The Rise of the Laptop

Blame it on competition. With mobility as the new buzz word, companies
have realized the importance of the low cost notebooks. Today, each company has
a notebook under the Rs 60,000 range and some even below the Rs 45,000. The gap
between notebooks and desktops has been closed. With the declining prices it is
obvious that the notebook segment, which has been driven by exclusivity until
now, will see good volume growth in the days ahead. This was very evident during

fiscal 2003-04, when notebooks registered a volume growth of 75% y-o-y.

Ground Zero

In the Indian context, the price slides indicate the beginning of a trend in
mobile computing and accessing information on the go. What makes it more
significant is the timing of this development. Today, Wi-Fi is a reality,
notwithstanding issues like usage penetration. The combination of the notebook
and ability to access information on the go represents a new degree of
individual empowerment that will have a direct bearing on productivity. S
Rajendran, general manager, sales and marketing, consumer products group, Acer
India, puts this in perspective when he says, "Notebook penetration in
Indian enterprises is gaining tremendous momentum.

But study of the current dynamics suggests that vendors have only just
started scratching the surface of the market, even as the same market is slowly
being defined. For instance, in the past, when the notebook was equated with the
niche segment of top executives, vendors by and large ignored the SMB and SOHO
segments. But now, the notebook category is classifying itself into three
segments. There is the high-end one, with prices of Rs 80,000 and above,
targeted at large enterprises. The mid-end notebooks, with prices between Rs
50,000-70,000, is targeted at the SMB segments, while the low cost notebook
segment, with prices in the sub-Rs 45,000 category, targets both small
businesses and home-users.

Says Raj Saraf, CMD, Zenith Computers, "Penetration of notebooks in
India is only 3% as compared to 40% in western markets. But now things are
changing fast. Mobility and portability are the buzzwords in computing today.

The Market Responds

The market is in the throes of a transition from a desktop centric mindset
to a mobile one. Much of the current interest in notebooks can be attributed to
the explosion of cellular phones in India. HP's country manger for portables
Rajiv Grover draws up an interesting analogy. He says, "Mobile phone usage
in India has brought to fore the benefits of anytime anywhere access. But mobile
phones have only voice exchange. People are now thinking and going that one step
ahead, accessing their data and the Internet on the go. With Wi-Fi becoming a
reality today, the notebook has, in a way, become the true reflection of
convergence"

Grover
also attributes the growing interest on notebooks to its evolution into a mature
product in recent times. For instance, in the past, during the 1990s, the
notebook's functionality was restricted by lots of limitations in terms of
graphics, memory etc. This made desktops superior, and laptops were viewed as an
add-on, with most people using it only to do some work while traveling.
"Two things will drive the notebook market: one the technology enhancements
that have made the notebooks equally powerful and brought them on par with
desktops. Two, with numerous connectivity options, notebooks will empower the
workforce and individual productivity will scale up immensely," says Grover

Since the economy notebook phenomenon is just a few months old, CIOs of most
Indian enterprises are undecided on the quantum of IT budgets that can be
earmarked for notebook buying in future IT purchase decisions. The verticals
that hold greatest promise are software development companies, banking and
insurance. These verticals will drive bigger sales, in addition to buying from
other enterprise segments. If we look at IT companies, a notebook is a vital
necessity, and high prices have, in a way, restricted its being given to the
workforce in the past. But with notebook prices going south, IT companies will
do some aggressive buying. Says Sanjeev Menon, brand manager, mobile computing,
IBM India "Low-cost notebook offerings are prompting many enterprises to
buy predominantly for sales force automation.

But if we take a holistic view, the percentage of notebooks to desktops in
Indian enterprises is less than 10% currently. That is a huge gap, and makes
India very much a desktop country. A survey of the desktop and notebook market
during 2003-04 reveals the same: India consumed 2,691,823 desktops as against
91,180 notebooks. Reflecting on this, Acer's Rajendran says, "The market
for notebooks in India is artificially crimped, low volumes as compared to other
neighboring countries. In India the Total Addressable Market (TAM) as a category
constitutes a meager 3% as against other Asian countries, which have a healthy
TAM of 8% to 10%.

The Road Ahead

These recent developments have all the trappings of a trend in the making.
In the years down the line, will this trend eat into the desktop market as
notebook prices decline further? "Notebooks cannibalizing desktops is an
extremely forward-looking projection. Desktops will always have their place in
the sun, and notebooks will be absorbed by certain buying segments based on
their unique needs like accessing information on the move, working from remote
locations etc", says HP's Grover.

Meanwhile, as the desktop market sees huge margin pressures, the major
vendors are pushing more portables in order to improve their overall
profitability. Further price slides are likely, as most of the TFT makers are
going through a lull period and facing difficulties in managing their
inventories. TFT manufacturers thus have incentive to ease their prices to push
more volumes, leading to further reduction in notebook prices. Also, with
Microsoft launching XPSE, the possibility of vendors bundling the OS will be an
attractive proposition for entry-level notebook buyers. For notebooks that are
price above Rs 80,000, it is a separate market altogether. Most second-time
notebook buyers will go for power notebooks, with large TFT screens and DVD/CD-RW
combo-drives. Meanwhile, the low-cost notebook will see major buying from
consumers who already have a desktop, and who will migrate to a notebook instead
of upgrading their desktops. On the enterprise side, MNC companies and large
corporates will react positively to the price cuts, and will slowly start
investing in notebooks. Overall, it's a win-win situation, with vendors set to
achieve volume growth, even as they give the users good value for money.

Shrikanth G in
Chennai