labels: hcl infosystems, marketing - general
HCL Peripherals begins to reveal its colours news
Chennai:
18 August 2005

What started as a research and development (R&D) wing for the group two decades ago is now a strategic business unit (SBU) producing around Rs270 crore worth of products and services.

The Chennai-headquartered HCL Peripherals has three business wings - display products (computer monitors, plasma monitors / television, keyboards that contribute a hefty 60 per cent to the company's revenues), networking (active and passive, wireless solutions, switches, bridges, routers, racks, etc, that yield a 10 per cent revenue) and technology products and services (thin clients, touch screen kiosks / monitors, anechoic shielded chamber, with a 30 per cent share of the company's revenue).

Earlier, the division was content supplying monitors and other products for its parent and also other original equipment manufacturers (OEM).Incidentally, HCL Peripherals is the only outfit in the country that makes and supplies monitors to other OEMs - nearly 85 per cent of the monitor production is supplied to OEMs including its parent.

However, the focus changed three years ago when as a part of a de-risking and client diversification strategy HCL Peripherals decided on develop a channel sales network.

However, the initial challenges were tough. "The end user knew the HCL brand and the products but not the channel partners / system integrators." says V Venkatesan, national head, networking products. "Further, our volumes were low while the prices were on the higher side. It took time and effort to familiarise users about our products.".

Though the efforts were successful, the division could have done better. For one, the division has yet to get out of the comfort of being a captive market supplier and dirty its hands in the channel sales, says an industry tracker. What he says is true as the channel business generates around Rs20 crore.

Th division's managers are, however, confident of an upswing in sales as HCL Peripherals is beefing up the channel partner network. The unit has also started seriously looking at product promotions and branding more seriously. Some of the product advertisements sport the tag lines like, `Empowering the techno life', `Limitless connectivity', etc.

"From our earlier focus on trade magazines, the division is now promoting its products through general magazines," says M V Preetham, head, marketing communications.

This year HCL Peripherals hopes to double its channel sales to Rs40 crore while the overall revenue target is fixed at Rs350 crore.

In order to accelerate its retail sales the unit has tied-up with Ingram Micro India Private Limited for distributing its display products. Says executive vice president S Pattabhiraman, "The tie up is an extension of our existing distribution agreement for our keyboards."

But this time the agreement has more depth as the division is realigning its existing channel partners. According to the new agreement, Ingram Micro would take delivery of display products from HCL Peripherals' Pondicherry plant and later distribute to regional distributors and resellers.

This way HCL Peripherals would cut down not only transportation costs but also transaction costs that were incurred earlier while dealing with 21 regional distributors. Pattabhiraman hopes to double the monitor sales to 10,000 per month as a result of the Ingram Micro tie-up.

Says V R Kirubakaran, national manager, display products, "The challenges in the channel business is the price and the promotion schemes. Our reward schemes are based on volumes and value."

On the other hand, the OEM and institutional segments are differently driven.. OEM sales are driven by price and stringent delivery schedules, institutional sales are dependent on price plus after sales support.

Here fiercely competitive with rivals like Philips, BenQ, LG and Proview already have an established presence. According to Kirubakaran, one of the important aspects of OE business is to see that HCL monitors qualify for the tenders.

Confident of achieving a sales target of seven-lakh monitors this year, Kirubakaran adds, "The market is growing at 18-19 per cent per annum. In India around 4 million monitors are sold every year while the country's manufacturing capacity is around 3 million."

Given this demand-supply gap and also the likely increase in sales of monitors after the launch of sub-Rs10,000-personal computer by parent HCL Infosystems, Pattabhiraman says capacity expansion is also being planned.

Today the division makes around 55,000 monitors per month. "Our aim is to make one million monitors per year from 2006 onwards," he says.

What augurs well for the division's retail thrust is that the replacement market for monitors has started picking up. "Customers largely prefer 17-inch monitors in place of 15-inch monitors," explains Kirubakaran. Currently the ratio of 15-inch monitor sales to 17-inch monitors is 55:45. This is expected to become 40:60 in favour of larger monitor. To cash on the trend Kirubakaran says his division is offering buyback schemes for 15- inch monitors.

The kiosks king

Meanwhile, the technology services division enjoys near monopoly in the touch screen kiosks and thin client segments.

Speaking about the kiosks business general manager (sales and support) R Srinivasan says, "We have supplied around 35 cheque deposit kiosks to Bharat Sanchar Nigam Limited (BSNL) where subscriber payments for landline and mobile phones are accepted." According to him, efforts are already on to develop kiosks that could facilitate recharge of prepaid mobile cards.

The other major orders for kiosks were from government of Tamil Nadu State Bank of India, Railways, Life Insurance Corporation of India (LIC).

While the kiosk king is expecting good orders in the near future, HCL Peripherals has already seeing fat revenues from its Windows / Linux-based thin clients.

Simply put, thin clients are stripped down computers. As against thick clients - fully loaded computers - thin clients work on server-based applications. These are largely useful in areas where the operations are well defined and repetitive in nature.

"The name of the game is cost savings and efficiency improvements when corporates look at IT investments," remarks Srinivasan. As the thin clients are loaded with fewer software and hardware features, their power consumption and maintenance problems are fewer.

According to him the market for thin client is growing at an average of 30-35 per cent. "The market size is around 3-lakh units. With more companies coming in the market is good potential."

HCL Peripherals has sold around 30,000 thin clients and is targeting a sale of 1.5-lakh units this year. "Linux-based thin clients move faster in the market. We also sell Windows-based thin clients." Major buyers include the Indian Railways, banks and the Life Insurance Corporation of India.

On the services side, HCL Peripherals is providing thrust to its radiation measuring services by setting up a 10-metre verification and validation facility at Chennai at an outlay of Rs20 crore.

The new facility will be ready next year where compliance certification could also be offered to manufacturers of electronic products. Electronic products have to meet certain radiation emission norms. In India, The Society for Applied Microwave Electronics Engineering and Research (Sameer), Chennai and Electronic Regional Testing Laboratory offer the compliance certification. They also do the pre-compliance test services.

Currently HCL Peripherals has a 3-metre facility where pre-compliance test services are offered for others.

In contrast to the luxury of monopoly enjoyed by the technology division, the networking division operates in a fiercely competitive ground.

The Rs1,500-crore market is fiercely competitive with global majors like Cisco, Avaya, D-Link, 3Com and others ruling the roast. But HCL Peripherals has carved out a niche in the domestic market. The unit manufactures passive networking products, it has tie-ups for active ones.

According to Venkatesan, the division has made inroads in education institutions, units located in the Software Technology Park of India (STPI) and a couple of telecom companies. "This year we are focusing on manufacturing, media and pharmaceutical sector."

Offering routers, switches, structured cabling, access points, wireless indoor / outdoor bridge and others, the division embraced the channel partners only two years ago. "We have around a two per cent market share on each product segment. Currently the division has around 75 dealers and plans to double that number."

After achieving good success in the small and medium enterprises last year, Venkatesan says the focus is now on high-end networking and storage segments. "Necessary manpower has been hired." The unit has tie-ups with Intransa Inc, and Overland Storage, for storage products.

According to him, the division will also start marketing aggressively console servers. "The market size is around 1,000 units per year and the target segments are banks, data centres and others."

Commanding good brand equity amongst the users and with its renewed focus HCL Peripherals officials are confident of exceeding the Rs40 crore revenue target from the channels.


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HCL Peripherals begins to reveal its colours