Subscribe

0

Partner Spotlight

India Is Calling, Where Are You?

author-image
DQC News Bureau
New Update

That is the new mantra across the globe as conglomerates make a beeline
for setting up their product-manufacturing units in India, to fully tap the
potential of this burgeoning market. Channel partners are also gung-ho about
this trend as it promises to address the issue of product availability

Advertisment

There was a time when the general perception was that while the
multinationals might hive off the IT development and backroom jobs to India the
really big projects, which would employ masses and help in boosting the gross
domestic product (GDP) and bring all round development, would go China's way.
And for some years the existing trends also confirmed this perception. But
events in the last one-year are clearly an indication that

this might not be the case anymore. With more and more multinational companies
setting up manufacturing units here, it seems India is all set to give China a
serious run for its money.

While companies are setting up units from Jammu, Pune to Chennai and Goa, the
major concentration of new manufacturing plants is happening in a small town in
South India. Sriperumbudur, which was infamous as the place where the former
Indian PM Rajiv Gandhi was assassinated, is these days gaining worldwide fame
for attracting MNCs to set-up their manufacturing plants. Till last count the
companies who had zeroed in on Sriperumbudur included Nokia, Finnish companies
like Salcomp and Perlos, US-based Flextronics, Taiwan-based Honhai-Foxconn,
Samsung, US-based Motorola and Dell.

Sanjay Sharma

VP-IT Business, Samsung India
“The benefits of local
manufacturing are already reflecting in terms of our pricing. That apart,
the channel also benefit from local manufacturing due to product
customization and faster response to the market”
Advertisment

Why India?

Apart from the skilled and economical labor that India boasts of, what is also
drawing companies to India is the immense potential of the market and the
burgeoning middle-class with its buying power.

Talking about their expectations from their Indian manufacturing Rajan
Anandan, VP and GM, Dell India elaborated, “The manufacturing facility in
Sriperumbudur is a manifestation of our ambition to become number one in India
in PCs across all segments. We will be the preferred technology partner to
customers in the country and our India plant will be the key to our growth.”

Adding further he said, “Our immediate plan is to get the manufacturing
facility opera­tional as soon as possible. With the manufacturing facility in
place we hope to roll out the first 'Made in India' Dell products in the first
half of 2007. The plant's initial capacity is planned at 4,00,000 units per
annum and will focus on desktop computers to begin with. With this, delivery
time to customers in India would come down significantly and we

will provide an industry-best experience.”

Advertisment

According to Sanjay Sharma, VP-IT Business, Samsung India, “The Indian
manufacturing unit will augment our existing production capacities and help us
better meet the growing demand for our products in the South. The manufacturing
facility will also help us in terms of our exports to SAARC countries.”

D-Link has also set-up a manufacturing unit in Goa. Elaborating about the
unit Tushar Sighat, VP-Channels, India and SAARC, D-Link said, “Our unit at Goa
is a state-of-the-art manufacturing facility. The manufacturing units are ISO
9000 and 14000 certified. This facility helps us to maintain stringent quality
controls and also tune products to Indian conditions.”

Jukka Lehtela

Director-Operations, Nokia India

“It is important for
telecom companies to be closer to their customers. The Indian manufacturing
unit helps us reduce the time to market, enabling us to fulfill customer
requirements faster. It also helps us understand customer requirements
better” 
Advertisment

Stressing the importance of the Indian market Jukka Lehtela,
Director-Operations, Nokia India said, “India is one of the fastest growing
telecom markets. It is, therefore, important for telecom companies to be closer
to the customers. The Indian manufacturing unit helps us reduce the time to
market, enabling us to fulfill customer requirements faster. It also helps us
understand the customer's requirements better and localize accordingly.”

“Our manufacturing unit in Chennai has been operational since January 2006
catering to the requirements of the market. Currently, 80 percent of the
production is being used for domestic consumption while the rest is being
exported to nine Southeast Asian markets including Hong Kong, Indonesia, Sri
Lanka, Thailand, Brunei, Vietnam, Malaysia, Singapore and Philippines,” Lehtela
added.

Explaining the reason why a manufacturing unit for their LCD monitors made
sense Dhananjay Shah, MD, Pureview Technologies reasoned, “Generally the
material that is imported and supplied to the channels does not go through the
final product testing before dispatch in India. In case of the local
manufacturing unit, pre-testing helps to ensure the quality before dispatch.
Also having a manufacturing unit here enables research and development (R&D) in
the assembly line, which reduces dependence on imported materials and helps in
localization of the products. Importing material also means that the channels
have to then deal with international pricing which keeps affecting the channel
business. A local manufacturing unit brings down the prices and also improves
the delivery time.”

Advertisment

Intex started their manufacturing unit in India in Jammu in 2004. According
to Suresh Gupta, Director-Operations, Intex, “The Indian unit has helped us in
reducing inventory holdings, avoiding product shortages. It has lead to a
greater satisfaction of the customers due to timely availability of stock,
spares etc and as a result have helped us in increasing our sales.”

Rajan Anandan

VP and GM, Dell India

“In a recessionary
market where prices of components keep tumbling, only our direct model can
pass on the benefits immediately to its customers by virtue of its
less-than-a-week inventory”

Pricing factor

While the industry is gung-ho about the various plants being set-up in India,
one question that is uppermost in everyone's mind is whether these plants remain
only a hype or will the benefits of reduced production costs also percolate down
to lower prices.

Advertisment

Sharma of Samsung, whose 'Made in India' products are already available in
the market, explained, “We are already manufacturing color monitors, both CDT
and LCD monitors, in the Indian market. So, the benefits of local manufacturing
are already reflecting in terms of our pricing. That apart, the channel also
benefit from local manufacturing due to product customization and faster
response to the market.”

Talking about pricing Lehtela opined, “The phone prices are very much fixed
in the design phase. However, the manufac­turing costs come mainly from
component and material prices. The Nokia Telecom Park at Chennai, where our
suppliers are setting up base, would help in bringing down the prices. Since
domestic production gives us the advantage of shorter turn around, I am sure the
channel would benefit from just-in-time delivery of products.”

Echoing similar sentiments Sighat reiterated, “Manufacturing definitely helps
in reducing market prices but a lot also depends on the government policies and
duty structures prevailing in any country. Channel business definitely benefits
as they get quality products, tuned to Indian conditions and the manufacturer
has complete access and know-how of the products to help fine tune, debug or
modify products to the maximum level.”

Advertisment
Suresh Gupta

Director-Operations, Intex

“Manufacturing in
India may not help in reducing prices of products immediately, however in
the long run this is bound to happen and then the consumer will benefit,
which will also result in channel becoming more competitive”

Agreed Anandan of Dell, “The manufacturing plant will definitely improve our
cost structures and we will look to pass that benefit on to customers. There
will definitely be an improvement in prices for Dell products, which will be
even more competitive. Having said that, we focus on the customer and offer
'best value technology' at all price levels to all our customers across the
globe. Dell's success has been because of the total value we deliver. Price is
only one part of the purchasing equation. Customers today recognize and seek
value-added services in their IT investments. Dell is also focused on actively
helping customers with lowering their total cost of ownership through stable,
reliable systems with planned transitions and longer life cycles.”

However there are some who do not see the situation turning rosy so soon. In
sharp contrast to the prevailing views, Shah of Pureview Technologies said,
“Initially the product costs might increase due to infrastructure costs and
excise.”

Agreeing with Shah, Gupta of Intex added, “Manufacturing in India may not
help in reducing prices of the products immediately, however in the long run
this is bound to happen and once this is done, the benefit will be passed on to
the consumer which will result in channel becoming more competitive. It will
also help them to increase sales.”

Channel satisfaction

Apart from the lowering of price, one problem that channel across India have
faced for long from multinationals has been the turn around time for problem
solving. And when the companies announced the setting up of manufacturing units
in India, the first and foremost thing that channels now want to know is, will
it help them in getting a quick resolution to their problems.

Tushar Sighat

VP-Channels, India and SAARC, D-Link

“Channel business
definitely benefits as they get quality products, tuned to Indian conditions
and the manufacturer has complete access and know-how of the products to
help fine tune, debug or modify products”

Sighat seemed to think that channel satisfaction most certainly has increased
with an in-country production facility. “Our channel has always been
enthusiastic about our manufacturing facility in Goa. We have organized factory
visits for most of them at our facility in Goa and they all were definitely
excited about the facilities and the state-of-the-art setup. This also adds to
the level of confidence they all have in D-Link products and definitely their
satisfaction levels also have increased,” he said.

In the same vein, Lehtela added, “Yes, our channel partners see this move as
an affirmation of our commitment to the market and India's strategic importance
for Nokia globally. Feedback has been very positive, mainly because of the
faster response time to order confirmations and deliveries.” While Sharma said
that, “Naturally, the channel views our commitment to the Indian market in terms
of fresh investments very positively. Our partners in South India are even more
enthusiastic since the South facility will help us cater to their requirements
faster.”

Recounting the feedback that they have received so far Gupta of Intex said,
“The reaction of the channel partners has been very encouraging.

We have taken some of our major distributors to our manufacturing units for a
visit and they were pleased to see our manufacturing facilities. The testing
procedures and the manufacturing process followed by us has raised the
satisfaction level of the channel. Also our R&D setup will soon start delivering
new models/new products from the manufacturing units. This has also shortened
the cycle time for introducing new models or products. And the channel is very
much enthused with this.”

Channel Speak

H Ratnakumar, Director,
CCS Infotech, Chennai

Local manufacturing will definitely benefit both the channel and
end-customers. Besides cost benefit, consumers will also get access to wide
range of products, manufactured for the global markets. Price, variety and
local support will spruce up the market and fuel the growth of business in
the region. Most importantly products available at a cheaper price will
curtail grey market growth. The product replacements against DoA claims will
also be quick, if we have a local manufacturing here by MNCs. Overall, India
as a manufacturing hub can create an impact on the economy, jobs, FOREX,
channel business and consumer buying behaviors, among others.


B Mukund, Director, Mukesh Infoserve Chennai


It is surely a good news that India is growing as a

manufacturing hub. It will definitely boost the country's economy, job
opportunities, trade, infrastructure and more. But, the question on whether
it will impact the channel business is debatable. I feel that this would not
have any effect on the channel business and especially on the pricing of
products. There might be some marginal reduction, which would be negligible
to refer to. However, local manufacturing can ensure availability of
products and quicker turn around in business, which itself is a blessing for
business.

Gagan Joshi, Director, Landmark Office Systems,
Siliguri

It will be extremely beneficial for the channel
business. When any manufacturing facility comes up it automatically develops
the surrounding area and elevates the local living standard. It also helps
to cut down the costs of the products. So in every way it will help the
channel as new avenues will open up in front of the channel and the business
horizon will broaden. As these companies will have to bear overhead costs to
run local manufacturing units they will become more aggressive. As a result
they will become instrumental in promoting the technology and products in an
aggressive manner, which will automatically make partners become more
aggressive and generate more business. Thus it will always add value to the
business procedure of the channel.

Once these companies heave a local manufacturing unit they
become more focused towards quality control as well as support structure.
Also the products manufactured in the Indian facility have same quality but
are cheaper (five to seven percent lower price) than those manufactured in
overseas factories. With more companies setting up their manufacturing
units, competition will increase among themselves. This will be hugely
beneficial for the channel, as the MNCs will become more supportive and
conscious about their channel.

Rajarshi Ghosh, Director, Epitom Networks,
Kolkata

In my opinion, once MNCs start setting up manufacturing units in India, it
will help the channel in two ways. Firstly, it will help the partners to
have a better understanding of the products, which will consequently help
them in better selling. As local units come up, it will help the channel to
visit the factories personally whenever required and understand the product
and the technology behind it in person.

Secondly, the channel will get better support, as the
spares will be readily available with them.

Definitely we have benefited; one big example is D-Link.
It is the only networking company who manufactures products in India. This
has given added advantage to its channel as far as product prices, support
and customer confidence in concerned. We were largely benefited from the
factory visits, which were arranged by them. Since both skilled and
unskilled labor is cheaper in India it also helps to cut down the product
prices considerably.

It will have a huge impact on the Indian channel business,
as the channel and principal communication will increase. This will help to
have a better understanding of the products and increase sales. It will also
enhance the business opportunity of the channel, as the principals will
become more aggressive in selling their products. Therefore the channel
business will largely benefit.

Shah of Pureview is of the opinion that setting up facilities sends the
signal that you are a long-term player as compared to players who are doing just
trading or importing products. Elaborating about the road ahead with the channel
he said, “They can have better technology involvement possi­bilities compared to
completely 'Built Units' being imported from other countries due to possibility
of seeing the actual assembling of the product. The possibility of setting up of
smaller assembling units in every state (owned by channel partners) on a royalty
basis is another way of upgrading them in future.”

Is customer the king?

So in the final analysis, with vendors and channel (see box) all happy with the
current inflow of production facilities in India, will the customer emerge as
the king?

Anandan of Dell seemed to think so. He explained, “Dell is different from
other computer manufacturers because of its unique 'Direct Business Model'.
Dell's build-to-order customized solutions with the latest relevant technology
are available at competitive price to its customers. It is also important to
note that in a recessionary market where prices of components keep tumbling,
only our direct model can pass on the benefits immediately to its customers by
virtue of its less-than-a-week inventory. Consequently, customers are able to
get the latest technology as it is introduced and cost management is that much
more efficient and immediate savings are achieved as opposed to our competitors
whose inventories range from 60 to 90 days. All combined, you have a low cost
structure and the best class performance to the customer.”

Expert speak

According to the estimates released by the Indian government's Central
Statistics Office on Feb 21, 2007 the manufacturing sector has helped in
boosting the performance of the Indian economy in the last year. The released
report suggests that powered by sustained growth in manufacturing output and a
strong performance from the ever-expanding services sector, the Indian economy
is expected to record a growth rate of 9.2 percent in fiscal year 2006-07. This
is the highest growth rate the economy has recorded in the last 18 years.

Growth in manufacturing output is estimated to stand at 11.3 percent compared
with 9.1 percent a year ago. The services sector is expected to record an 11.2
percent growth as compared to 9.8 percent a year ago. India's GDP in fiscal year
2006-07 is expected to touch $854 billion. The government has also revised its
growth rate figures for fiscal year 2005-06, raising it from an estimated 8.5
percent to nine percent.

Projections by other agencies also support the government's estimates. Global
financial services operator Goldman Sachs stated in a recent report that,
“Baseline projections for India's potential output growth show that the economy
can sustain growth rates of about eight percent till 2020.” The report concluded
that, if growth continues at the same pace, India is likely to overtake the UK
as the world's fifth-largest economy by the middle of the decade.

According to estimates by the International Monetary Fund (IMF) India's
growth rate in 2006-2007 stood at 8.9 percent and the GDP at $840 billion. This
will take the country ahead of Korea's estimated GDP of $826.9 billion, making
India the third largest economy in Asia after China and Japan.

Similarly a 2004 report by McKinsey and the CII (Confederation of Indian
Industry) said that manufactured exports from India are expected to increase by
$300 billion by 2015. “Made in India' could become the next big manufacturing
exports story,” the report summed up.

Shivangi Yadav

With inputs from Ruth Samson in Delhi, Nelson Johny in Mumbai, Piyali Guha in
Kolkata and S Gopikrishna in Chennai