FUTURE OF ASSEMBLERS

There are two schools of thought on what the future holds for assembled PC
makers, post duty-cuts. One points out that assemblers will have to make changes
to their business model, while the other opines that they would continue to
enjoy a distinct advantage over branded PCs.

"With prices coming down, consumers are going to give branded PCs a serious thought now and hence we too may start selling the same, apart from our own machines" Bimal Kumar Director, Geonet Computers

Change in business model is imminent...

As an assembler, I don’t see doomsday for this community though a
significant change in the way we do business is inevitable. Post duty-cuts,
prices of both, MNC and national brands as well as assembled machines have come
down.

So, very likely, consumers are going to give branded PCs a serious thought
now. In view of this, even we may start dealing in some branded PCs ourselves so
as to give our clients a choice.

This is not to say that we would stop selling our own systems, but at the
same time we have to be open in terms of providing the customers a wider choice.
Also, with demand expected to increase, the volumes of even our own systems too
will continue to grow.

Indian brands will have an upper hand...

Earlier, our main competition was against MNC PCs. But with Indian brands
like Zenith and HCL reacting much faster to the duty cuts than MNCs, the former
will now enjoy an upper hand.

Now we would really need to find out what can sway a customer’s buying
decision. If we are now able to offer sub-Rs 20K PCs, so can the Indian brands.
Essentially, its going to be a very closely-fought competition.

White-box may be the way to go...

It would make a lot more sense for assemblers to get into white-box business
now. Even in a developed economy like the US, between 40-45% PC business is
commanded by white-box sellers.

Further, there’s not much value in terms of price or quality that we can
add while assembling PC components that a white-box doesn’t already provide.

It is more practical to sell white-boxes while maintaining our high levels of
service, which is what will ensure our survival in the long run anyway.

Future’s challenging but not bleak...

No doubt our profitability has come down but at the same time volumes too
have increased. So tomorrow will be challenging but we just won’t get out of
business.

We would leverage on our after-sales support, personal relationship with
clients and wider choice of products to sustain healthily.

In fact, we have also started pushing notebooks to a great extent. True, this
doesn’t meet the trademark definition of an assembler. But then, in a dynamic
industry like IT, evolution of this nature is unavoidable.

Assemblers have nothing to fear...

I sell branded machines from both MNC and Indian vendors, yet I maintain
that assemblers have nothing really to worry about. If prices have come down,
they have happened for everyone, branded or unbranded. The price-gaps too have
remained more or less the same.

"Branded players cannot customize systems, the way assemblers do. This puts the former at a disadvantage as user awareness on technology has increased" Vikash Tibrewal Director, Microtrack Business Systems

Further, we are yet to see MNC brands reacting to the duty-cuts. No one else
can quite match the reach and relationships enjoyed by assemblers. Essentially,
assembled PC makers can continue to survive in their business but will have to
get more aggressive in a highly competitive landscape.

Brands have the disadvantage of non-flexibility...

Flexibility–that’s one of the most important factors which will continue
to drive assembled PC business. Branded players cannot customize products as per
buyer demands, the way assemblers do.

Further, assemblers are very fast at introducing latest technology
products/components as compared to MNC/national brands. Considering the fact
that today users are very well-informed on technology front, this obviously
brings a great advantage to assemblers.

Quality would be an issue for white-boxes...

Feedback tells us that white-boxes present a very promising alternative to
assembled PC makers. While selling white-boxes would an appealing proposition to
assemblers, they would have to tackle the issues of quality and support. When
assemblers build a system, quality norms can be well-controlled by them. This
may not be the case in white-boxes.

Also, in terms of end-user acceptability, even if the white-box is made by HP
or IBM, it would always be seen to be like any other assembled system, as the
branding is missing there.

Future’s bright and promising...

Say what one may, the fact remains that assemblers are here to stay and give
tougher fight to branded players. There may be a little change in marketshares
but as long as volumes are growing, they should not worry.

By leveraging on their after-sales support and customer relationship, the
assembled PC makers can continue to command bigger portion of the market pie.
Also, with PC penetration poised to grow, demand from smaller towns and cities
will surge.

And it is an assembler who would be best equipped to tap this emerging
consumer segment. In metros, a price-differential of Rs 2-3 K may not mean much.
But in smaller towns, even this can sway a users’ decision to buy assembled.