Power Wars

A decade back, UPSes were looked upon as

large unsightly system, usually kept under staircases or basements, emitting strange

buzzing noises all the while. Today, the technology is on the desktop. Slick look, compact

sizing, pre-installed user software, and microprocessor-driven hardware are the common

specs in the present-day UPSes. And, not only the technology has changed, other things

like user perceptions and market environment also seem to have undergone a sea change in

the last few years. While earlier, UPSes were seen more as electrical devices to be bought

and managed by the facilities department of corporate, today a UPS is seen more as a

peripheral (though still a neglected one) and the buyer (at least the corporate buyer) is

more aware of what to expect from the machine.

As for the market, it has been in a

constant state of flux ever since the economy opened up in the early nineties. While older

players like Tata Liebert and DB Power Electronics are finding ways and means to retain

their hold on the market, MNCs like American Power Conversion (APC) and CG Powerware (a JV

between Crompton Greaves and Exide Electronics) are trying hard to establish their brand

equity in the Indian market. And then, their are some like Tripplite who came with a bang

in the early nineties but tripped on the way.

The Market



In fact, the current market scenario can be guaranteed to set a veteran market analyst
scratching his head. Estimated at a modest Rs 450 crore, the UPS industry has over 300

large and small players. Not only is the market unorganized and fragmented, but there is

cut-throat competition as well. Consider this: the newly entered MNCs are vying against

national players, who in turn are battling with the regional players for their chunk of

the pie. And above all, there is the all-pervading and flourishing gray market with its

cheap and shoddy products. Says Biswajit Ghosal, Director, CG Powerware, "Of the

total UPS industry revenues, nearly 50 percent comes from the gray market. So the

competition becomes double edged-on one hand are the established players and on the other

the gray market players."

Making matters worse is the absence of

standards, technology parameters, and business ethics. Each player is wooing the customer

with a predatroy prices, special replacement deals, customized products, and innovative

after sales support-resulting a marketplace where price-product wars,

distribution-networking tie-ups, and mergers/acquisitions are routine occurrences.

One would think that with all this, the

customer is finally getting what he deserves-choice, flexibility, and value for money.

Well, almost. While, from a technical point of view, competition is definitely spurring

companies to bring out quality products, the same cannot be said about marketing

practices. The complete lack of standards, coupled with the buyers ignorance about the

product, has led to a chaotic marketplace. A marketplace where malpracticing marketers are

having a field day, even spurring some of the established players to get down to dirty

marketing tricks.

Says Anand Ekbote, VP (Infotech Division),

Tata Liebert, "One of the biggest problem is of standards. There are no standards in

the country regarding the rating parameters, topology definitions, ideal backup time, or

optimal load." Consequently, there are a plenty of instances where a customer ends up

buying, not what he actually wants, but what the seller wants to sell. Hence, a 3 KVA is

sold as a 4 KVA, an offline as a line interactive, and the customer is provided with a

distributed solution when he actually needs a centralized one or vice versa. The problem

is more intense in the under 5 KVA segment, and the reason is obvious. With over 200

players crowding this segment, competition is intense. Also, while most customers who go

in for high-end systems have technical consultants and generally are aware of their

requirements, the low-end buyer rarely knows his requirements. Starting from requirement

analysis till the implementation stage, he relies upon the vendor. Their are a host of

small and big players operating in under 5 KVA market-APC, Tata Liebert, CG Powerware,

Numeric Power Systems, Elnova, Aar-em Electronics, Kunhar Peripherals, Microsys, TVS

Electronics (TVSE), and Brain Control to name a few.

While APC is perceived as the undisputed

leader in the under 5 KVA market segment by most, their are also some who harbor antipathy

toward the UPS major. They claim that APC dealers are selling line interactive models as

online systems and that the UPS major is eating into the online segment even though the

company does not have any online models. Others question the technology itself. Says DV

Bhide, Chairman and MD of Pune-based DB Power Electronics, "The APC line interactive

is not a true parallel processing UPS as it does not control the output voltage or wave

form when on mains. We are bringing out a product which will take care of all this."

Refuting all such allegations, Rishipal Sethi, Country General Manager (India and South

Asia) says, "We train all our resellers and all our manuals state the product specs

clearly. In none of the product brochures we have given specifications which do not comply

with the actual product. As for our product definitions, they are based on world

standards." Another allegation against APC is that since the company caters to the

under 5 KVA products, it recommends customers to go in for distributed solutions. Sethi

has a different story to tell. According to him, "The perception in the market is

that centralized solutions are better. However, this is not true all the time. In terms of

procurement costs, a centralized UPS solution might cost less, however, the Total Cost of

Ownership (TCO) with a distributed solution would be much less and the cost of deployment

can be distributed."

No one knows who is right and who is wrong.

But the fact is that there is a lot of misinformation prevailing when it comes to

topologies and other technicalities. UPS manufacturers are constantly trying to go

''one-up'' in the competition by claiming a better technology. The truth is that each

technology has its own advantages, and each may be necessary for configuring

cost-effective power-protection, especially in complex networks.

Forecast:

The Industry In The Year 2000

• The market will become more or less
  
  organized. Their will be a drop in the number of players operating-from over 300 to 60-70
  
  players.
• Major MNCs like APC, Exide, Merlin Gerin,
  
  and Victron are already in the country. Two or three more players will try and enter the
  
  Indian market in the next few years, while a few will exit.
• The industry will grow at a CAGR of 23
  
  percent.
• A couple of MNCs will start their
  
  manufacturing plants in India. Exports too cannot be ruled out.
• Taiwanese reverse engineering products will
  
  enter the market-it will be the last ditch attempt of the small players.
• Import duties will be relaxed, reducing the
  
  number of gray market and unorganized units.
• The main drivers will be IT and telecom as a
  
  result of which the 3-6 KVA rating market will see the maximum growth.
• The power situation in the country will
  
  worsen-both in terms of generation as well as distribution.

Adding to the general confusion is the

buyer with his limited knowledge and low expectations from the product. UPSes have never

been ''very high involvement'' products. Seldom is the actual user involved in choosing a

UPS. In fact, most of the time he is not even aware if he is using one at all. Says Sethi,

"Educating the customer has been our primary goal. Even our ads are about informing

the customer about the various topologies and technicalities of the product. In fact, our

biggest competition is no UPS at all." Other than this, in India the expectations of

a buyer from a UPS are lot less than they are from other IT or electronic devices. This is

not very encouraging for quality-conscious buyers, who leave no stones unturned to bring

out a quality product.

However, most players agree, that this is

only a passing phase. The fact that more and more players are becoming quality conscious

as far as product specs are concerned is a good beginning. Second, the buyer is slowly and

gradually becoming more informed and seems to be developing a questioning attitude. Also,

a drop in import duty is anticipated, which would definitely go a long way in reducing the

number of gray-market operators and small unorganized units. Also, it is generally

believed that with most MNCs already in the arena, it is only a matter of time before the

market consolidate.

The Players: Wooing The Market



Though there are no common rules or business standards governing the industry, what is
common amongst all the players is that none of them is in a hurry to leave the field,

without a proper fight. What has given the market this competitive edge is the entry of

MNCs and with them-the brands, new technology, and marketing strategies. The once

indigenous market is witnessing competition at every level. And it is clear that only the

fittest will survive.

Market

Segmentation

Their are three main parameters to be

considered while segmenting the UPS industry-KVA ratings, technology, and end-user

industry.

KVA Ratings: When seen in

terms of KVA ratings, their are three main categories: under 6 KVA market, 6-40 KVA

market, and above 40 KVA market. Of these, the under 6 KVA market is the most price

sensitive, price elastic, and crowded of all the segments. A low-value, high-volumes

market, it commands 36 percent of the total UPS market in terms of value and 80 percent in

terms of volumes. Mainly catering to the IT and telecom applications market, this segment

consists of MNCs, national players, regional companies-and a hyperactive gray market.

While organized under 6 KVA market is roughly valued at Rs 90 crore, an equal value is

attributed to the unorganized sector.

The 6-40 KVA market primarily serves the

medical and telecom industries, and consists of MNCs and national players. UPSes sold in

this market have large backup times, advanced software features, and modularity. As for

marketshare, it is valued at around Rs 50 crore of the total UPS market in the country.

The above 40 KVA or the high-end UPS market primarily caters to enterprise-wide computing,

critical process industry, control and instrumentation etc. All the systems here are

online systems, requiring high backup time. Valued at Rs 60 crore, only a few national

companies operate in this segment.

Topologies: Three basic

topologies govern the UPS market-offline or standbys, line interactive, and online

technology. Standbys, ideal for small, less-critical standalone applications like PCs and

peripherals, kick off as soon as power supply is down or deranged. Line interactive

provides highly effective power conditioning plus UPS backup and are particularly

applicable in areas where power outages are rare but fluctuations are frequent. The online

alternative provides the highest levels of network power protection, conditioning, and UPS

backup.

According to a detailed market study

carried out by Frost and Sullivan, in 1996, the online UPS segment contributed to 60.8

percent of the total UPS industry revenues, with offline and line interactive segments

contributing 27.1 percent and 12.1 percent respectively. However, the study estimates that

in the year 2002, the Indian UPS industry would exhibit growth trends comparable to the

West and offline segment would see the highest growth. In the year 2002, the Indian

online, offline, and line interactive segments are forecasted to contribute 13.4 percent,

61 percent, and 25.7 percent respectively.

End-user Industry: With

regard to applications, the UPS industry caters to two main categories-mainline IT and

microprocessor-based equipment. As per marketshare, 70 percent of the revenues come from

mainline IT while about 30 percent come from microprocessor-based equipment. As per

industry segmentation, the main end-user industries implementing UPSes are computer and

dataprocessing, critical-process industry, control and instrumentation, telecom, and

medical. Amongst these, IT and telecom industries are the largest users; contributing

nearly 75 percent in terms of value, and 92 percent in terms of volume sales. This is in

tandem with the worldwide scenario, where 84 percent of the revenues are contributed by IT

and telecom.

And the spirit is definitely there, not

only to survive but to become the best. Says Ghosal, "We want to become India''s # 1

company. So, we''d better do things right. I will not trod the much-trodden path of the

leaders. If I do that I will never become a leader." The company entered at the worst

time of the decade, but in barely one year it has grown to over Rs 9 crore. For its

strategic planning, it has adopted the scenario building and analysis tool which requires

the company to go in for extensive event analysis. Clearly, CG believes in understanding

the market before stepping in.

Adds Ghosal, "No man is an island. He

is part of an organization...an industry...and finally an economy. The economy of a

country is driven by the political and international trends. And that is why looking at

the future is so important, because that is where you are going to live." According

to the company, its biggest USP is the Exide brand name and the fact that it can provide

end-to-end solution-from 250 VA rating to in above 5000 KVA.

Most players are of the opinion that

understanding the Indian market and power conditions is necessary if one wants to succeed.

While the Indian players like Pune-based Microsys and Mumbai-based Kunhar Peripherals feel

that they have a better understanding of the market than the MNCs, the foreign players are

going in for product innovations and tie-ups with indigenous ones. Says V Anantharaman,

President, Indmark Infocom Ltd, TVSE, "We understand the Indian power conditions and

the Indian market itself, through our experience in manufacturing and marketing of our

products since last 10 years." The company has made changes in the product so as to

make it compatible with low voltage, variable frequencies, operational generators etc. For

instance, to suit the Indian conditions, the company has made changes in the Victron

product. Earlier, the product had just one indicator and a switch. But the company felt

that Indians are not used to this concept. So, it made changes and added six indicators

and two switches.

When it comes to understanding the market,

Tata Liebert, country''s largest UPS company, seems to know the market better than most.

The company has gone in for extensive product innovations to suit the Indian environment.

To begin with, all the critical components like the PCB, battery, and software are

produced in-house. Further, the company has installed extensive test equipment like

transient generators, spectrum analyzer, oscilloscopes etc. Says Ekbote, "The Indian

vendors do not have technical expertise while the MNCs lack market knowledge. Tata Liebert

is a JV between the Tata Group and Liebert Corp. We not only have technical know-how but

ample knowledge of the Indian market. And I guess that is the main reason for our

success."

Bhide does not agree with the view that

only MNCs can bring out quality products. He says, "While in terms of glossy

packaging and brand equity, MNCs have an upper hand; in terms of features, we are at par

with them. In fact, we can compete with MNCs when it comes to prices and technology. It is

only the brand image that we cannot compete against." An ISO 9001 company, DB''s main

thrust is customization and after-sales support. The company was the first in the country

to develop 40 KVA transistorized CVCF, way back in 1982. However, many feel that in spite

of being in the market since 1973, the company has not been able to establish a strong

brand image. Defends Bhide, "Till now, we were focusing on customization rather than

pushing any single product line. Recently, we developed 5 KVA UPSes for NPCL which could

withstand seismic tests. While value-wise the order was not very high, it was a

challenging project in terms of technical expertise. However, now we are planning to bring

out low-end fast-moving, price-competitive products." Similar is the case with

Pune-based Microsys which plans to broaden its product range to suit the market

needs-fancy packaging, software, and hardware connectivity. Not only are companies revving

up to face foreign competition, some have also achieved considerable success. With 2,500

installations all over the country, Enertech Electronics has achieved the distinction of

being the only UPS manufacturer in the country to have become a supplier to the Government

of Hong Kong. Says GKK Singh, Director, Enertech, "Considering that Hong Kong is a

very sophisticated market, with many options available to it, this is quite an achievement

for an Indian company."

Other than the product specs, what

distinguishes one product from another is the value-add provided by the company. For

instance, Numeric provides a Mac interface to computers and an auto save software along

with its UPSes: Kunhar has Powercom-trained engineers spread through out the country;

Brain Control gives customers tailor-made designs; and APC offers a two-year warranty with

all its products. Says Sunil Jose, Marcomm Manager (India and South Asia), APC, "We

do not sell mere `battery on wheels'', all our products have built-in software and are

technically up to the mark. In fact, the failure rate of our products is as low as 2

percent." Instead of after sales, APC has a stock replacement policy for its

malfunctioning products. However, most feel that such policies do not have a future in

India. Says Ranjit Mohite of Pune-based Aar-em Electronics, "Sheer logistics do not

allow such a policy to work out in the long run. APC has a lot of financial muscle and it

is flaunting it right now, but for how long can it continue is something left to be

seen." However, APC''s Sethi says that the company is very clear about where it is

heading. "We have been operating since last three years. And we have been successful.

So, we must have done something right."

Most of the players feel that ultimately

what determines the actual standing of the product in the market is the

dealer-distribution channel. Says R Chellappan, MD of Numeric Power Systems, "The

call response time and service are vital to the business." Most players are following

the traditional channel strategy when it comes to distribution. While, TVSE has 100

dealers and 5000 resellers in the country; APC has appointed six national distributors and

has OEM tie-ups with companies like HCL. Following an altogether different policy is CG

Powerware. "We are developing our own channels and have not appointed any national

distributors, as we do not want to be at the mercy of others," says Ghosal. The

company is also encashing on Exide''s worldwide OEM tie-ups with Digital, HCL HP, Motorola,

ECIL, IBM etc. This is a major advantage for companies which have JV with an MNC.

However, not many of the national players

seem to be worried about the MNC connections. Says Chellappan, "They cannot score

over us because of the services we offer, with service locations spread across the

country." Each national player has his own view. Says Bhide of DB,

"Two-and-a-half years back, Siemens came, but we are still there. Clearly, we have

created a space for ourselves. And anyway, who ever matters is already there, so now it''ll

be a stable ride." Reiterates Mohite, "I am not affected by MNCs. Prices have

crashed. And from here on, it''s just a volumes game." All the players agree that

price seems to be the bottomline when it comes to attracting the customer, especially the

low-end individual buyer. While the high-end market is not so price sensitive, the under 5

KVA market is fully price-driven. "I have tried all the tricks in the trade. The

bottomline is price," says Mohite.

The battle has begun. Each player is trying

to match the other-in terms of product, price, advertising, marketing, and what not. Says

Mohite, "Our latest product-Champion UPS 425-will give APC a run for its money."

Till the battle ends, no one knows who are the winners, losers, or for that matter, the

survivors. However, what is clear is that in the coming years, the number of players will

come down significantly-while some will take up the role of distributors others just might

be forced to close shop and look elsewhere. The indications are already there. Datapro

Infoworld, which was earlier selling its own brand of UPSes, is an APC dealer today. Says

KR Venkatraman, Sr GM, Datapro, "Distribution is our strength and we wanted to work

with a company committed to customer satisfaction. We went in for APC as it is one of the

strongest brands today."

What is also clear is that the winners will

be winners in the true sense of the word. With the anticipated growth of the IT and

telecom industry, the UPS industry is considered one of the sunrise areas of the future.

At present, the PC versus UPS ratio is just 5 percent, however, this percentage is going

up with each passing year. And whoever can establish himself in the business definitely

has a brilliant future.

HIMANI SEMWAL



in Mumbai and Pune,


with reports from AKILA S in Chennai.