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Challenging times

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DQW Bureau
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The bad news has now been confirmed. The domestic PC market which grew at a frenetic pace in the last two years has started to slow down. According to the latest report of market researcher, IDC (India), PC sales in the AMJ quarter was a mere 11 percent over the same period. Based on this bad beginning to the new financial year, IDC has revised its annual forecast of PC sales drastically. The report expects the domestic PC market to grow by just 16 percent against the whopping 56 percent sales growth in the previous year.

What is disheartening to the industry is one of the key reasons for the downward slide.

Compared to the first three months of Calendar 2001, the PC buying by the home segment increased by only 16 percent in AMJ'01. The corresponding growth rate last year was 35 percent. In fact, it would not be an exaggeration to say that it was the home PC segment which has helped the industry to notch up brisk PC sales. The buyer interest from this segment, partly spurred by the Internet boom and the opportunities opened up by the education market, had kept the sales growing while the mainstay corporate segment cut back IT investments slightly. Now even the home buyers, probably worried by the slow growth of the national economy, have started to wait and watch. Consumer spending was thought to be recession-proof because of the vast, pent up demand for PCs in middle class and upper middle class homes across the country. But the negative economic sentiments have played the spoilsport, as far as the IT hardware industry is concerned.

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Of course, there is a silver lining in the report. IDC expects the IT investments by the government, finance and education segments to continue unaffected by the slow down. So there is a message for the resellers. They should target these segments to push up PC sale. It will not, however, be an easy task. The government has started to look seriously at the computer hardware segment. The good news is that Finance Minister Yashwant Sinha has promised to set up a mechanism to monitor government spendings on IT. Government departments and agencies have been, for long, asked to invest three percent of their budgets for beefing up IT infrastructure. The actual spending is just a third of the budget allocation. The Finance Minister has promised to ensure that the spending takes place.

The demand stimulation in the education sector too largely depends on government efforts. As the major financier of the educational sector, a government resolve to make available the latest educational tools, will go a long way in spurring IT investments in this sector.

But should every one wait only for the government to act? What should be the industry's role to stimulate demand for PC and other IT products? The industry has to evangelize the importance of IT and the key role played by PC in taking the benefits of this modern technology to the potential buyers. This is the time for the industry to go out and market its products. There will be a shakeout among players. So be it. It is part of a normal business cycle. But the better ones have the chance to diversify their product range, offer at competitive prices, enhance the service offerings and lock on to the customers with their differentiated offerings. The industry should see this as the opportunity to consolidate and use every available opportunity to market IT products. This would involve a change in mindset as well as require creativity. In meeting this challenge lies the bright future of the industry.

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