Market Lead

Sub-10k PCs fail to take off

Although the sub-10k PC was launched with much fanfare, it failed to create the desired effect. Shivani Shinde reports.

Precisely a year back the Indian market was abuzz with talk of the PC priced at less than Rs 10,000. Almost every newspaper, every hoarding and every channel saw their advertisements. Right from the pundits to government spokespersons, everybody was gung-ho about these announcements. It seemed that at last the answer to the average PC-less Indian’s prayers had arrived.

But now from market surveys, reports from IDC, and vendors who offered sub-10k machines, one thing is clear: the sub-10k PC has failed to make a dent in the Indian consumer PC market, perhaps because the so-called ‘10k PC’ had an actual price tag of Rs 13,000 to 14,000.

Marketing gimmick

A study conducted by IDC India (India Quarterly PC Market Tracker, 4Q 2005), within six months of the launch of sub-10k PCs in India in July 2005, found that these PCs accounted for only about two percent of overall PC market shipments in the country during July-December 2005.

During the same period, the Indian client PC market witnessed a 26 percent year-on-year growth in unit shipments. In other words, while the PC market grew, PCs priced at less than 10k didn’t contribute much to the market’s buoyancy.

Comments Piyush Pushkal, Assistant Manager, Personal Computing Research, IDC India, “We feel that the launch of sub-10k PCs was more of a market penetration approach in response to a government initiative for increasing PC penetration in India. Though the announcement itself did not materialise into immediate sales, it did help to increase footfalls in PC retail outlets.”

So what was the fuss all about? According to market sources, it was just to generate market curiosity and create brand awareness. In the Indian PC market, other than in Tier-I cities, brand awareness is low. Few in Tier-III and -IV cities know about PC brands.

"Conceptually, the launch of 10k has been a success. These low-cost PCs have broken the myth that one cannot get a fully-functional PC at an affordable cost" - George Paul Ex-VP, HCL Infosystems

George Paul, Ex-Vice-president, HCL Infosystems, offers this analysis: “Conceptually, the launch of 10k has been a success. These low-cost PCs have broken the myth that one cannot get a fully-functional PC at an affordable cost. Further, these PCs have brought a totally new group of customers to the showrooms, the people who earlier could not even imagine going in for a branded PC. And when they come to the showroom in response to the new price-point, they actually end up buying PCs in the range of 12-15k which match their requirements and offer them a value proposition.”

The Kolkata-based Xenitis Group was among the few who announced the availability of sub-10k PCs. The company says that this announcement brought them volume business. States S Das, the group’s Country Manager, “We made headway in the market and gave a new dimension to it. Having said this, sub-10k PCs are just one of the many offerings that we have.” Their lowest-end desktop model is priced at Rs 9,990, and is powered by a Cyrix-based chip platform. He informs that while this offering got a good response from B and C cities and first-time PC buyers, Xenitis did not make money on the model.

"The market showed a positive response to the offering we made by launching sub-10k PCs" - George van der Merwe Chief Operating Officer Sahara Computers

Says George van der Merwe, COO, Sahara Computers & Electronics, “The market showed a positive response to the offering we made by launching sub-10k PCs. Now we are looking to cater to the need of the growing market by launching a new range of products meeting the requirements of fresh customer segments.”

eSys was another company that jumped on the sub-10k bandwagon although they feel it is not the answer for gaining market share. “We were among the first few companies to launch Via-based computers…our focus has been to provide PCs that offer value for money,” says R Govindan, CEO, eSys. He also makes the point that the actual cost of the sub-10k PC was higher than the category name suggests.

What also happened was that when customers went to check the sub-10k PC they realised that in terms of features they were getting very little. Points out Pushkal, “One of the principal reasons for the comparatively lower offtake of the sub-10k is that it lacked features. Why should a customer buy a technology which will become outdated within the short span of a few months?”

Adds Paul, “Volume-wise, the sub-10k PC was not a very strong number-player, but it worked as a catalyst in the market for PCs in the range of 12-20k, which actually benefited and registered strong growth. The sub-10k was the price-point which fuelled the entry of this new set of customers, and in that perspective, it has played its role very well.”

According to most of the players, the reason they could sell at such low prices is because they have a manufacturing unit in India, which naturally lowers their cost of production. (See box: Made in India)

It’s not just about price

"We are making great strides in getting XPSE to an even wider audience" - Rishi Srivastava Director Windows Client Business Group Microsoft India

It’s just not about low-cost PCs any more. Take for instance the Windows XP Starter Edition (XPSE). It was first introduced in India in early 2005, and since then Microsoft has made considerable investments in offering localised editions of the product. Currently, XPSE is available in 10 Indian languages: Hindi, Tamil, Kannada, Telugu, Malayalam, Bengali, Punjabi, Marathi, Gujarati and Konkani.

According to Rishi Srivastava, Director, Windows Client Business Group, Microsoft India, “The Microsoft team has visited families in emerging markets around the globe, met with Prime Ministers and IT government officials, forged new connections with local and international PC manufacturers, and overcome linguistic challenges. Along the way, the team has helped bring computer literacy to more than one million families who might not have otherwise had been able to purchase or use a PC. We are greatly encouraged by the response so far, and are making great strides in getting XPSE to an even wider audience.” From an OEM perspective, Microsoft India is partnering with HCL, Toshiba and Sahara.

Though with this launch Microsoft has tried to answer the demand for a lower-priced PC, one has not actually heard much from either OEMs or the market. XPSE-based PCs are available starting from Rs 13,999 or at an EMI as low as Rs 399 per month. The street price for the product varies from Rs 14,000 to 15,000 depending on the specific model and OEM. According to Srivastava, the offering has had a tremendous response with many clients. For instance, Microsoft and the Government of Uttaranchal launched XPSE in Hindi under the government’s Gyanotkarsh programme.

Then again, pundits say that the concept of EMI might just not work for an IT product. Comments Pushkal, “EMI-based pricing is better suited to consumer durable products rather than IT products. One of the reasons is that there are very few banks/financial institutions which are providing this. Secondly, the resale value of an IT product such as a PC nullifies almost immediately after the product leaves the dealer’s showroom/premises, or at best within a few days/months.”

Microsoft’s move is quite commendable, but is the consumer, whether an individual, education institution or government organisation, not looking from a long-term perspective when buying an IT product? A beginner’s system just might make sense in an education institution, but a home user wants to experience the multi-media features that will always come at a price.

Not a magic bullet

This is not the first time that the sub-10k PC has failed to catch the interest of the consumer. It also happened with Wipro’s Janata PC, iNabling Technologies e-mail device, and the handheld device Simputer.

Pushkal observes, “For PC penetration to increase, any initiative should address three key aspects of the ecosystem—availability, affordability and applications/applicability of the PC to daily life. The IT community needs to come together to find solutions to these problems rather than take piece-meal action.” According to him, what is needed is a solution-centric approach rather than box-selling.

Maybe PC manufacturers can take a cue from mobile phone manufacturers who, due to the aggressive pricing and easy manageability that they offer, have seen tremendous growth.

Govindan believes that the PC business is not just about selling boxes but rather about convergence. The three aspects of this convergence are IT, telecom and entertainment. “Because of this, the PC has to become a digital access device rather than being used only for accessing Excel or Word files.”

"It’s not just affordability that counts, but also manageability with performance at the desktop" - Rajesh Jain MD & CEO Netcore Technologies

Says Rajesh Jain, MD and CEO of Netcore Technologies, and one among many who is striving to solve the dilemma of low-cost PCs, “It’s not just affordability that counts, but also manageability with performance at the desktop.” He feels that what Indian markets need is a server-centric computing model with multi-media network computers which can provide desktop-like performance without the pain of having to manage a complicated set-up.

Novatium, a technology products company that designs, develops and markets a range of network computers, is trying to address the sub-10k PC with a different approach. Nova netPC, its intended $100 offering, is a pure plug-an-play solution from the regular PC. Explains Alok Singh, CEO of the company, “Our approach to affordable PCs is a bit different from that of others. While the others are focussing more on the packaging wherein the product is not up to date, we look at the computing aspect.”

Nova netPC, a network computer, is designed on a completely new hardware platform without using any of the typical PC or thin client components. The hardware design instead uses components designed and developed for advanced electronic and digital devices. Nova netPC provides the combination of desktop computing and server-centric manageability with some added benefits.

Elaborates Singh, “From the user’s perspective he will have a screen, keyboard, mouse and a box slightly bigger than a modem for the connectivity, which would be provided through a broadband link to servers that would have the required software and applications. The user is going to be able to choose the space he needs for storage; it can be either local storage or central storage.” The company is running a few pilot projects with home-users, and based on the feedback gathered it plans to launch the product soon.

PC prices have come down considerably, but it will need more than low pricing to ensure mass adoption. Issues such as Internet connectivity and government policies will also count.