Suresh Kumar has been selling computers in Bangalore at his shop, Karthik Business Machines, for eight years and he's never had it so good. Situated in a historic building on the bustling Mahatma Gandhi Road, Kumar offers the latest Hewlett-Packard computers, printers and related gear. Two years ago, he sold 50 PCs a month; now he's up to 150--maybe 2,000 for the year.
India is giddy with growth, and both businesses and consumers are using their new-found wealth to snap up computers. As long as the economy keeps up its 7.6 per cent pace, computer makers expect to see India begin to mirror China's voracious appetite for technology. Last year the industry sold only 4.4 million PCs in India, according to market research firm IDC. By contrast, China bought 19 million. But between now and 2010, analysts expect to see India's sales double.
For years, doing business in India was a headache for international technology vendors. In the 1970s, the Indian government made the restrictions on foreign ownership of companies so tight that many firms, including IBM, quit India. As the PC gained steam in the US in the mid-1980s, companies including Wipro--which got its start selling vegetable oil--began selling Intel-based PCs. Even so, until 1999, annual PC sales were well under 1 million units.
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The success of India's outsourcing and software business began driving PC demand, heating up other sectors of the Indian economy. Banking, construction, telecommunications and biotechnology are growing strongly. Consumers, determined to provide the best education they can buy for their children, are buying PCs in record numbers. Another powerful kick: In 2004 the Indian government stripped away some historically high tariffs leveled on imported computers.
As a result, India has become a powerful magnet for computer and chip makers. Both Intel and rival chipmaker AMD are jousting to prove their commitment to India. In February an industry-government consortia, SemIndia, announced plans to build the country's first chip-assembly-and-test plant outside Hyderabad, at a cost of $3 billion. AMD has been a key player, pledging to contribute its manufacturing know-how. That deal left Intel scrambling. It subsequently pledged to spend $1 billion over five years to strengthen its research, venture capital and community activities.
Intel has also developed computer-board technology that it is sharing with domestic PC makers including Wipro and HCL aimed at producing sturdy, lower-cost PCs for rural areas. Ashutosh Vaidya, vice president of Wipro's PC division, says that his company began testing the new PC designs with clients in March and expects to make them widely available by the end of the summer.
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The systems are designed to withstand the rigors of daily life in rural India: temperatures hot enough to fry an egg, dust and intermittent power outages. (The new computers can run for up to six hours after recharging off a car battery.) Vaidya expects the units themselves will cost 3,000 to 4,000 rupees ($65 to $85) more than standard PCs but notes that customers will save money because they will not need to install air conditioning, extra power generators or other equipment just to keep the machines working.
HP, which started a research lab in Bangalore in 2002, is also designing technology for India. In March HP unveiled a "gesture" keyboard--it looks like an electronic slate--that lets people use a digital pen to take notes in Hindi and other scripts. HP has licensed the technology to an Indian-based vendor, which is already selling the items.
Last year HP continued to strengthen its position as India's top PC vendor, extending its lead over HCL. Over 200 retail outlets, such as Karthik's Bangalore store, exclusively carry HP gear; another 1,000 shops carry HP as well as other brands. HP's deep expertise in setting up and running computer systems has also helped it win key corporate accounts.
Gaining Ground | |||||
| In the most recent quarter HP has widened its market-share edge as the Indian market rapidly grows. | |||||
| VENDOR | MARKET SHARE | ||||
 | |||||
| Hewlett-Packard | 20.5% | ||||
| |||||
| HCL | 15.8 | ||||
| |||||
| Lenovo | 7.7 | ||||
| |||||
| Acer |
6.0 | ||||
| |||||
| Dell | 4.4 | ||||
| |||||
| Others |
45.6 | ||||
| Sources: IDC. | |||||
"We believe that to succeed in this marketplace, you need to fire from all cylinders"--the consumer, small business and large enterprise marketplaces--says Doraisamy Balu, managing director of HP India. "For us, all three are growing."
HP began building PCs in India in 1999 in Bangalore and now churns out 50,000 units a month. Along with more than 75 support and service organizations, Balu contends that HP can reach just about any corner of India.
For many Indian customers, starting with banks, that kind of reach makes all the difference. Two years ago, for instance, the Bank of India decided to put computer technology into 900 of its branches throughout India. "We needed a partner with experience in hardware, software, implementation, as well as training in banking and services--and competitive pricing," says D. Krishnamurthy, general manager of information technology for the Bank of India. HP beat 21 other bidders for the ten-year contract. Other banking contracts have followed.
Competition is heating up, however. Acer offers some of the lowest-cost PCs at about 13,000 rupees ($280). (Although there has been much discussion of "10,000 rupee" computers, most industry executives dismiss such machines as much more limited than PCs.) "We expect India to become a key market for Lenovo," says IDC's Ma. He added that Lenovo has been testing some of its latest models in India, including PCs that easily switch from playing games to displaying television.
Lenovo executives say they believe small and medium-size businesses will provide them the greatest opportunities for growth. "We have very localized marketing campaigns," featuring local celebrities as ambassadors for Lenovo products, says Deepak Advani, chief marketing officer.
IBM has continued to build a presence in India, focusing on midsize business and enterprise customers. Even Dell is now showing its commitment to India. Although it employs thousands of people to handle its customer support lines, the world's largest PC vendor has so far imported all its computers into India. In the latest quarter, Dell even lost a bit of its scant market share. That could change next year when Dell plans to open an assembly facility in India. The company has yet to announce the plant's location.
"Part of our success is being here all the time," says HP's Doraisamy. "Customers that were once small have become big"--as has HP.
