The recently conducted MAIT-IMRB study on the Indian IT
industry’s performance points out that the UPS sales in the FY 2001-02
declined by six percent. In contrast to 3,98,195 units sold in FY 2000-01, last
fiscal saw 3,75,460 UPSs getting sold. While there is solace in the fact that
UPS sales were not as hard hit as PC sales (which declined by 11 percent),
vendors and channels equally admit that revenue-wise it was a tough year.
THE YEAR THAT WAS
Last year, which was heavily accentuated by economic gloom, worked both for
and against the UPS industry in general. The recession saw many fly-by-night UPS
manufacturers disappearing from the business scene.
Says Vinyak Joshi, Western Regional Manager-Marketing, DB
Power Electronics Ltd, "Last year many small-time manufacturers had to
close operations because they had insufficient capital and infrastructural
support to sustain themselves in difficult times. This year will see more of
such players making an exit." DB Power hopes that in the near future there
would be no two-way pressure and the competition would be far healthier.
“The reach and understanding of the local market make local players an ideal choice for delivering service to buyers” |
Anand Ekbote, MD, Emerson Network Power India Ltd |
On the one hand, lack of standards and adverse duty structure
kept manufacturers unhappy; on the other, partners were hit by shrinking
margins.
Says Yogesh Shah of Mahavir Enterprises, a Mumbai-based APC
dealer, "Though we clocked Rs 2.5 crore in 2001-02 as against Rs 1 crore in
the fiscal before, our profits were much lower." Yogesh is doubtful of any
growth in margins this year and expects to make no more than Rs 3 crore.
A similar sentiment is expressed by Vijay Punjabi of Smile
Infotech who says, "Only the high-end UPSs brought in decent margins of
three to four percent."
While vendors were not exactly able to address the problem of
shrinking margins, they did make some strategic changes in their business
models.
CHANGING STRATEGIES
Last year saw some of the vendors making strategic changes in the way they
have been doing business. After being renamed as Emerson Network Power India
Ltd, Tata Liebert underwent a complete restructuring of its business divisions.
With the new structure in place, all divisions were consolidated into one and
were categorized on the basis of industry verticals.
Offering reason behind such a move, Anand Ekbote, MD, Emerson
India says, "It made more sense for us to reach a particular user segment
with a consolidated basket of product offering instead of different divisions
making separate visits to them."
UPS MARKETSHARE
Market sources indicate that Emerson Network retains its numero uno position
in the overall UPS market with an estimated marketshare hovering between 15 and
16 percent. However, Emerson is facing a tough competition from APC, which in
the last two years have caught up amazingly well in this closely-fought com-petitve
arena leaving Numeric behind. APC can well attribute this growth to its policy
of widening its channel base.
“Through our reliability provider program, we expect to cover 500 cities in the next two years” |
Anand Iyer, Country Manager, APC |
Talking about the launch of APC’s reliability provider
program, Anand Iyer, Country Manager, APC says, "This program is aimed at
increasing our reach in the country and and we have targeted to cover 500 cities
in a two-year time frame." Anand informs that as a part of this program,
authorized dealers would benefit in terms of advertising and marketing support,
product knowledge and training.
Unfortunately, all this has not excited all the partners.
Many of them feel that having lost on exclusivity, margins have become as bad as
in any other box-pushing product. Says Yogesh of Mahavir Enterprises,
"Earlier, if we were selling 300 units a month, now we manage just about
80. And this is bound to happen as there are many more dealers now who can offer
the same product at lower margins than ours." Yogesh feels that APC has not
honored his organization’s loyalty in the true sense.
As a result, he has now shifted his focus mainly on
servicing. He claims to be making better money in servicing APC UPSs than in
selling them.
ALL
SET FOR SERVICES
Service apparently is fast turning out to be an attractive proposition for
partners to strengthen their bottomlines. This is complemented by the fact that
services play a very critical role while selling mid-size and high-end UPSs.
Emerson emphasizes more on service support than the actual
sales while DB Power claims to be servicing even those UPSs which it had
installed nearly twenty years ago. Companies like APC, Powerware, Numeric, TVSE,
Microtek and Wipro ePeripherals too boast of a well-established service network.
"To us after-sales service and support is of prime
importance because we realize that selling boxes alone cannot generate enough
profits for partners," says Ranjit Mohite, Jt MD, Aar-em Electronics, the
manufacturer of Champion brand of UPS.
However, Emerson´s Anand has a different vision in this
regard. He feels that the smaller players could perphaps serve as the service
arm to the larger and established players. "The reach and understanding of
the local market make these local players an ideal choice for delivering service
to the end-users," believes he.
MISERIES CONTINUE
The UPS business is still craving for the kind of attention that is bestowed
on any other IT product segment. While only recently the Supreme Court
instructed to consider UPS as an IT product and no more as an electrical
product, many other problems still remain unaddressed. Topping the list is the
lack of standardization.
Says Deepak Sharma, MD, Powerware, "While worldwide UPSs
are certified rigorously, in India we still don´t have any standards. As a
result consumers end up buying low-quality products on the sole basis of
costs." There is an unquestionable need for an independent body which can
set up industry-wide standards for UPS and certify them accordingly.
Another major issue haunting this business is the absurd tax
structure levied on it. Manufacturers feel that it’s high time the Government
did away with disparaties in taxes imposed on UPS business. Vendors demand that
UPS should be treated at par with any other IT product. Only then they think
would this segment become more organized and players more serious.
This would also be encouraging for few new but genuine
players who have entered the market recently.
WHEN THE GOING GETS TOUGH
Last year saw the entry of some new players. Su-kam and Ingram Micro were
two of them. While Su-kam introduced a completely new range of UPS, Ingram added
the UPS to its already existing Vesta range of products. With onlly three months
since its launch, Ingram hopes to sell 12,000-15,000 units in the JAS quarter.
"We have got a very positive response from the channel as well as end-users
and we are confident of clocking 1,00,000 units annually," says NY Prasad,
CEO, Ingram Micro. Here again, according to Prasad, standardization of design
posed as the major challenge while manufacturing Vesta UPS.
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Wipro ePeripherals, which launched its UPS in December 2000,
recorded a turnover of Rs 10.5 crore for FY 2001-02. The company also intends to
expand its range up to 5 kVA from a present 500 and 600 VA models.
Aarem maintained its focus on B and C-class cities, it also
succeeded in selling its product to the African markets. According to Ranjit,
there is a great demand for Champion UPS in Africa.
Aplab continued its dominance in specialized segments like
defense. Says Parag Rele, MD and CEO, Aplab Ltd, "Though it was recession
for others, we continued to experience a consistent growth of about 15 percent
and we hope to have at least that much growth this year too."
Several UPS players continued to play a dominant role in
eastern India. Manufacturers including Leonics, AVO, Voltas, HiTA, Frontech and
Digital Data Systems have already created a good brandshare for their products.
These players are all now want to make a national presence with
economically-priced product offerings.
HOME AND SME SEGMENTS SURGE
While last year corporate buying nearly came to a standstill, demand from
home segment continued to grow. Now SME segment is where the players are betting
their money on. Also banking/finance and other mission-critical business
segments are expected to give a thrust to the UPS business.
Anand of Emerson believes that, it is the networking of
Indian economy, which will bring in good results for this industry. "As
more and more components of economy get inter-connected, criticality of network
uptime increases," says Anand.
He is confident that the demand for UPS is bound to increase
in days to come. Even other players are positive that with IT- enabled services
taking off in a big way and more and more Internet data centers being set up in
the country, UPS would play a very important role in the overall IT
infrastructure.
HOWEVER...
Though from a distance, the UPS business seems to be flourishing with an
estimated market-size of about Rs 1,050 crore, a closer look and the picture is
far from rosy. True to its nature, this segment has a large number of spikes and
surges as of now.
What is needed is filtration of non-serious players, better
previleges from government, setting up of standards and a constant emphasis on
services as an attractive revenue stream. If all this comes in to effect, UPS
industry in the country should be able to command the respect that any other
product segment does, which would consequently bring smiles on the faces of
partners as well as vendors alike.
GOLDIE in Mumbai with inputs from MOHIT CHHABRA in Delhi and
SUNILA PAUL in Bangalore