Home is the battleground--this time for PCs

According to IDC India forecasts, the home PC and the SOHO segment are two promising target markets likely to register impressive growth rates over the next five years. The consumer desktops or home PCs are expected to record the strongest compounded annual growth rate of 56.9 percent between 1999-00 and 2003-04 vis-a-vis 40.7 percent for commercial desktops and 26.8 per cent for portables.

They are also thus expected to be the next battleground for the price war among MNCs, such as Compaq, HP and Dell, and domestic manufacturers such as HCL Infosystems, Wipro Infotech, Vintron Informatics and all our GIDs and local assemblers.

The forecast seems to have set the trend in the market now. There is a virtual price war between MNC brands, Indian brands and local assemblers. To save the best, there is a trend now--which was actually started by Compaq India--to allow the contract manufacturing or appointing sub-contractors for assembling the complete PCs and then they are branded by the principal. The trend came into prevalence with the idea to reduce the manufacturing cost and get maximum margins possible.

Starting the fashion in the country, only about couple of months back did Wipro Infotech employed Computer Vision in the capital as its Local Independent Manufacturer to assemble its Voyager range of PCs.

If one looks at the comparative pricing, then there is no major price difference between those offered by MNCs and Indian brands. Take a look at the price offered by six main vendors--MNCs like Compaq, HP, and IBM and Indian brands like HCL, Wipro and Vintron--for a common configuration.

A Compaq P4 1.5 GHz, with 128 MB RAM, 20 GB hard disk, 15 inch color monitor, Windows keyboard, scroll mouse, 1.44 floppy disk drive, 56.6 KBPS internal modem, LAN card, whole of multimedia kit i.e. 52x CD ROM, JBL speakers, built in microphone and Compaq IJ650 color printer is priced at Rs 55,000.

The HP VC 420 P4 1.5 GHz, with 128 MB RAM, 20 GB hard disk, 15 inch color monitor, Internet-ready keyboard, scroll mouse, 56.6 KBPS internal modem, sound card, whole of multimedia kit i.e. 52x CD ROM, Philips speakers is available for Rs 50,500. A Webcam is free along with the offering.

IBM NetVista A22P P4 1.5 GHz, with 128 MB RAM, 20 GB hard disk, 15 inch color monitor, keyboard, mouse, LAN model Internet card (can be replaced with internal modem), integrated audio is priced at Rs 46,900 plus taxes.

On the contrary, the Indian brands have more of the Celeron range that counts their cheapest category.

The HCL Busybee based on Celeron 850 MHz with 64 MB RAM, 20 GB hard disk, floppy disk drive, 14 inch color monitor, Internet keyboard, mouse comes at Rs 29,900. An additional Rs 2,000 can fetch a multimedia kit.

Wipro Voyager Home based on Celeron 850 MHz with 64 MB RAM, 20 GB hard disk, 1.44 MB floppy disk drive, 52x CD ROM, Altech Lancing speakers, 56.6 KBPS internal modem, 100 hours Internet connection valid for three months, Britannica Encyclopedia CD, Internet keyboard, scroll mouse, Windows ME, McAfee antivirus and a five CD pack is priced at Rs 27,000.

Vintron's machine also based on Celeron 850 MHz with 64 MB RAM, 20 GB hard disk, 1.44 MB floppy disk drive, 56 KBPS internal modem, 14 inch SVGA color monitor, keyboard, mouse can be bought for just Rs 23,500. The similar configuration but based on AMD Duron processor is also available at the same price. With multimedia kit and 100 hours Internet connection, the price goes up to Rs 25,000.

Though the market for home PCs evolved only in the last three years as before that--in late 1995-96 and early 1996-97--most MNCs such as IBM with its Aptiva range, HP and Compaq targeted the 'price high-skim-the-cream' households to build home PC volumes. But two major developments caught them by surprise.

One, the realization that the business-centric model was fraught with risks during an industrial slowdown. Considering that both the domestic manufacturers and the MNCs had to create a new market, and one with depth, to survive. That is when it stumbled upon the family-buyer-driven model and decided to shift to this approach.

But then if all these people can--by the affect of time--outsource dealers to assemble for them, what is the reason that these dealers can't assemble it on their own. They can get the material much cheaper and at do it at much lesser cost.

Explained Saket Kapoor, Director, Computer Vision, "This is actually a concept borrowed from West. But yes, surely the costing improves. It is plainly because an established company can afford to spend on promoting the brand, and the company.

But a small dealer cannot. Even if he manufactures it on his own, he has to make sure there is an added name to it. So it makes sense to tie up and work towards something that is beneficial for both. Also home PCs cost the cheapest and they are picked up fastest."

But on the other side, Modi Peripherals is actually planning to launch its brand of assembled PCs. Opined Shyam Modi, Director, Modi Peripherals, on this, "May be people who are new need to buy the name or recognition for launching the assembly line. But if the customer trusts you, has been witnessing you for number of years and relies on you for anything that he buys, then there is no reason for which he would not buy the PC branded by a dealer and go for a renowned name. We are in the process of launching our brand very soon and understand the scenario well."

The PCs are also available between the dirt-cheap price range of Rs 16,000 to Rs 22,500. The chip base is that by VIA Technologies, which was recently available for sale in a Kolkata exhibition. The configuration was attractive enough for the consumer who is looking for a value PC--VIA C3 550 MHz, VIA PLE 133 FSB motherboard, 64 MB Ram, 20 GB hard disk, 14 inch SVGA color monitor, 56.6 KBPS internal modem, CD ROM drive with keyboard, speakers, cabinet and scroll mouse--all for a cool Rs 16,000.

But looking at the other side of it, IDC expects the home segment to grow to 43 percent of India's total installed PCs by 2003. So, does it indicate that we are soon to hit at a price point which would soon make the PCs available at the price of a television. Is it actually a trigger towards the betterment of the downsizing market of local assemblers due to brands dominating them? What comes out of this is only for time to tell, and for all of us to see.