumers

increasingly look at the brand. This is due to the fact that power back up is

seen as a critical back end enabler. The high end UPS consumers are from large

enterprises, who go in for a mix and match of power back up devices. This kind

of segmented market composition did not exist a few years back and this is also

putting pressure on the un-organized



UPS sector.

Understandably, Mumbai, New Delhi, Chennai, Kolkata and Bangalore are the

largest markets for UPSs as these cities are also the largest consumer of PCs.

However, this year, vendors saw a shift towards B- and C-class cities such as

Pune, Chandigarh, Lucknow, Hyderabad and Jaipur, which are fast becoming global

hubs in terms of R&D, ITeS, BPO, retail, and manufacturing. Given the

criticality of operations undertaken in these sectors, there is an increasing

need for a comprehensive network of uptime solutions, including enterprise-class

UPSs.

Power to the Center



In the previous year, one of the key trends was the shift from use of micro

UPSs to centralized setups. This year saw an escalation of this trend with large

enterprises opting for centralized power backup architecture. The concept of

offering custom backup solutions has gained momentum. These trends signify that

UPS is becoming a key component of an enterprise's IT architecture rather than

just a peripheral device. The market leader, APC, as expected, had a huge grip

on the market with its focused offerings cutting across large enterprises, SMBs,

service providers, government, education and SOHO. Estimates peg APC's market

share at 26% in the segment up to 5.1KVA. The key emphasis APC laid over the

year was in rolling out products



with a small form factor with higher VAs. APC also focused on manageability and
created products that are rack mountable. With a wide gamut of products, APC was

witness to a good response to all its power backup solutions.

Vendors Go for Entry Plays



Another key trend is that of vendors of high-end UPSs giving attention to

entry-level UPSs. This is a low-value and high-volume category often

characterized by cutthroat competition. Players like Emerson, which were

concentrating on the high-end UPS space, forayed into the entry-level space. In

August 2005, Emerson Network Power announced its entry into the SOHO UPS market,

with the launch of two UPS models, the 600 VA and the 1,000 VA under the ITON

range.

With this, Emerson is now able to offer a complete spectrum of power

solutions across SOHO, SME and large enterprises. Some companies also forayed

into the open market by selling key UPS components. For instance, Numeric Power

Systems inked a pact with Panasonic Industrial Asia to sell Panasonic's SLA

battery products in India. Numeric, which uses Panasonic's batteries in its

UPSs, is looking at open markets as an additional revenue stream.

Other trends witnessed over the year are related to dual power servers. Dual

power gives redundancy at the server level. A customer has an option to utilize

two sets of UPS power sources rather than a single source. This eliminates the

possibility of a single point of failure.

Apart from reliability and 24x7 service, the customers looked for

feature-rich equipment to cut down installation and running costs. For example,

use of active rectifiers results into near-unity-input power factor at all loads

which enables generator compatibility, lower harmonics and input cabling as well

as better overall efficiency. Customers also expect the equipment to match their

load power factor. The new servers and PCs have low power factors and hence

there is a need for power-conditioning equipment that can match this.

Smaller Form Factor, New Markets



With space becoming a premium, especially in sectors such as BPO, vendors

also offered small form factor UPSs in tower models. Eaton Power launched two

new products in FY 2005-06 with small form factors. With small footprints, one

gets many options for locating the UPS, and therefore, more data center space is

freed for future expansion. Meanwhile, Pune-based DB Power, one of the oldest

UPS companies, entered into a strategic partnership with Chloride Power

Protection based in UK.  By virtue

of this partnership, DB Power is poised to offer locally manufactured Chloride

products. In the verticals, DB Power focused on infrastructure and

manufacturing.

Deployments like IP telephony, server consolidation, medical diagnostic and

imaging equipments have been instrumental in driving the UPS market globally.

Clearly, these have emerged as an alternative target segment for UPS vendors

worldwide. Meanwhile, the buoyancy in the IT spend is likely to positively

impact UPS purchases. As companies ramp up their IT hardware, there will

undoubtedly arise the need for more UPSs. 

Vendors saw a shift towards B- and C-class cities such as Pune, Chandigarh, Lucknow, Hyderabad and Jaipur, which are fast becoming global hubs of R&D, ITES, BPO, retail, and manufacturing

$8.6 bn by 2012



A recent report by Frost & Sullivan on the global UPS market states that

the number one reason for organizations investing in UPS systems is to protect

digital equipment and process against the damages from power abnormalities.

However, a lack of awareness has prevented end-users like medium-sized

organizations from upgrading their equipment. Furthermore, the study further

says that compliance with regulatory standards was a key factor that drove the

demand for backup power solutions between 2004 and 2005. Organizations were

forced to advance their IT networks to ensure better tracking systems and

improve accountability. Demand for backup power is not expected to slow down in

the coming years either. The adoption of next-generation blade server technology

as well as the transition to IP telephony is expected to put a strain on the

power infrastructure and the overall data center environment. In some markets,

where the UPS is considered to be a generic product that requires low

involvement in terms of determining brand or specific features, the purchase

would be based solely on price and not on advanced features such as battery

management, automatic shutdown, or scalability. 

24x7 Drives the Market



In the Indian context, an organization's ability to meet the 24x7

requirements of the digital economy is driving the UPS market. For instance,

large data centers opt for state-of-the-art power backup architectures primarily

because they have to comply with the quality norms. Traditional verticals like

utilities, textiles, logistics and the like have built a lot of legacy systems

and system silos over the years. These verticals embarked aggressively on ERP

exercises over the year, leading to the consolidation of their backup power

architecture. Hence, new apps deployed acted as the key drivers for the

mid-to-high-end UPS segment. Several enterprises still operate with

heterogeneous IT setups; this augurs well for the UPS market in the ongoing

year. With this opportunity in the backdrop, the UPS market is well poised to

clock more than 28% growth in FY 2006-07.

Finally, a look at the current growth rates indicates that the

mid-to-high-end UPSs will gain ground as SMB and large enterprises embark on

power backup expansions. Meanwhile, entry-level UPS will continue to be a

volumes game and the ideal route vendors should adopt is to bundle UPSs with

PCs. Overall, the UPS market outlook will remain good and the vendors can expect

another strong year.

Shrikanth G



shrikanthg@cybermedia.co.in