Market Realities

It's a well-known fact that the PCQuest Users' Choice awards don't always reflect current market standings of brands, but buyers' aspirations. What is the present market situation?

The fiscal year 2000-01 was one of the most exciting years for Indian IT in recent times. With the domestic market notching up a growth rate of 37 percent, there was optimism right until the fag end of the year, when the economic slowdown started pinching. In the aftermath of the global and domestic slowdown, the mood in the industry varies from cautious optimism to outright pessimism. While it is true that we are currently going through a very bad phase, IDC strongly believes that the domestic market will start looking up from January 2002.

The strategies that vendors need to adopt in a slowdown are very different from those when the market is booming. Productivity, profitability, and consequently cost control assume higher significance, which means that vendors need to keep a close watch on how and where they spend their money. Building strong relationships with existing customers also becomes critical, so that when the market starts looking up, vendors can leverage upon them. IDC believes that current market leaders can emerge stronger when the economy turns for the better, provided they invest in customer relationships and don’t lose track of the future amid the pessimism. This means that the slowdown is probably a blessing in disguise for the market leaders and it makes prudent sense for them to exploit this opportunity to the fullest.

Personal computers

The Indian market is predominantly hardware-driven, and within hardware, PCs are the largest sub-segment. While local assemblers continue to dominate the market, there is a continued tussle between local and global brands to capture the branded segment. In 2000-01, Compaq overtook HCL to become the highest selling desktop vendor in the country. Compaq’s success was equally distributed between the consumer and commercial segments of the market. As opposed to the commercial segment, the consumer segment shows a higher preference towards locally assembled PCs due to their lower prices and easy accessibility. Most branded players have limited flexibility as far as the price is concerned, but they can make their presence felt in the consumer market by expanding their retail reach and coming up with innovative promotional schemes. This is precisely the area where Compaq has scored above many of its competitors.

Servers

The server market can broadly be segmented into two: SIAS (Standard Intel Architecture Servers) and non-Intel servers. In the SIAS category, Compaq maintained its leadership position, even as HCL, Wipro, and Dell added on to their respective market shares. Despite a strong resurgence of Compaq in the non-Intel server category with its Alpha and Himalaya product lines (especially in the mid-range and high-end segments), Sun retained its place at the top. Sun's success was a direct result of its aggressive pricing strategy, especially at the entry level.

Peripherals

While competition is heating up in the peripherals market, the leaders in almost all product categories enjoyed very high market shares, thereby giving an oligopolistic flavor to the markets. While Hewlett-Packard continued its dream run at the top in the inkjet and laser-printer categories, Wipro and TVSE fought neck to neck for supremacy in the dot-matrix printer category. HP’s strong run in the printer market has been due to strong brand image, aggressive pricing and promotional strategies, and wide distribution reach.

As far as the Indian hard disk drive market is concerned, the market is much more brand-conscious now than it was, say, two to three years back. Today, end-users demand a particular brand of hard disk drives in their PCs. Seagate enjoys a strong brand image and is the market leader by a wide margin. However, Samsung has started making inroads into what was hitherto Seagate’s closely guarded preserve.

What Seagate is to hard disk drives, Samsung is to monitors. However, as compared to the hard disk drive market, the monitor market in the country is more competitive as more than a dozen players vie for end-users’ attention.

LAN hardware

The LAN hardware market registered phenomenal growth in 2000-01. Strong buying in the telco/carrier segment due to investments in infrastructure boosted the market in the first half of the year, while the enterprise segment remained buoyant all through the year. Vendors whose strategy revolved around tapping both these segments were the ones that emerged winners. Cisco was the clear market leader in value terms, specifically due to its strong presence in the router and LAN switch segments. However, when we look at the various product categories within the LAN hardware market, a different picture emerges. The lower end of the market, comprising NICs (Network Interface Cards) and LAN hubs, price, and reach were the critical success factors. D-Link and Compex focussed on the volume game in these markets and emerged as winners. On the other hand, switch and router selling is a different ball game altogether, as directly addressing the needs of the customers through specialized solutions is the key for success. Enterasys and Cisco dominated these markets.

The current year will be the real test for IT vendors in India as those who can consolidate their position in a slow year will reap the maximum benefit when the economy turns around next year.

Aditya Pant, IDC India