"Business has become tough in the past one year. The thinning margins have made life difficult. The price cuts by multinational and bigger domestic brands have added to our woes," says Shyam Modi, president, Delhi Computer Traders Association. Most industry observers see these as travails of a maturingindustry. Says Raj Saraf of Zenith Computers, one of the prominent domestic brands which recently created a stir in the market by drastic price cuts across its product-line, "The PC business has been in a transition in the last three years and only long-term players will survive the changes."

Saraf justifies the price cuts on ground of offering the customers with "more value for money". "Unlike the price cuts by PCL (in late-1996) which directly took on the grey market operators, we are basically fighting off the charge of the multinational brands," says Saraf. Thanks to similar such cuts, price of personal computers have seen a dip between 30 and 60 per cent across various ranges in the last two years.

The margins too have suffered a similar fate. Says Modi, "Margins have dipped from 15 to 20 per cent two or three years back to 5 to 7 per cent on complete systems while for the peripherals market it is as low as 2 per cent in some products."

A tight money market in the last six months has forced some tosell systems at margins of few hundred rupees, says Modi. No wonder, an increasing number of assemblers are looking for value additions for survival. "Most of us are making money only through value additions in terms of providing customers with after-sales-services, meeting their software requirements as also need for various peripheral and networking products," says Modi. The key to success lies in keeping overheads and inventories low and go for aggressive marketing to build volumes. With diminishing margins, the industry has become a volumes game, say most players.

Rising up the value chain by being a solutions provider is the way to go for most assemblers, feels Sameer Kochhar, an IT consultant. "The USP of the local assembler is his ability to customise machines in accordance with needs of the buyers. This is something even most deep-pocketed MNC brands lack." The opportunities for these die-hard entrepreneurs lies in acting as "customised tailoring shops for customers or be channel partners for MNC orbigger brands and act as their shop floors," feels Kocchar. This is exactly what some of them have been working at. When Intel, the chip major, launched its Gunnuine Intel Dealer (GID) program around a year back, quite a few of them lapped it up. "By being Intel certified dealer, which obliged us to use original Intel microprocessors, many of us have gained a cloak of respectability," admits a Delhi-based GID.

"The best part of the scheme was that it helped in building a brand equity for small players and also did away with the tag of being grey a market operator," adds another one. The success of the Intel move paved way for other multinational and domestic brands to follow suit. HCL Infosys, a major domestic player in the PC business, too appointed several such assemblers as dealers of their brands who had the onus of providing after sales-service to customers.

The menace of the grey market lies in the huge tax evasion that these players are able to effect, says Rahul Singh of HCL Infosys. "According toour estimates, in 1997, the combined loss of sales tax and excise duty to the government was to the tune of Rs 220 crore."

Intel's GID and HCL's moves have come as a positive rehabilitation influence for the industry by bringing these players to the organised segment, says Singh. However, the amount of duty evasion is still of immense proportion, he adds. One thing that most industry players agree on is that smaller players have their own place under the sun. "Even in a mature market, like the United States, the top 10 brands occupy just about 43 per cent share," says Saraf. Adds Kocchar that in most Asian markets, such as China, Taiwan, Malaysia or Thailand, the small players in the unorganised segment account for 40 per cent of the market. "India too would be no different," feels Kocchar.

The small players may be down but certainly not out. "They will survive the price war," says Manu Parpia, president, Manufacturer's Association of Information Technology (Mait). "Lower prices help to stimulate demand.The small players are in a unique position to fulfill this demand offering custom-made assembler configurations coupled with next-door after sales services."

As if to justify Parpia's faith on the assembler-next door, some of them have even taken a leaf out the big MNC brand's marketing handbook by floating a brand of their own. Six Delhi-players have joined hands with multinationals to float `Horizon PC' which comes with genuine Microsoft-certified software, Intel chip and other standard peripherals. Says Modi, one of the six players, "We realised that branding is the name of the game and also its future."

Modi now has on offer a configuration for the small business segment but hopes to add more range in the coming few months. "A Pentium II for Rs 50,000 for the home segment will be our trump card against the high-end MNC brands," says Modi. The unorganised sector has tremendous importance in terms of market penetration. And as players, of all shapes, sizes, swadeshi and videshi vie forbuilding up volumes in the ever-expanding domestic market, the one who commands an army of small entrepreneurs will only call the shots.