Revisiting the low-cost PC market

A computer at nearly one-third of current prices is a dream for most Indians. And yet, buyers are not holding their breath for these devices. For experience has proved that expectations are seldom met. However, this time around, those propagating low-cost computing solutions have taken a different route. Chris Ann Fichardo elaborates on the difference

If the price point of a PC comes down between Rs 5,000 to 10,000 per user, India has the ability to absorb 10-20 million PCs a year for the next several years, says rajesh jain

The buzz is in the air again. PC manufacturers are excited. Users are expectant. Even institutions like the IITs are enthusiastic. The reason: India’s dream of an affordable PC (priced below Rs 10,000) is ready to hit the market. For nearly a decade this dream has struggled to become a reality. India Inc. has made many noteworthy attempts in the past to introduce low-cost computing solutions, but in vain. Be it Wipro’s Janata PC, iNabling Technologies’ e-mail device, iStation, or the much-talked about handheld device, the Simputer—all brilliant concepts that have not quite made it commercially yet.

So why is the market still bullish about a low-cost computing solution? The answer is simple—because the customer still needs an affordable computer. None of the earlier products have been successful in filling the void.

Rajesh Jain, whose company Netcore is doing groundbreaking work to make possible the Rs 5,000 PC (5KPC), says that if the price point of a PC comes down between Rs 5,000 to 10,000 per user, India has the ability to absorb 10-20 million PCs a year for the next several years. This potential gains further significance when one realises that the present market size is just two million PCs a year! In the last 20 years the installed base has barely crossed six million PCs in India.

It’s difficult to ignore a goldmine like this, especially when the overall market conditions are depressed. Numerous vendors have set their sights to tap into the potential. VIA has tied up with its partners Priya and eSys, to introduce PCs starting at Rs 9,990. HCL too is eyeing this segment with the launch of the Ezeebee brand of low-priced PCs. Not to be outdone, IBM too has announced that it will soon introduce a low-cost version of its desktop PC, at a very competitive price.

Richard Brown, director for International Marketing at VIA attributes this sudden interest by vendors to the "real growth potential" of the low-cost PC market. "I remember five to seven years ago when the first $1,000 PC appeared (introduced by Compaq), people wondered if the price point was for real. And since then there has been a continuous push down in the price points for PCs, which is a sign of commoditisation of the industry. For a long time the industry has resisted moving to lower price points, and now they are actually seeing that there is demand in that space and they are buying into it," he says.

The legitimate advantage

Being a price-conscious market, the Indian PC market is dominated by assemblers. At present, assemblers account for over 60 percent of the PC market. One main advantage of these white box manufacturers is the zero cost incurred on software, as they install pirated software. Though branded PC manufacturers get the discounted OEM rate on software loaded on their machines, they find it difficult to compete with this zero-cost advantage.

To overcome this problem, proponents of low-cost PCs have taken the Linux route. As the Linux code is open source, manufacturers are free to install Linux on the machines. Thus, effectively nullifying the assembler’s advantage. In this way the user is also at ease as he/she is using a legitimate copy of the software, and the PC manufacturer is happy, as he does not have to incur any software-related expense. Another option to lower the software cost is the thin-client route. This route is currently being explored by IIT Bombay at its newly launched Affordable Solutions PC Lab. The lab, which was set up in technical collaboration with VIA, is equipped with about 60 computers of various capacities and is well equipped to test software functionalities and hardware requirements. Prof Deepak B Pathak, head of the Kanwal Rekhi School of Information Technology (KReSIT) at IITBombay, says, "India’s PC penetration level is low. And players are looking for validation that the sub-Rs 10,000 PC market exists; we aim to provide that validity. We believe that decreasing costs to this level might not increase penetration overnight but will at least get people interested to buy."

The lab at Powai will be vendor- and technology-neutral and will have a dedicated team to test technology and products that have the potential to become mass computing devices. Pathak stresses that while IIT will not be proactively involved in marketing any of products emerging from the lab, vendors can leverage the IIT endorsement in marketing campaigns. "Our endeavour is to try and dig out solutions that are affordable," Pathak emphasises.

Jain also strongly advocates the thin-client-thick-server option. According to him, his 5KPC is actually a PC terminal, connecting to a server via a network. All the processing and storage is done on the server, with the 5KPC essentially being a display and user interface machine. "I want to target the non-customers or the next 90 percent of the market, those who cannot even afford to think about a PC today. Educational institutions, homes, TeleInfoCentres (rural areas), bank branches, SMEs and the government are my target segments," says Jain.

From non-buyer to buyer

The irony is that while the PC market in India struggles for growth, only 10 percent of the population currently has access to a PC. The current price points have limited PC buying. VIA’s Brown says that while India adds two million PC units a year, China adds 10 million units. The reason for this disparity in the figures can be explained better when one realises that in India a PC costs approximately 24 months of per capita income, in China it’s 4 months and in the US it’s 12 days (Source: Nasscom). India’s need for a low-cost computing system is further stressed in Nasscom Strategic Review 2003, which says that every 50 percent reduction in price can lead to a three-fold increase in demand.

In its new avatar, the low-cost PC seems to have ironed out the technical snags faced by its predecessors. This time round there is a robust, technically-savvy, smart looking product that has hit the stores. Realising that consumers are discerning enough not to interpret "low-cost as cheap PCs," vendors are striving to give the best for the least price. But will their best be good enough to restore the confidence of a market that has seen one two many failures in the past?

Market analysts like Sameer Kochhar, managing director of the market research firm Skoch Consultancy are not so sure. "There have been several initiatives in this regard from as early as 1992, companies that have talked of a sub-10K PC. Most such efforts failed due to poor go-to-market strategies as well as lack of relevant applications for such a device. Today, more than ever there may be an outside chance of such devices taking off in the medium- to long-term, due to initiatives like the Affordable Solutions lab at KReSIT, which is looking at cracking the applications part as well… It is not just price point but also an applications issue that has to be tackled. Having said that, I would also say in the short-term this looks highly theoretical and impractical."

Striving to make things better

The one main difference between earlier attempts to bring cheaper computing devices into the market and the current endeavour is that this time around there is a right mix between academia and the industry. Most of the past attempts in this area were lab products that were being experimentally tried in the real world. Without adequate industry backing, these ventures failed to live up to the dream of becoming successful commercial ventures. Now, however, it’s the industry that is providing the hardware, while institutions fine-tune the solutions.

Maybe in a more bullish scenario, PC vendors might not have worked so hard at commercialising the low-cost PC concept. But in the current depressed market, these low-cost devices seem to be the mantra that will bring new life to the industry. For if these attempts are successful, a PC priced between Rs 5,000 to Rs 10,000 is the best news India Inc. has had in a long long time.