The Foreign Grip Tightens

Name the top Indian companies in each of the segments of the IT industry.
Think peripher als and names like HP, Samsung, Seagate, Epson and Canon spring
up. Talk servers and we have HP, Compaq, Sun and IBM. Think about the channel
segment and it’s the MNCs–Tech Pac, Ingram and Redington that make the top
troika. Where are the Indian companies in this space? Barring the domestic
services and training segment (NIIT, Aptech, SSI) and HCL Infosystems and Wipro
in hardware, it is difficult to find Indian IT companies that are among the top
three players in any other segment.

Also, MNCs make up a good chunk of the Top 20 Indian IT companies. In
FY01-02, there were nine MNCs in the Top 20 list but their share slipped
marginally to 40% of the overall Top 20 revenues. Also, while the top 20
companies grew at the industry average of 13%, the MNC players grew slower at
10%. Compare this with the Indian companies (predominantly software players) in
the Top 20 list, which grew by 18%. This shows a reversal of growth rates in
FY00-01 where MNCs grew by 67% while the Top 20 companies grew at 56% and Indian
companies at 49%. Some more statistics–the MNCs are strong in the Top 100 list
with about 44 of the total 47 odd MNC falling in this category. Together, these
MNCs constitute about 50% of the total Top 100 revenues. However this dominance
of MNCs is no different from any other country in the Asia Pacific rim barring
China where homegrown Legend commands the # 1 slot in the desktop business.

Top of the line

Compaq, with its subsidiary Digital Globalsoft retained its top slot with a
total of Rs 2122 crore in sales. Thanks to the stupendous performance by Digital
(80% growth) and Compaq also marginally moving ahead of its last year revenues,
the combined entity grew by 9% and held on to its top position. However, there
were some changes down the line. Channel giant Tech Pacific slipped to # 3 due
to a negative growth rate. IBM was back in the # 2 spot after a gap of two
years. When IBM’s hardware business slipped, services paid off for IBM. As a
result of the slowdown, Hewlett Packard’s revenues dropped by 13% and even the
40% growth by HP ISO could not stop HP slipping to the fourth place. FY01-02 saw
the entry of a new player in the list–Intel. Together, Intel and Intel IDC
grossed Rs 1298 crore to be at # 6, just below Redington.

Ups and downs

FY01-02 being one of the worst years for the Indian IT industry, most of the
players catering to the domestic market saw a reversal of roles. While the
domestic Indian IT market fell by 2%, there were players who showed an above
industry average performance in such a bad year. Ingram, Samsung, Intel and
Cisco were among the star performers in the domestic industry. Samsung, with its
branding of an ‘IT essentials company’ continued to ramp up Y-O-Y growth.
While slowing down from previous year’s plus 50% growth rates, the company
added about 225 crore to its FY00-01 revenues. This is amongst the highest
revenue additions and is next only to Ingram’s scaling of revenues.

At a time when the other two channel majors showed negative or flat growth,
Ingram was the other star performer. It crossed the magical Rs1000 crore mark
and grew 31%. Part of Ingram’s success has been due to the ramping up of its
channel network and adding about 2000 resellers in FY01-02. Among the major
disappointments has been HP. HP was down by 13%. Enterprises witnessed avid
discussions on Compaq, Carly Fiorina, the HP-Compaq merger and the future
product line rather than about HP products. Systems were the worst hit and
dropped 36%. Now that the companies have merged and there is no Compaq and with
the Compaq team leading HP, this fiscal should see HP reversing the trend of
falling growth rates. IBM, too, would have been in bad shape but was bailed out
by services.

Channels: Good channels management has become the critical success
determinant as 80% of the total IT products are routed through the channel
market. However, it was a tough year for the MNC channel players. Numero Uno
Tech Pacific retained the top position but could not outperform its FY00-01
revenues as it dropped 3%. Packaged software closed the gap for other segments
like systems, peripherals and networking. Redington showed flat sales with a Rs
5 crore increment over its previous year’s sales. System revenues dropped by
about 20% and the gap was closed by growth in packaged software and peripherals.
Ingram was the star amongst the channel players and claimed a double digit
growth of 31%. The mantra — increase market reach (the company added 2000
resellers and a direct presence in 33 locations) and consolidated product lines.

Systems: In FY00-01, Sun Microsystems saw handsome gains in server sales —
105% growth. This year, the collapse in segments like data centers saw revenue
from servers tumbling by 24% but its leadership in the RISC server space
remained unscathed. Its market share dropped to 33% from the previous year’s
37%. Compaq retained the top system vendor status with its continued leadership
performance in the PC server business. In fact, Compaq has increased the gap
between itself and the #2 player (Sun Microsystems) by over 91%.

In other segments like networking, printers and packaged software, the
rankings were the same as the previous year. In the networking segment, Cisco
remained the undisputed leader with a revenue of Rs 930 crore, followed by
Bangalore-based Enterasys and D-link. In the packaged software segment,
Microsoft, with revenues of Rs 665 crore remains way ahead of Oracle (revenues
of Rs 250 crore). For Microsoft, the channels have become an important source of
revenue.

Looking forward: The new HPQ

It has been a bad year for the MNCs. But the biggies have managed to hold on
so far thanks to services (IBM and Compaq) and peripherals (Samsung, HP). This
year too, with the shadows of slowdown continuing, MNC system and channel
players will have to resort to services to break away from the slowdown specter.
However all eyes will be on the new HPQ. Will it emerge as the # 1across
segments– servers, desktops, services, printers and consumables. Or, will
other players nibble away at its marketshare?

Yograj Verma