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Follow UsIDC India estimates that the size of the service industry is as big as Rs 4,013 crores, of which hardware and software maintenance takes almost 40 percent share. But with the improvement in technology, the failure rate of hardware has declined considerably. Vendors have begun to increase the warranty period of their products. If these developments foretell near perfect products in the future, the question is: What will happen to the service sector?
Nothing much because the volume of products sold is on the rapid rise. Says Anand C Mehta, Marketing Manager, D-Link (a vendor with collection centers at 50 locations and a service setup in Goa), "In the near future, the role of the service industry will not shrink. However, lower defect rates and specialized skills and equipment required for servicing, coupled with an emerging culture of use-and-dispose-when-faulty, may signal a crunch in this industry after 2005."
Umang Mehta, Director of Roop Technologies, Authorized Service Center (ASC) for ViewSonic in Mumbai, has similar view. "As technology improves, the returns will come down. But this will not push service centers out of business, as volumes of IT products will go up. As sales start doubling, service centers too will keep getting business."
And he is not the only one who feels optimistic about this trend. Jayesh Master of Mumbai-based Ruchi Infotech, who is into servicing IT products for the last seven years in Mumbai, is positive about the future too. "The market is very big. It is like an ocean," says he, "It depends on how much water you can remove from it. Of course, profit margins will reduce and only the best will survive."
Sanjay Asrani of Prism Technology, Mumbai, quips, "A boom time is going on in the IT industry (with a sale of two million PCs expected in the current year). Service being a important part of the industry, a tremendous growth can be anticipated."
Anil Kumar Singh, Marketing and Customer Support Manager, Lampo Computers Pvt Ltd, Bangalore, an Authorized Intel's Premium Solutions Providers has similar views. He says, "There is a lot in store for service industries. The growth of service industry directly depends on the growth of the IT market. Also, the success of a service industry depends upon the customer satisfaction. It’s a tough game but if played well, anyone can succeed."
Service scope
While major vendors are busy setting up ASCs, the unauthorized segment does not seems to be worried about their future business. Sanjay Asrani of Prism Technologies raises an interesting point about imported products. "The computer along with its peripherals consists of a number of components. The ASCs cater to only a few of these," he says. "MNCs like HP, Epson, Samsung, LG, Compaq and others cater to products like monitors, printers, hard disk, etc. But what about products like motherboards, floppy drives, power supplies, keyboards, CD drives, of other brands which are brought in by importers?"
Aditya Khemka, CEO and Director, Aditya Group, New Delhi, says, "The failure rate in hardware has come down a lot. Earlier one used to see everyone repairing monitors all over Nehru Place. Today one does not see that. Users today mostly go to authorized repairers only."
Every hardware is bound to fail some time or the other. Though nobody knows when. The general tendency amongst users when a product fails is to go to an ASC until it is under the warranty period. When the warranty period is over, the user prefers to go to any reliable service centers, irrespective whether they are authorized or not. "If customers are coming to us, it is only because they have faith in us," says Jayesh. "We do repairs even at component level and our service cost is less."
True, the service cost of a non-ASC compared with an ASC is comparably low. But at the same time, what really matters is the quality of service offered. Kishore Karkare, Technical Incharge, La Plume, (an ASC for HP) says, "Customers can be sure of good quality service when they come to an ASC. Of course, there is a cost factor involved in providing good quality service."
GJ Kulkarni, Director, Samtech Infonet, New Delhi, says, "Not so long ago, the hardware failure rate was very high. As a result, annual maintenance contracts (AMC) thrived. But today, the scene is different. With the arrivals of MNCs, the hardware failure rate has come down drastically. So users opt for on-call charges instead of AMC." On the other hand, calls for service in the software segment have increased to a large extent. To cater to this need, various facilities management services have also cropped up.
Nirmal Dey, VP - Customer Support, Microcity India Ltd, Mumbai says, "Service industry is going to flourish. There has always been a need for outsourcing such service by the corporate and small and medium segment enterprises." Microcity offers service for any laptops, desktops, servers, and printers, which normally do not carry chip level repairs. "The repair work is purely on card level at this point of time. Chip level repairs are given to the principal companies," says
Nirmal.
Passing the work
Ironically, for some unauthorized service centers, the existence of ASC is a boon. Very often, ASCs outsource their work to local unauthorized service centers whenever there is excess of work. John S Pinto, Gordon Computer Service Station, Bangalore says "I think it would be time consuming if all the complaints are attended in-house at authorized service centers. So the authorized service centers outsource work." Although some ASC have denied this, the fact remains that some local service centers have to solely depend on outsourced work.
Amit Rawat of Computer Workshop, Bangalore says "Outsourcing helps ASCs to clear backlogs as well as deliver repaired products on time. I think this is one of the main reasons why unauthorized service centers continue to exist and thrive."
However, there are some ASCs who deny using this practice. Kishore Karkare of La Plume says, "We got our HP ASC status about a year and half ago. But we have never given our excess work outside. No matter how hard it is, we do it ourselves." Even Nirmal Dey of Microcity, Mumbai agrees, "We never outsource our work. Besides, we not faced huge back-logs till date."
And in some cases, vendors themselves put a clause in the contract that prohibits ASCs outsourcing their work. Anil Kumar Singh, Manager — Marketing and Customer Support, Lampo Computers Pvt Ltd, which is also an Authorized Intel Solutions Providers — Premium, says "It’s against the Intel Policy to sub-contract work to other service centers."
Customer trends
A look at the user-end gives a different picture. Whether this is an encouraging or a dangerous trend depends on the perspective of the observer. As Anand Mehta mentioned customers are moving towards newer technology and are not interested in repairing their old products. The use-and-throw culture is beginning to make inroads amongst customer’s psyche.
"When a printer fails and the expenses to repair it comes to, say Rs 10,000, the customers prefers to buy a new printer paying Rs 20,000 with the latest technology," informs Kishore of La Plume. Beside, the cost of repairs at authorized service centers are much higher then the non-authorized ones. Besides, the general feeling among users is that ‘if quality after repair, especially after the warranty period, is not assuring enough, why not go for a new product?’
Admitting this, Yashpal Bindra, Director - Sales, Summit Infotech Ltd, New Delhi, says "Post-warranty, repair charges are high. When it comes to low-end products, customers usually prefer to go for brand new products rather than pay high prices for spare parts."
Edge of non-ASCs
There is a general assumption that unauthorized units have an edge over the ASC when it comes to labor cost. ASCs trumpet about their quality aspect to offset this claim. Says Aditya Khemka, "I don't see any competition between authorized service providers and non-authorized service providers. The users today are intelligent and they go mostly to authorized service providers."
Even R Venkatesh of Epson India, does not consider unauthorized service centers as serious competition. While conceding that the price difference does sometimes work to the benefit of the unauthorized centers, in the end quality and value-added services make the difference.
Surprisingly, Umang of Roop Technologies feels that what also matters is the multiple-brand servicing that is provided. "It is very difficult to survive in this business with just one authorization. Your business can be profitable only if you work as a multiple service company," he says. Umang says that the unauthorized segment survives because they run their business from small setups with hardly any overheads.
Anand of D-Link says, "Unauthorized service centers are not really a threat, except when the product goes out of warranty. If these centers are not able to repair a product and if it is sent to us for repairs, it would be at a cost as the seal would be broken and we would have no way to know weather the defect is due to a D-Link problem or user mishandling."
To counter this problem, many vendors have already begun to increase the warranty period for their products. This in itself could become a problem for the survival of many non-authorized setups in the country. But unauthorized centers are unfazed. "If vendors have raised their warranty on products from one year to two years, I am sure, those products will not go wrong in those years. The chance of hardware going wrong comes only in the third or fourth year," says Jayesh or Ruchi
Infotech.
Accreditation please
It is a known fact, that despite doing good business in the non-authorized service sector, there is always a desire in members of this tribe to become an ASC for at least one major vendor. HP and Epson with a major network of service centers have been a boon for most of them. These service centers thrive on products like printers, monitors and CD-ROMs, which fail often.
Besides, there are many non-authorized service centers, which specialize in component-level repairs. Many of them have qualified and efficient engineers too. Despite having all these, there is a feeling that these fail to get accreditation as ASCs.
GJ Kulkarni, Director, Samtech Infonet says "I do not agree to the statement that vendors do not easily part with authorization for those who want to provide service on their behalf. Resellers should realize that quality standards have gone up. My feeling is that resellers are not scaling up to meet these quality standards." This is an obvious fact because when vendors give authorization for service, their name and credibility is at stake. So they would like to select their partners very carefully.
Anil Kumar Singh of Lampo Computers says, "Intel’s policy clearly defines the criteria for receiving an authorization. Apart from basic infrastructure, skilled manpower plays an important role."
Instances of small units not sizing up and shortage of trained staff as per vendor requirements, have become the main reasons for not getting accreditation. The location and the business possibilities also play an important factor.
John S Pinto of Gordon Computer Service Station could not get accreditation because of shortage of trained and qualified staff. Amit Rawat, Computer Workshop, Bangalore, failed to get ASC status because of the location. Jayesh Master of Ruchi Infotech could not manage to get ASC status because his unit was on the third floor.
Anil Kumar Singh says, "Intel’s policy clearly defines the different stages where they can be approached for support. We generally contact the technical centers at Manila through their toll free numbers. Every authorized service center has a unique code, which is given to the technical person for identification to get online help. And if we are not able to solve it online, we are asked to contact the local service centers. The support is good though the process is long."
Manpower retention
There is no dearth of efficient personnel in the service industry. But to make them stay is the most difficult part. Says John, "Training my staff and holding them back is a big problem. After training, they switch jobs to better places. This puts me in trouble, as I have to start from scratch."
R Venkatesh of Epson India says, "Manpower plays a very important role. It sometimes effects the smooth operations because of switch over." This problem is more in the case of non-ASCs than ASCs. Umang Mehta of Roop Technologies states that they never had a problem of brain drain.
However, Umang faces a different problem and that is sourcing of parts. "I get my parts through DHL and getting it cleared from customs is very difficult. I have to order various parts for over 15 models."
"We usually take three to eight days to service one client. If we exceed this period, we provide stand-by units," he adds. Sanjay of Prism Technologies also agrees that sourcing spare parts is indeed a problem, "We have to serve all types of customers like importers, dealers, distributors, SI and end-users. And to get spares for custom built products is a real problem."
For some centers in the outskirts of Mumbai, octroi has become a genuine problem. To overcome this, some companies have set up new units within and outside octroi limits to overcome the problem of cumbersome octroi formalities.
Moving with the technology With the kind of growth the IT industry is witnessing, the requirements are bound to increase. And if the right infrastructure is not in place, doing business in the service industry would be tough. Says Anil Kumar Singh of Lampo Computers, "The present infrastructure is not enough. We find technology and concepts changing rapidly. We lack updation, which is not moving in the same pace as that of technology." R Venkatesh of Epson India agrees: "The present infrastructure is insufficient to meet the growing customer base and the nature of technology growth. Also, the fact that computers are becoming popular in small towns is affecting our reach and the quality of our infrastructure at these spots." Companies like D-Link believe in servicing their customers with their own setup. It is not interested in giving ASC status to just about anyone. Anand of D-Link says "If a low technology product is dead-on-arrival, a replacement would be provided by the dealer or distributor itself. The industry in which we operate is a high technology area. Major products like NICs, hubs, switches, routers, modems, etc, are manufactured on expensive SMT machinery. The defect rate being as low as 0.01 percent, we do the return material analysis only at one place." Getting the right people Without trained personnel no service center, whether authorized or non-authorized, can survive. When a service unit approaches a vendor for ASC status, the first thing the vendor looks for is whether the personnel are efficient enough to handle the job or not. For that matter, the applicants are also required to give exams before getting the ASC status. According to Umang of Roop Technologies, the only kind of free support, which an ASC gets, is training. "And for rest of the things, we have to pay." Training requirement arises not just for the hardware segment. Training in software also plays an important role in the smooth functioning of a service center. Yashpal Bindra, of Summit Infotech, says, "We have a flexible model with regard to service. Either we provide service on our own or we provide it through our authorized service partners. We have a very liberal authorization scheme. We provide training on a regular basis to those who want to become our authorized service providers. We have a technical tie-up for Adobe products." Trained staff is equally important for non-authorized units as well. But, in this case, the role of qualification is not very significant. As Amit Rawat, Computer Workshop, Bangalore, puts "it is trained manpower rather than a qualified one, which plays an important role" Nirmal of Microcity agrees, "Training is the prime requirement. There is no alternative to qualified and trained manpower." Kishore of La plume says, "A good location and the right engineers are very important in getting accreditation. As we are ASC for HP, they provide us with the required training." Aditya Khemka of Aditya Group states, "The quality of manpower is very important in the service industry." Thus, be it ASCs or non-ASCs, success depends on the investments made on trained and qualified manpower to run a successful service center. This also can bring in the much sought after accreditation to non-ASCs from vendors. The other investments required are towards the real estate. The cost of setting up a small unit can vary from Rs 50,000 to Rs 2,00,000 depending on the location. Once, a place has been decided, then what counts is good reporting systems. The ideal setup should have the day-to-day operations being reported online. Though this may result in a lot of costs, the positive result would be that the users would find themselves a satisfied lot. Nelson Johny
With inputs from Bangalore and Delhi