LOW-COST PC: Assemblers And Vendors Slug It Out

The share of the assembled PC is on the rise primarily because of low

pricing. This has been a thorn in the flesh for national as well as MNC vendors

who too want to play the ‘price’ card by offering their own versions of

low-cost PCs. But the latter have hardly succeeded and the assembled PC segment

is still growing.

Years of marketing accompanied with a myriad of special offers and

promotional schemes did not help branded PC manufacturers to break the

stronghold of assembled PC segment in India. However beginning this year, the

market saw activities from branded PC vendors aimed at shedding the conventional

‘pricey’ tag that was so far attached to them. There were solid attempts

from these vendors to make a dent to the marketshare enjoyed by assemblers by

offering ‘low-cost PCs’.

Some big names that came out with their versions of low-cost PCs were LG,

Samsung, eSys, HCL and recently IBM. Some even went to the extent of announcing

PCs with a price tag as low as Rs 10,000 and even Rs 5,000.

But what really needs to be looked into is the fine print that comes along

with such tempting offers.

HOW DOES IT WORK?



A closer look at the whole concept of low-cost PCs shows that none of the

vendors have actually done anything specific to redesign the PC or its

components to bring down the cost. In fact, most have chosen to use low-priced

alternatives belonging to the less popular brands.

In the Intel family, Celeron processors are a low-cost option. However, a

whole range of AMD’s Athlon and Duron processors takes the lead in building

low-cost PCs.

But, in the case of very low-cost PCs, Via’s C3 is the most preferred

processor. On the OS software front, Linux for its open-source and free-of-cost

nature is the best choice.

Here, what needs to be looked at is that, these vendors have actually saved

around 15 to 30% on the software, processor and motherboard costs by opting for

such alternatives.

The

gradual evolution and increasing awareness of low-cost PCs has ensured that the

big brands that conventionally used to go in the making of a PC no longer run

the show. For instance, Intel Pentium processors are no more the favorite of

low-cost PC manufacturers. Similarly, on the OS software front, Microsoft’s

expensive software is the last choice for a PC vendor trying to make his

low-cost version popular.

HOW COSTLY IS LOW-COST?



LG’s MyPC range of desktops uses the Linux OS instead of Windows. However, its
attempt to cut OS cost has not worked to their advantage, "At Rs 36,000,

the MyPC is still not a low-cost alternative as the company claims it to

be," exclaims one reseller.

Samsung, known mainly for its monitors, also entered the PC arena with

BuildurPC. Initially, it supplied kits to select partners countrywide and

certified PCs assembled by them under Samsung BuildurPC brand.

These partners had the option of choosing either an AMD or Intel processor.

The lowest price that these machines offered was around Rs 30,000. Not low-cost

yet!

Delhi-based distributor eSys unveiled the ePC range using Linux as its OS and

Via’s C3 processor and priced it at Rs 10,000 without the monitor, CD-ROM

drive and speakers.

Adding another Rs 5,000 for a 15" monitor, makes it a Rs 15,000 PC,

which can run the most popular applications like any other PC. Add another Rs

2,000 for a CD-ROM drive and set of speakers and a multimedia PC is ready for Rs

17,000.

This can be called a low-cost PC to a great extent. However, what can’t be

overlooked is that being the main distributor for brands like Via, Seagate and

Hynix, eSys enjoys a great price advantage for majority of the components it

uses in ePC.

But, the question is, how many users would prefer the less-known Via C3

processor to the more-popular Intel Pentium or the AMD Athlon processors? eSys

claims that users will prefer functionality, performance and price over sheer

brand image. And so, it believes that this is a good reason for ePC to gradually

become popular among the masses.

MORE PLAYERS TO PLAY THE GAME



Whatever may be the apprehensions concerning the success of low-cost PCs,

many vendors are still willing to play the game. Vendors like IBM and HCL are

increasingly becoming serious about devising new ways of penetrating the PC

market in India. And they try doing this to some extent by having their own

versions of low-cost PCs.

IBM India recently launched its ThinkCenter series of desktop PCs, which are

positioned as PCs that would reduce the total cost of ownership (TCO) and give

higher return on investment. The company launched three PCs in the series - S50,

M50 and A50p.

The series comes equipped with Intel P4 processor, 856 chipset, and a 256

kbps security chip embedded within it. The company boasts about features like

‘rapid restore’ button which helps protect data and reduce downtime by

creating a mirror image of the hard disk drive and restoring it quickly before

the software becomes corrupt.

But at Rs 40,000 the PC is very expensive for the SOHO segment that IBM is

targeting. However, with all the unique features, it justifies that the total

cost of ownership in using a ThinkCenter PC is much less.

According to Alok Ohrie, VP-PCD, IBM India, the unique value propositions

offered by the ThinkCenter PCs would enable cost reduction to the tune of

10-15%. IBM is even planning to phase out the NetVista range of PCs and replace

it with ThinkCenter.

LOW-COST AT HIGH-END



Among other recent developments on lowering the cost of PCs, is the joint

initiative by Oracle and Sun Microsystems to bring low-cost computing to

customers in India. This announcement came a month after both the companies

announced their global strategy to redefine low-cost computing for the

enterprise by offering ‘uncompromising choice, innovation and value’ to the

customer.

Bhaskar Pramanik, MD, Sun Microsystems India says, "We are all set to

define TCO as Taking Cost Out of an enterprise. For this, we will be attacking

PC costs from all angles."

There are almost two million PCs sold every year. And Bhaskar feels that with

open standard software applications there is a lot vendors can do to cut costs.

"In fact, we can cut costs in excess of 70-80% for each desktop brought

into the market," adds he. According to him, Sun would be debuting its

much-touted Madhatter project as part of its low-cost initiative for desktops in

September this year.

Meanwhile, Oracle would run on Sun’s OS including Solaris Sparc, Solaris

x86 and Linux 86 and the two companies would bring their individual products–Oracle

Collaboration Suite and Sun StarOffice software–together to make it less

costlier than the market alternatives.

But, the joint efforts are initially planned to focus on providing solutions

for the growing BFSI and telecom sectors in the country.

ASSEMBLED, AND STILL GOING CHEAPER



Despite these low-priced offering from big brands, local assemblers continue

to grow. Why? The very reason is that assembled PCs are still cheaper with

better configuration. The most important factor is customers’ preference to

have the latest models for the lowest price. Also, home customers seek

individual attention when it comes to support, which they feel the biggies are

not be able to provide.

What makes this ever-growing segment of the channels stronger in the country

is undoubtedly the price-advantage it holds.

Many assemblers manage to evade sales tax, install pirated software for free

and use cheaper alternatives for components like motherboard and gray memory

modules in order to make their sales pitch more attractive.

While doing this they not only retain about 8-10% margin but also manage to

handsomely beat the bigger brands on price-front. And with Indian customers

being extremely price-sensitive, it is not surprising to see that nearly 60% of

end-users still continue to prefer an assembled PC over a branded one.

READ THE FINE PRINT



Another reason for branded PCs not doing that well as compared to their

assembled counterparts is the hidden cost that customers have to bear when they

actually buy branded machines. Branded PC advertisements always propagate

attractive pricing.

But, there is always a fine print at the bottom of the ad that spells all the

extra cost that needs to get added. Costs like taxes, octroi, levies and

installation charges are never displayed prominently in such advertisements. Add

up all these and one ends up with quite an ‘expensive’ PC.

Many a time, vendors even advertise attractive price of PCs but without

including the cost of monitor. What is the whole idea of not including the cost

of a monitor? Customers often drop the idea of buying a branded PC when they get

to see this. They tend to doubt the sincerity of their claims, no matter how big

and famous the vendor is.

A PC FOR RS 5,000!



There are vendors who even talk about Rs 5,000 PC (sans the monitor). This

is another way of enticing customers on the price point. But this time the

target audience is not the individual desktop customers, because these PCs do

not work as individual desktops.

These are essentially thin clients which work on a networked environment.

Thin clients (also called nodes on a LAN) usually comprise of monitor and a base

unit, which connects to the server through a network for it to work.

Some basic components like hard disk dives, CD-ROM drive, floppy disk drive,

and the operating system are usually not required and are omitted from the

nodes. The nodes utilize all the processing and storage facility available with

the server.

Netcore Solutions, a Mumbai-based company, has pioneered the art of providing

low-cost solutions through the thin client route. According to Prakash Advani,

VP, Netcore Solutions, there is a general perception among users that thin

client are not suitable for home users. "But, we have solutions that can be

brought to the homes as well," he says. According to him, thin clients need

not be limited to a networked office and it can also reach the home through ISPs

or some LAN within a building or a residential complex.

Netcore calls its solution Emergic Freedom. According to Prakash, Internet

access providers and cable operators can provide an Emergic Freedom-enabled

solution, which includes the computer and connectivity for as low as Rs 1,000

per month to home users. The same can be done in schools, colleges, villages,

hotels, call centers and hospitals.

SIGNS OF INCREASING EFFORTS



Currently, Via’s C3 operating at 800 MHz is one of lowest-priced

processors that is available in the market. According to Via, its C3 processors

have sold well in developing markets such as India, China and Russia. The C3 is

not as powerful as processors from bigger rivals Intel and AMD, but is cheaper,

consumes less power and doesn’t require an elaborate cooling system.

Via recently partnered with Indian Institute of Technology in Mumbai to

develop low-cost computers. The Affordable Computing Lab at the Kanwal Rekhi

School of Information Technology (KReSIT) at IIT Mumbai is the first such

facility that Via is involved in.

According to Via officials, very few people in India need PCs with high

configuration. All users need is a computer that can e-mail and browse the web

at an affordable price. The new lab houses around 60 computers and various

equipments from Via that are being used to develop new hardware and software

suitable for the rural India.

IMPORT ALTERNATIVES



While vendors have been advocating the low-cost PC model, partners should

also look at the option of importing second-hand PCs from developed countries.

The US, for instance, replaces millions of PCs every year. A year-old PC is

available in the US for close to $100 (Rs 4,800). "If the Indian government

is serious about PC penetration in the country, they should look at this avenue

as well," opines a systems integrator.

Currently, there are some partners in the country who import such PCs and

sell them at rock-bottom prices. But this still remains a very niche and

unexplored business opportunity.

DECIDING THE WINNER



For long vendors have been advocating the low-cost PC model and a slew of

solutions have been tried to make this dream successful. But, it is only

recently that vendors have become serious about penetrating the PC market in

India, while playing on price-points. While one certainly admires the efforts

put in by these companies to bring out a low-cost PC, assemblers continue to

enjoy their edge.

The day may not be far when more and more branded PC vendors will try and

match the assemblers’ price, cutting down on overheads or using low-priced

components and operating systems.

But before that what they would really need to do is to create a strong

value-proposition for the customer segment that they wish to address. Indian

customers need solutions that address their requirements at the most competitive

of price. And the vendor or assembler, who can offer that solution is ultimately

going to win in the PC game.

NELSON JOHNY in Mumbai