The future looks good: HP's Managing Director Balu Doraisamy

Here's a spot quiz, the answer to which may surprise you. Which is the largest selling personal computer in India? The answer: Hewlett Packard (HP). But, the company has been strangely reticent about tom-tomming its success. "Yes, we have not been blowing our trumpet about the significant success we have had in India. That's because we would rather have our products, services, people and customers speak for us," says Balu Doraisamy, Managing Director, HP India.

Not many people are aware that HP's operations in India generate revenues of Rs 12,250 crore and employ around 29,000 people. The company is the market leader in PCs, jousts for the #1 spot with IBM and Sun Microsystems in the server market, is the runaway leader in the printing and imaging segment, and has emerged as a major player in the managed outsourcing contracts space. Its software division, meanwhile, has increased revenues 10-fold in the last five years. Says Doraisamy: "We have grown at a CAGR of 35 per cent over the last five years. For HP, this is the fastest growing market worldwide."

Succeeding in the fiercely competitive Indian market has not been easy. The key has been HP's strategy of providing the latest technology at the right price points. "Unlike some of our competitors, we don't offer end-of-life products here. We are aware that the India is a value market and not one where price is the sole determinant of choice," says Doraisamy.

HP has a 21 per cent share in the five million units a year Indian PC market, which includes desktops and notebooks (laptops). Ravi Swaminathan, VP, Personal Systems Group (PSG), HP India, points out that the company had a mere 7 per cent share in the desktop market just five years ago. "Today, that figure has grown to 18 per cent," he says. HP's position in the notebook market is much stronger-it commands a 39 per cent share in the one million units a year market. "India is a value-conscious market; buyers here consider the total cost of ownership rather than the initial investment alone," he says. "Here, our 350 service centres across the country give us an advantage that few others can match." HP is now planning to capitalise on its enormous lead in the notebook market to further consolidate its position. Says Doraisamy: "Prices of notebooks are falling. The day when there will be a notebook on every desk is not far away."

The Four Ss

"Our 350 service centres in India give us an advantage that few thers can match" Ravi Swaminathan VP/Personal Systems Group	"We want to make greater inroads into the fast-growing Indian market" Ajay Gupta President/HP Labs

Servers: For it hardware companies, the Indian server market is a key area of attraction. According to IDC, the Indian server market-traditionally Big Blue's turf-was estimated at $583.16 million (Rs 2,624.22 crore then) in 2006. The market has three distinct segments-the low-value, high-volume, entry-level x86-based servers; the non-Intel Unix-based servers; and the high-end server market comprising blade servers and mainframes. At the top end and in the mid-market segment, HP competes fiercely for market leadership with IBM and Sun Microsystems, but it has struggled in market for entry-level servers. But Doraisamy says this is part of a well thought out strategy. "HP has consciously chosen to stay away from the lower end of the market. Our focus is on profitable growth."

Software: HP is also very bullish about the progress made by its software group. The sector is extremely profitable and offers very high margins, and here HP's Open Call Media platform has done well. Doraisamy points out that the software group's revenues have grown 10-fold over the last five years. "There is further scope for tremendous growth," he says.

Storage: In the Rs 706-crore storage market (which includes Network Attached Storage and external controller-based storage), HP is the third-largest player after IBM and EMC in terms of value, and leads in terms of units and terabytes shipped. This market is set to grow at 25 per cent and HP expects to derive more revenues from it.

Services: The one segment where HP has not done as well as its rivals is in the outsourced services space. While competitors like IBM have bagged big-ticket deals like the $750-million (Rs 3,075-crore), 10-year contract from Bharti Airtel and the $620-million (Rs 2,542-crore) Idea deal, HP has won nothing of note. Kapil Jain, VP, HP Services, however, denies this. "We have had significant wins like the Bank of India and Bank of Baroda deals," he says. Brave words, but the numbers show that HP India derives a mere $150 million (Rs 615 crore), or 6 per cent of its Indian revenues, from outsourced it services. Also, the BOI and bob deals were considerably smaller than the Bharti Airtel and Idea ones.

Unlike his colleague, though, Doraisamy is candid about HP's failure to make a mark in this market. "Yes, we did go head to head with IBM in the recent Idea deal and lost. But one has to recognise that such large deals don't come by every day. There are some significant deals in the pipeline and we should hopefully be able to bag a few of them," he says, but declines to elucidate further.

The Strongest Arrow

"We have won significant deals from Bank of India and Bank of Baroda" Kapil Jain VP/ HP Services	"We are now the fourth-largest computer systems vendor in India" Rajan Anandan VP/ Dell India

The Imaging and Printing Group (IPG) is the strongest arrow in HP's quiver and contributed nearly all of the company's international profits till 2004. In India, HP has a dominant 75 per cent market share in this segment. Ravi Aggarwal, President, IPG, HP India, says the all-in-one's, also known as multifunction devices (MFDs)-which combine the functions of a printer, copier, fax and scanner-are the fastest growing product in the company's portfolio. Leveraging its core strength in printers, HP has been able to extend its lead in MFDs over rival products from Xerox and Canon.

However, in the small office home office (SOHO) segment, where inkjet printers still hold sway, Epson is snapping at its heels. Says N. Samba Moorthy, Senior General Manager (Sales and Marketing), Epson India: "Because we are #2, we try harder." Dell, which had tried hard to muscle into this market, however, has come a cropper and has failed to make any inroads into the printer segment internationally and in India.

India a Resource Base

Increasingly, HP is targeting India not only as a key market but as an important resource base to serve its international customers. It is carrying out a substantial chunk of application services, maintenance and development work out of India for them. The scale may not yet match that of an IBM, but Doraisamy says that HP is doing "some cutting edge work" out of India. "Not many people remember that along with Texas Instruments, HP was one of the first companies that identified India's prowess in the IT arena and made substantial investments here," he adds. Amitabh Ray, Director, IBM Global Services India, however, points out that it is Big Blue, with more than 53,000 people, that has better leveraged Indian resources. "None of our multinational competitors has been able to scale or execute the kind of complex work we do here," he says.

But Zarir Batliwala, Head (HR), HP India, says that one of the key attractions of HP in the job market is that there are very few companies in the world that operate in all the segments of it industry-like hardware, software and services. "That is one of the reasons why HP's attrition rate, at 12 per cent, is well below the industry standard (18 per cent)," he says.

"There's more value to be unlocked in the KPO market" Sanjay Singh President and CEO/HP BPO

One reason for that could be the fact that unlike most of its rivals, which have massive call centres and BPO outfits in India, HP BPO, its business process outsourcing arm, employs only 6,600 people in the country and focuses exclusively on the non-voice, transaction processing market. "We deliberately kept away from the low-value, low-margin voice business; industry trends over the last couple of years have vindicated our stand," says Sanjay Singh, President and CEO, HP BPO. While rivals such as IBM's Daksh and EDs's MphasiS have ramped up their India presence inorganically, HP is unlikely to follow suit. "Since we don't need a large voice presence, there are few interesting options in the BPO market," says Singh, adding that HP BPO will shortly open its second facility in Chennai.

Within the transaction processing business, HP BPO focuses strongly on the finance and accounting (F&A) vertical. Singh claims that HP BPO is among the largest F&A outfits in the country, with over 5,000 people on its rolls. "There's more value to be unlocked in the KPO market and we have a growing team of over 600 specialists," says Singh, adding that he's now looking at "cities such as Jaipur, Chandigarh and Coimbatore to expand into".

"Multifunction devices (MFDs) are the fastest growing product in our portfolio" Ravi Aggarwal President/IPG

New Products

HP is now focussing on launching new products tailor-made for the Indian market. Says Ajay Gupta, President of HP Labs, the R&D arm of the technology services giant: "We started by focussing on what we could do to bridge the digital divide. Now, we want to make greater inroads into the fast-growing Indian market."

Despite being the market leader in PCs, for example, HP's growth in this segment has been hamstrung by the fact that conventional keyboards require users to have a functional knowledge of the English alphabet. So, it developed the Gesture-based keyboard that allows users to write in their native languages (and save or transmit the image). This keyboard, HP is hoping, will help drive the sales of its PCs in the Indian hinterland.

Good to Great

HP India's contribution to its parents' global turnover is just about 2 per cent. Doraisamy, however, believes that this is just the beginning. "HP is committed to India. Good companies either grow revenues or cut costs, but great companies do both. My aim is to make HP India a great company," he says. it spends in India are expected to sprint along at about three times the GDP growth rate; Doraisamy says his goal is to grow HP India at 1.5 times the industry growth rate. That's a tall target; and global CEO Mark Hurd, who led the company past IBM as the world's largest tech company, will be watching Doraisamy very carefully.

-additional reporting by Kapil Bajaj