IT was the year in which people asked, "Is the PC dead?"… And the question reverberated across the world. Much to the dismay of vendors, the US answered in the affirmative, and so did Europe and other prominent geography. The APAC region came to the rescue, offering a buoyant demand. However, in the last quarter of 2000-01, even this market exhibited a decline. China, the ‘Big Daddy’ of Asia, also slowed down to post a negative growth.

The silver lining was India, and it promised to stay. According to IDC, India was the only country in the region to post a positive double-digit growth rate in the last quarter of fiscal 2000-01, over the previous quarter of the year. The market continued its northbound march with a growth of over 50% in unit terms and over 40% in value terms. Although the growth in revenues was lower as compared to previous year’s 94%, it fared better in unit terms as against the previous year’s 45%.

So what happened in the last one year? The drivers of the previous year continued to take the market forward. The home and the small-office-small-business (SOSB) segments had been driving the Indian PC market since 1999, and the trend only strengthened in the last fiscal. All major vendors, barring Dell, focussed aggressively on this fast-growing market. As competition hot up, it also pulled down the prices. Vendors resorted to playing on the price point to drive sales. Earlier, one could not have asked for an MNC brand for anything less than Rs 50,000. But today all top MNC vendors have come up with desktops priced in the sub-Rs 40,000 range. Vendors also offered innovative finance schemes to lure the home users—they could have a high-end PC at a monthly installment as low as Rs 2,500.

The year also saw vendors beefing up their channel infrastructure, which was imperative to capture the SOSB segment. HCL, for instance, has already built an enviable network of over 1,000 dealers. Compaq and H-P were also busy expanding their channel network. Today, H-P has a presence in over 100 cities while Compaq has covered over 75 cities, with about 730 dealer outlets. However, IBM with a presence in only 47 cities, was not as active.

Improved channel network, coupled with competitive pricing, helped PC brands increase their penetration in the home segment, but the gray market continued to rule the roost. According to estimates, assemblers still hold over 70% of the market in this segment.

In the commercial desktop space, apart from the SOSB segment, banks and financial institutions generated huge demand. The RBI directive of computerization weighed heavily on public sector banks. Private banks, driven by their expansion plans, also ensured ample demand for PC vendors. The insurance sector, which played a relatively smaller part in boosting the overall demand, is expected to be an important driver in the ensuing fiscal. With private insurance companies entering the scene, it will become imperative for players to beef up their IT act. Training and education companies constituted another hot market and will continue to do so in the current fiscal as well. Once again, lowering of prices was adopted as a key strategy to push consumption. Vendors priced their commercial desktops only a few thousand rupees above the assembled ones. The assurance of services and quality associated with branded products added to their advantage. However, the flip side was that the low prices for commercial desktops led to a lot of cross sales to the home segment. And for vendors pinning hopes on selling the high-end home PC, it was bad news as the numbers did not match even their already pessimistic estimations.

Vendors had another ace up their sleeve—more features at the same price. The 4.3 GB HDD was replaced with 8 GB and today 20 GB is the accepted standard. The same was the case with processors, which moved from PII with 533 MHz to the PIII 533-800 MHz range at the same price levels.

Market movers<