FRAGMENTED INDUSTRY: Crises For Attention

Notwithstanding the critical role played by UPSs in the

smooth functioning of computer systems, the UPS industry continues to be a

nobody’s child. With the continuance of the Government’s bureaucratic

attitude, the industry itself is unable to lobby its case successfully.

Though the recent initiative by the Government to categorize

UPS as an IT product has been a blessing, issues like an uniform tax structure

for the product and its components still needs to be addressed.

The UPS industry is highly fragmented with most of the

trading taking place in the unorganized sector. Ashok Mazumdar, Executive

Director, Association of UPS and Power Conditioning Systems Manufacturer, a

recently-formed organization, estimates that as much as 75-80 percent of the

total UPS sale in the country comes from the unorganized sector, though other

market sources put the figure roughly at 50 percent as against 60 percent for

other IT products. The UPS market is estimated to be around Rs 1,050 crore with

a annual growth rate of 35 percent. Says Dependra Mathur, GM - International

Operations, Wipro ePeripherals, "Despite its potential, the industry has

not been able to take off due to lack of organized representation."

DOMINATION BY LOCAL PLAYERS



A large part of the UPS market is today dominated by local or regional

players. Majority of these players run their business as a one-man show and

churn out inferior quality products.

By and large, they neither follow any standardization norm

nor do they have any quality processes in place. Says Vinayak Joshi, Western

Regional Manager - Marketing, DB Power Electronics Ltd, "Many local players

manufacture products without laying much emphasis on quality and service.

However, they continue to sell well on account of their low cost."

The UPS sector, specially the low-end segment, attracts many

such manufacturers, as it is not very difficult to come out with mediocre

products. And with customer awareness still not reaching a desired limit, many

see this as a good way of making some fast money.

Dependra laments, "Growing end-user demand and low

product knowledge has increased the number of players emerging out in this

segment."

ISSUES HINDERING UPS BUSINESS



Among many issues faced by the industry, the most pressing one is

counterfeiting or imitation of leading UPS brands.

Confirming this, Yogesh Shah, Partner, Mahavir Enterprises

says, "There have been cases of small players trying to imitate recognized

brands as far as looks and aesthetics are concerned." Thus, these inferior

products give the established brands a bad name.

While the channel has embraced famous names like APC, WeP,

TVSE, Numeric, vendors have become very cautious about the replication of their

brands. "Our vigilant partners bring instances of duplication of our

products to our notice," says Anand Iyer, Country General Manager, APC

India.

Gray market sales are also a serious issue that still remains

unresolved. According to sources, gray market accounts for more than 20 percent

of the total UPS sales in India. Though the favoring elements are still not

clear, sources say that the primary factor could be illegal imports, which makes

the products available at prices that are 15 to 20 percent lower than the

reputed brands.

DEALER LOYALTY



Anand Ekbote, MD, Emerson Network Power India Ltd, believes in maintaining
exclusivity with his channel partners thus helping them work closely with the

company. "We do not believe in blind expansion of channels. By appointing

select partners we can closely monitor their performance, thus maintain dealer

loyalty," adds Anand.

"Dealer loyalty can be maintained by providing

world-class quality products backed by excellent after-sales support and good

incentives," points out Vivek Jain, Director - Marketing, Microtek

International Ltd.

How important are schemes in the UPS business? Not much, if

partners and vendors are to be believed. Brand, features, warranty and service

drive the popularity of UPSs among partners. When MNCs brought down prices at

par with those of indigenous players, the channel logically turned to brands,

which met all these factors. Says Anand Iyer, "Resellers now look for a

state-of-the-art product, good distribution network and sound warranty

policy."

Generally established companies have very clear warranty

policies, which favor loyalty of several channel partners. Some companies offer

warranties that include battery as well for the entire warranty period while

others exclude battery after a certain period. However, there are players with

unclear warranty policies in the market. Says Anand Ekbote, "Players who

lack business ethics would have fine prints and ambiguities in their warranty

policies."

Currently most vendors offer one to three years warranty. The

nature of warranty, like on-site, off-site and swap, varies with the product.

The presence of MNCs has alerted domestic manufacturers with

respect to warranty and service. Previously, barring a few exceptions, most

local players were lacking when it came to service. Today, to be at par with

MNCs, Indian players too are improving their service policies.

The service is provided either by vendors or by partners.

Emerson has a service center for end-users and also has business partners, who

have their own service set up. Wipro supports its customers only through

partners.

NEW PLAYERS



Recent trends in UPS business seem to favor channel partners. PC vendors

like Wipro and Vintron have become UPS manufacturers in recent times. They

bundle UPS with their PCs and sell them through channels. This has helped

partners to sell more number of PCs and give better value to their customers.

The current slowdown is expected to bring about a

metamorphosis in the UPS industry. Only big and strong players, be it domestic

or overseas, are expected to survive in this tough and competitive market.

The organized channel operation of big players is expected to

hit many weak local players, who sell directly. These players will have to

quickly move up the value chain if they want to survive.

SUNILA PAUL in Bangalore with inputs from MOHIT CHHABRA in

Delhi and GOLDIE in Mumbai