Caught between utility and cost

Tablets have started to carve out a niche in the Indian enterprise. Meanwhile, ultrabooks could make inroads, provided that vendors offer the right mix of price and utility. By Venkatesh Ganesh

2011 finished with little cheer for the Indian PC market. According to Gartner, the combined desktop and mobile PC market in India totaled nearly 2.5 million units in the fourth quarter of 2011, a 6.5% decline from the same period in 2010. In the third quarter of 2011, the combination of desktops and mobile PCs in India totaled 3.15 million, a 13% increase over the same period in 2010. While the previous two quarters yielded a muted growth for the PC industry in India, the story was different when compared to developed markets. Worldwide PC shipments totaled 91.8 million units in the third quarter of 2011, a 3.2% increase from the third quarter of 2010, according to Gartner. These results are slightly lower than Gartner’s earlier projection of 5.1% growth for the quarter.

In such a scenario, emerging markets, notably Indian and China, could see the bulk of this PC consumption. According to Vishal Tripathi, Principal Research Analyst, Gartner, growth was mainly driven by the mobile PCs segment, which saw 29% y-o-y growth. Similarly, IDC in its Q2 PC tracker pointed out that the Indian PC market sales stood at 2.44 million units with a revenue growth of 2.6% over the previous year.

Both IDC and Gartner are of the view that this growth is primarily driven by mobile PCs. According to IDC, in the second quarter, mobile PCs grew 21.2% year-on-year. In the third quarter, Gartner estimated that mobile PCs grew 29% year-on-year.

The government sector contributed significantly to the growth of PCs and laptops. The government of Karnataka along with Intel and Educomp announced a pilot program that aims to bring ICT education across 5,000 schools in the state. This would include providing students with netbooks and laptops powered by Intel’s Atom processor. Similarly, Acer won a deal with the Gujarat Informatics Limited, the IT arm of the Gujarat government, for desktop deployments across the state. Acer and HCL Infosystems won a multi-crore deal with the Assam Electronics Development Corporation to provide laptops as a part of the Government of Assam’s way of honoring meritorious students.

The Kerala State IT Mission went in for PDAs to equip the police and enforcement unit of motor vehicle department for generating e-challans. Other state governments decided to go for alternatives like thin clients. The government of Punjab selected NComputing’s virtual computers for 480 computer labs across schools in the state. This is a part of an initiative called ICT Education Project for Punjab, estimated to be valued at Rs 7.5 crores, which will provide computer access to schoolchildren across the state.

Enterprises started to embrace tablets

Last year saw India Inc. starting to consider tablets as an option. Samsung, Sony, BlackBerry, Viewsonic, Dell and others launched a wide variety of tablets. Fujitsu, is planning to come out with its first Android-based tablet in the first quarter of 2012.

One of India’s largest private financial institution (a mutual fund company) has ordered a thousand tablets from Viewsonic. These 7 inch tablets are being provided to some of the top sales executives who are being encouraged to use these devices for selling insurance policies. This insurance company is using tablets to make presentations and send periodic reports back to their headquarters. “We are talking to other financial companies and educational institutions for our tablets and, this year, we will see considerable uptake for this product category,” said Ajay Sharma, Country Head – India, ViewSonic Technologies.

Tablets saw a similar uptake amongst investment bankers. Private sector banks and multinationals have started giving out tablets to their top management. Apart from the financial sector, other sectors such as FMCG and healthcare are also adopting tablets. Medical reps are bring given tablets to showcase their products to doctors and send feedback regarding their interactions to their managers. Smart Sky Electronics and Research is working with a known Indian retailer to arm its workforce with tablets.

Telcos are expected to drive PC buying but in the backdrop of issues with regards to cancellation of licenses and spectrum, it remains unclear as to whether they would go in for PC refreshes this year.

The hospitality industry is also thinking of using tablets. Mirah Hospitality, the group that runs Manchester United and Rajdhani themed restaurants, plans to use tablets for its customer management initiatives. “A lot of feedback by our customers does not get captured sometimes due to the negligence of our workers. With a tablet, we can capture the feedback information provided by our customer in real time and can act on it,” said Aji Nair, Assistant Vice-President, F&B division, Mirah Hospitality and Food Solutions Pvt. Ltd. The company has plans to open more than a dozen Rajdhani restaurants all over India and plans to use tablets across them.

It is interesting to note that when the smartphone first surfaced around 2005, a lot of enterprises in India gave these devices to their field executives to improve both productivity and business. This same trend seems to be playing out initially in the tablet category. In a country where smartphones and tablets could be the first computing device coupled with a young population that is about to enter the workforce in the next five years, vendors are looking at a long term play. “Despite not having access to a traditional PC, there could be a large workforce that will have their first PC experience around smartphones and tablets and we are targeting them,” said Saji Kumar, Head – Product Management, Acer India.

The government had plans to use tablets for some of its citizen-facing initiatives. “We are planning to use tablets keeping in mind the mobility, ease of use and are talking to vendors for the same,” said Sabarish K, Mission Coordinator, Kerala State IT Mission, Department of IT, Kerala.

Last year also saw the launch of $55 Aakash tablets and similar other tablets that were competitively priced at $100 range. “For nations which are faced with low PC penetration and has a growing population, the mobile Web is the most affordable as well as the most accessible doorway to the Internet,” opined Alex Huang, Country Head, System Business Group, Asus Technology Pvt. Ltd. (India).

While the iPad’s halo seems to be rubbing off on other tablets, on the ground there are many issues that need to be ironed out before tablets succeed in India. The first issue is with regard to content. A tablet is ideal for consuming content but it is not so great when it comes to content creation. If you look at the ecosystem currently, the bulk of it is centered around content consumption with things like 3G yet to pick up pace.

The other factor is a lack of good quality applications that can drive the adoption of tablets, which has been the case in developed markets. Analysts see this as a chicken and egg situation.

“The jury is still not out on the effective use of tablets in India and till the whole ecosystem—from connectivity to the kind of content consumed/generated—is not in place, tablets won’t find a whole lot of takers,” said Nitin Khanapurkar, Executive Director at KPMG.

Meanwhile, vendors are bullish on laptops sales in 2012. Fujitsu is betting on laptop sales growing in triple digits on the back of a successful 2011. “We see ramp ups of our notebooks and for our Lifebook A531 3G laptops; we are talking to telcos amongst other distributors,” said Alok Sharma Country Manager Workplace Systems, Fujitsu India.

VDI to make inroads

Thin clients and VDI started making inroads this year. In June last year, VDI got a big boost when IBM decided to unveil a new virtual desktop solution that enables users across thin clients, desktops, laptops, tablets and smartphones. Further, it was operating system agnostic and one could access both Windows and Linux.

Others like Citrix Systems and Ncomputing had their CEOs come down to India to endorse the merits of VDI and how it fits in with a large number of India companies that do not have legacy technology baggage.

“Going ahead, small and medium businesses will kick off the VDI adoption in India due to their inherent cost benefits and ease of management,” said Jyothi Sathyanathan, VP, IBM.com -Inside Sales Organization, IBM India /South Asia.

“As workforce mobility increases in conjunction with the Cloud, VDI adoption will witness a significant uptake,” felt Mark Templeton, CEO, Citrix Systems. According to company officials, it is in talks with banks (for VDI deployments) who are being asked by the RBI to quicken their financial inclusion process by opening new branches in unbanked areas. In 2011, Citrix saw adoption in the IT-ITES sector.

According to a report by Frost & Sullivan, the Indian desktop virtualization market that includes hardware, software, licensing, and management tools is expected to grow at a CAGR of 33.31% from 2008 to 2015.

Customers in India are deploying some of largest and most innovative virtual desktop infrastructure in the world on NComputing technology. One of the largest deployments is for the Employee State Insurance Corporation with approximately 31,000 seats across 2,200 locations. The company also recently announced success with Indian state education ministries of Uttar Pradesh, Rajasthan, Bihar etc. “NComputing has an installed base of over 500,000 units and a strong channel partner base in over 100 cities across 20 states in India,” said Will Poole, Co-Chairman, NComputing, Inc. ICICI bank has deployed about a thousand Wyse thin clients across its headquarters and key branches earlier this year.

“We see a new wave of growth coming from healthcare, government and education sectors as they are increasingly considering features such as security and power savings,” said Tarkan Maner, President and CEO, Wyse Technology.

However, companies are weary about claims made by vendors. While there may not be upfront costs, management costs add up significantly. If one factors in the software license, the hardware and supporting infrastructure, a virtual desktop ends up costing a lot more than a normal desktop PC and some estimates suggest that it’s 1.6 times the price of a normal PC.

However, in the last few years there has been a whole set of issues arising from a lack of manpower to maintain IT systems, which, in turn is increasingly prompting companies to look at thin computing as an alternative.

Further, with increasing virtualization, the push for VDI is on the rise. While none of the industry players are willing to stick their neck out and assert that 2012 could be the year of VDI, everybody is upbeat about its prospects this year.

Newer categories still to find takers

Last year also saw vendors pushing their newly created category called ultrabooks. In October, Acer, HP, Lenovo, LG, Asus, Toshiba and Samsung released their versions of ultrabooks, which, according to these companies would reinvigorate the PC market. For some like Dell, ultrabooks hold promise. “We see ultrabooks as an important niche category for those looking for a companion PC device that moves beyond the basic computing needs like browsing, e-mail, entertainment and documentation. Dell sees customers demanding increasingly thinner and lighter products, without sacrificing performance and to address these customer demands, we have been moving towards thinner, lighter and more responsive systems,” according to Shishir Singh, Director, Product Marketing, CSMB, Dell India.

Analysts are of the opinion that the category of ultrabooks will open up new vistas for their traditional line of computing devices such as the laptops. Also, margins are getting thinner by the day at the mid- and low-end laptops. This, coupled with the entry of tablets and other devices is eating into some of their own product categories.

UItrabooks from Acer, Lenovo and Asus are already on retail shelves in India, with several others expected to follow suit in the first half of next year. Intel is investing significant money and resources to create and accelerate this as a category,” said Sandeep Aurora, Director of Marketing, Intel South Asia. As a part of its investment initiatives, Intel recently announced a $300 million ‘Ultrabook Fund’ from Intel Capital that invests in companies around the globe that are innovating in hardware, software, battery technology, and design.

Awareness is being built by others like Acer, who have been hit by competitors. “At the moment ultrabooks are about experiential buying and we are creating awareness of this category and selling them through our retail stores and also through some large format retailers,” said Kumar of Acer India.

Despite the bullishness, high pricing of ultrabooks remains a concern. Also, in an economy that is set to grow slower in 2012 as compared to previous years, ultrabooks could suffer in terms of volume, opine industry watchers. Vendors themselves feel that price could play a role going ahead. Recently, Acer’s President, Jim Wong, was quoted as saying that the company was planning to ship 250,000 to 300,000 ultrabooks in the fourth quarter of this year and that prices would fall to $499 in 2013.

Looking ahead, the government is set to drive demand this year as vendors are trying to break old mindsets in sectors like defense, which is uncomfortable with their personnel using laptops or tablets due to security issues. In the final analysis, the pace of technology changes will force enterprises to look at newer ways of consuming devices for both work and entertainment. With quad core smartphones set to be launched in the first half of 2012, mobility in devices is set to be the way of the future.

As PC makers start addressing issues of hard disk shortages (which is disrupting shipments) and as Indian enterprises are set to witness a slight slowdown as compared to last year, the writing is clear. Devices need to match user expectations in terms of features and utility. Else, vendors will find that they need to come up with newer categories this year too.