UPS:Surging Ahead With Power

The UPS, as a category in the IT peripheral
space, has remained in dark corners with little attention paid in the past by
market analysts. But during 2004, one of the much talked about back end IT
infrastructure enabler was the UPS. And industry estimates pegged the UPS market
numbers at Rs 1,200 crore (DQ has revised the number). But when we factor the
huge size of the unorganized market, the market size would be much bigger. The
escalation of the marketshare of branded players in the last two years, has
stunted the growth in the unorganized sector. The UPS industry in India is
highly fragmented-it consists of many unorganized players at the lower end and
organized players at the higher end of the segment. Even then this segment
registered a growth of about 17% to clock Rs 1,400 crore.

Just like computing devices are scaling up constantly, UPS
devices, over the ages, have also renovated technologically. As we trace the
evolution path of power back-ups, it is only post the 1980s that vendors have
started realizing the business potential in this space. In the 80s, an age
dominated by mainframe computers, power blackouts were predominantly managed
through standby generators. This approach just kept the key systems up and
running while the majority of terminal users were denied access. This lacuna
acted as the catalyst for the emergence of defined segments in the UPS space. It
was during this time that standalone PC back-ups came into being and created a
new market altogether. Standalone UPS devices of various capacities have now
become default PC peripheral devices.

Industry experts broadly classify the UPS market into three
segments: Micro UPS segment (upto 3 KVA) largely caters to the SOHO, SME, and
corporate sectors for stand-alone PCs, small network stations. The government is
also a big customer of this segment. Small-medium UPS segment (3-20 KVA) caters
to corporates, institutions, retail outlets, and hypercritical applications such
as ISPs, ERP implementers, VSAT, email servers. At the top end, high-end UPS or
enterprise segment (20 KVA and above) caters to segments such as Infotech,
telecom, datacenters, BPOs, and industrial entities.

A key yardstick for the growing stature of the UPS industry
is the maturing of the home segment and aggressive enterprise buying in the last
two years. Some of the UPS vendors only cater to the SOHO, with their
entry-level offerings. Here, with low price offerings, they targeted huge
volumes last fiscal. Meanwhile, the enterprise segment brings in big revenues
for a handful of big UPS vendors, and a typical large enterprise goes for a
range of power back up devices. For instance, datacenters, BPO, and financial
institutions go for huge capacity power backups, where downtime is totally not
acceptable. Enterprises also went for UPSes placed in a networked environment
where workgroups share a single UPS. In terms of consumption, the metros are the
biggest markets and only in the recent times one is seeing a shift towards B and
C class cities. However, most vendors are putting in place aggressive growth
strategies to capture more market share from the higher end of the spectrum.

Market Realities

The growing UPS market clearly drives home the message that it is now
treated as a mission critical equipment. The power conditioning market is
getting more sensitive and mature to the evolving needs of the businesses. With
India assuming a key role in the Asian economy, businesses have to become
attuned to the fact that they need to be robust in terms of infrastructure, to
attract and retain investors. Hence, network uptime is being viewed
strategically. In line with the critical nature of power back-up devices, most
of the vendors during the year pitched on 99.99% uptime. Interestingly, selling
power back solutions assumed the path of the software services models by vendors
giving SLA guarantees on uptime. This is the core USP of the UPS market, and a
key differentiator.

A look at the vendors in the fray shows a highly divided
market in India. The Indian UPS market can be divided into three-vendor
categories-national, regional and local. Vendors like APC, Emerson, Eaton
Power Quality, DB Power, Numeric, Microtek, TVSE, and Ingram Micro compete on an
all India basis. Meanwhile at the regional level, players like Champion, Elnova,
and the likes have good traction. The local players operate city-wise and
provide assembled UPSes that mainly go with PC assemblers. The local UPS segment
falls under the unorganized sector of the UPS market and numerous players
dominate that space.

Performance-wise, during 2004-05, most of the frontline
national players have grown well. For instance, APC found good movement of its
offerings and also attacked SMBs and large enterprises with different power back
up configurations. Numeric Power Systems also had a good run during the year
with its product offerings moving up the value chain. In 2004-05, Numeric posted
revenues of Rs 219 crore. Major chunk of it has come from the South, which
summed up to Rs 77 crore. Numeric also made several product innovations during
the year-its digital series UPS came with LCD display.

Another interesting trend over the last year was the market
getting more defined in terms of entry level, mid and high ends. Vendors like
Emerson majorely focused on the higher end of the spectrum and players like TVSE
purely focused on the entry level in which it demonstrated lots of traction
through its StartUPS range of UPS that vended with capacities starting form 600
VA to 1 KVA. TVSE pushed close to 38,489 units of its UPS during 2004-05 that
garnered Rs 20 crore.

Vertical Demands

Every vertical has a unique set of demands. Given that most of the vendors
during the year offered complete suite of power management solutions addressing
different power back up scenarios. According to industry analysts, the key
differentiators of each vertical have to be factored in. Take for instance a
simple differentiator of industrial and office applications: There are unique
demands of redundancy, usually met by the application engineers selecting the
suitable configurations. Each vertical demands different service level
agreements, depending on the location, available expertise, and spares policy,
among others.

This is one market where there are very active small and regional players, even as the big guys strengthen their hold

In India, during 2004-05, high-end verticals that showed lots
of traction were the process industries like BFSI, BPO, datacenters, and
software development facilities. These segments assumed a large enterprise
stature and big vendors like Emerson, APC, GE Digital Energy, Numeric, and DB
Power have large mandates here. The high-end enterprise segment opted for
three-phase UPS with optimum load performance and battery management systems.
For instance, Internet datacenters went for redundant UPSes that enabled on-line
maintenance and repair without impacting the processing operation. All the major
vendors during the year targeted datacenters. APC, for instance, aggressively
positioned its infrastructure (branded as InfraStruXure) power solution as the
key component of the Network Critical Physical Infrastructure (NCPI) for
datacenters. APC offered infrastructure solutions along with power products
ranging from 500 VA to 4,320 KVA.

Outlook

Over the years UPS has evolved into a functionally rich product. During
2004-05, the leading vendor pitch was digital UPS. Today, these devices come
with a slew of intelligent features in-built, which enable the user to better
manage their power back-up needs. Going forward, the UPS market will get hotter,
with vendors offering a slew of offerings cutting across all segments. While big
players will gun for the big enterprise mandates, the entry level will see
volumes growth. The outlook for 2005: Experts foresee the market will see a
growth of 18-20% in value and 20-30% in volume terms. As far as technology goes,
analysts foresee that more players will move to sophisticated transformer-less
design, delivering higher efficiency to customers. Exciting days are ahead for
the power back up market, and 2005 will firm up the market with branded players
further edging out the unorganized sector.

Shrikanth G