Multinationals in India Firm Foothold, Rapid Growth

DQI Bureau
New Update

Eight of the DQ Top 20 are

multinational companies. Prominent among them are Hewlett-Packard, IBM, Tech

Pacific, Compaq, Microsoft and Samsung Electronics.


How did the MNCs manage to flourish in

India, against the hurdles here? Slow bureaucracy, weak infrastructure–particularly

telecom, piracy, and intense competition–especially among themselves? How did

they grow so fast despite the low penetration of infotech? How have they

penetrated India’s myriad small towns?


MNC System Vendors

(Rs crore)

Rank Company Revenues

in 1999-00
1 IBM India 1,182.4
2 Hewlett-Packard* 1,137.8
3 Compaq 1,046.3

Revenues of HP only


MNC Peripheral Vendors
Rank Company Revenues

in 1999-00
1 Samsung 501.1
2 Epson 159.4
3 Liebert 134.5

A big factor is of course their

products, which often have a technology, quality and brand edge. But products

alone do not make success stories, and other factors have helped.


One has been the strategic ability to

work closely with Indian partners and developers. Another, the acumen with which

market needs have been assessed-and, often, products developed or modified in

response to these needs. And of course, the advantage of experience of

international trends and their impact on local markets.

HP, IBM...1,2

In the last fiscal, HP along with its

software operation, HP-ISO, grew rapidly-by some 80%, to Rs 1,256 crore. HP,

already dominant in peripherals, grew through a focus on corporate desktop PC

sales and enterprise systems and storage. HP also announced its e-speak

technology to stake its claim in ebiz, and pushed servers and services to ISPs.

The challenge for HP in India now will be to make its presence felt in the

increasingly crowded world of ebiz infrastructure providers.


IBM also had a good year in 1999-00.

Most systems areas brought in strong revenues, and services helped fatten the

bottom line. Notebooks, PC servers and RISC servers did well, though the company

struggled to grow in desktops. The Tata-IBM joint venture ended, and became IBM

India in September 1999. The Rs 707-crore company remained separate from the Rs

476-crore IBM Global Services, but the two worked closely and reported to the

same CEO. IBM Global Services grew 34% to Rs 476 crore, over half of the growth

coming from service exports. Systems made up four-fifths of IBM India revenues,

down from the 90% in fiscal 1998-99, as peripherals grew faster and software

finally integrated Lotus.

Acting as catalysts for change and

helping build and develop a set of opportunities around them, MNCs played a role

in building new dimensions in both software and hardware sectors. As MNC

companies and their markets grew, a positive spin-off was that a whole industry

of partners, channels and resellers evolved, leading to a mature IT industry

catching up with the developments and standards worldwide-and fuelling a

consumer boom.

Channel focus


Demonstrating the channel trend was the

performance of Samsung Electronics India-which grew 54% to Rs 501 crore, moving

four rungs up the DQ Top 20 ladder. With just 11 employees, that’s an

impressive productivity level of Rs 46 crore per employee-helped by a channel

program and a supporting B2B network. The company worked towards building volume

demand and gaining market share, and it brought in a full range of computer

subsystems and peripherals. It ramped up its share of the monitor and hard disk

drive markets. Samsung’s flagship Samtron line of color monitors continued to

dominate the market, selling 435,000 units-and helping unit sales grow 61%. A

channel focus, customer orientation and tech expertise were clear strengths that

helped Samsung grow exponentially. Samsung intends to touch Rs 800 crore this

fiscal, and Rs 2,500 crore by 2003.


MNC Networking Vendors

(Rs crore)

Rank Company Revenues

in 1999-00
1 Cisco 360.0
2 D-Link 160.9
3 3 Com 140.0

MNC Software Vendors
Rank Company Revenues

in 1999-00
1 Microsoft 466.2
2 Oracle 195.0
3 SAP 141.6

In the Indian peripherals market

another big gun, dot-matrix and inkjet vendor Epson, established itself firmly,

helped by a high-profile branding campaign and a wide range of new products.

Epson clocked Rs 159 crore against the previous fiscal’s Rs 95 crore, moving

to #50 in the DQ Top 200, up from 71. It sold 80,106 DMPs and 70,542 inkjets in

the country.


Cisco’s Net game

Cisco remained number one in

networking, as in 1998-99. Its sales revenues rose to Rs 360 crore in 1999-00

from Rs 143 crore last fiscal. The router king held a virtual monopoly with an

estimated market share of about 75%. Cisco also continued its lead in the remote

access server (RAS) market, cornering a 45% chunk of the market. However, in the

switches segment, it faced heavy competition from Cabletron and 3Com.

The MNCs chose their markets with care.

For example, while many players in the networking space focused on the higher

end, D-Link targeted the low-end network interface card, hub and dial-up modem

segments-growing 93% in the last fiscal. With a strong channel network, and its

manufacturing plant in Goa, the company ensured the shortest time to market,

another strong MNC characteristic.


Software struggles

The packaged software market presented

a different scenario for MNCs in the hardware-dominated Indian domestic IT

market. For the strongest company in this sector, Microsoft India, the last

fiscal was one of mixed fortunes. OEM Windows sales improved, with growing MNC

PC market-share, and it signed agreements with state governments, ending up with

revenues of Rs 466 crore in fiscal 1999-00, a growth of 40%. But the much-hyped

Windows 2000 did not move as well as it may have hoped for, with Windows 98

still remaining dominant by far. Microsoft focused on growing enterprise

application areas, especially SQL Server databases and Exchange email servers,

an other NT server software.

The database multinational Oracle

couldn’t generate the same fervor in India that it did in the US, but it did

launch a high-profile TV and media campaign. Though Oracle remained the most

sought after database name, Microsoft’s SQL 7.0 continued its inroads into the

company’s traditional stronghold.


Another big MNC engaged in software was

SAP India, the wholly-owned subsidiary of SAP AG, Germany, which enjoys a 50%

market share in the enterprise software worldwide. The SME segment continued as

a prime focus for the company, with the reconfigured SAP/R3 and MySAP.

Lotus, now an IBM subsidiary, is more

than a decade old in the country and another stalwart in the software business.

The company, which operated in India through a liaison office, dealt in packaged

software and training. It achieved approximately 65% of its revenues from

software, including Lotus Notes and Smart Suite, and the rest from education,

support and consulting. (Beginning this year, Lotus revenues are included in IBM


Shortfalls made up

On the flip side, there were areas

where MNCs did not fare so well. For instance, the retail business for IT

products and the quality of the supplies market, which was characterized by

substantial amounts of counterfeit and fakes. But what offset these negatives

was that most MNCs had a wide range of products within their IT stables, whether

it was consumables or high-end servers. These brought the companies high

visibility and was key to entry into many segments of the market. A consequence

was the explosive growth in the home PC market. And the retail business in India

saw an upturn in relative terms.

Lessons for the future

What can domestic companies learn from

the MNCs? One, there is a need for IT companies to nurture, invest and maintain

their position in retail so that consumers have easy access to products. Second,

provide better products and technology at good prices. Three, make products

trouble-free and put in a good support network.

Then there are the macro issues. The

lack of adequate infrastructure is one of these. It prevents the Indian industry

from exploiting the Internet economy to the maximum. And though we may witness a

steady growth in ecom transactions, the absence of adequate bandwidth and

world-class telecom infrastructure not only slows the pace for companies across

the board but also affects the Indian companies’ bottom-lines. Many MNCs have

invested heavily in infrastructure, with backup datacom, call centers, and more.

It costs money, but it’s a major differentiator and a critical customer need.

A key foundations of the MNC model is

to share best practices with customers-on a world-wide basis. They allow their

customers to form a link wherein they give feedback on how a particular solution

can be improved and made far more effective. The experience gained through this

process is tailored to the needs of the MNC customer all over the world. This

leads to an increase in the ability to deliver customer-centric, open,

personalized and collaborative solutions on demand. Aligned with customer

requirements, the MNC in India as elsewhere has the ability to offer solutions

to a range of industries. And with the Web, it’s easy to do this.

On a particularly positive note, there’s now a range

of Indian MNCs spanning the globe too-from training majors NIIT and Aptech to

software exporters who are busy opening offices, merging and acquiring

companies, and listing on Nasdaq and NYSE. Doubtless, other countries will learn

form them, too. DQ