IT Industry Performance Annual Review: 2007-08

Press ConferenceNew Delhi: July 08, 2008

ITOPSITOPS

Only Only Demand-Demand-SideSide Study on Study on the Indian IT the Indian IT

Hardware Hardware marketmarket

Industry Industry ValidationValidation of of the Market the Market FiguresFigures

LongestLongest Running Running Tracker Study Tracker Study on the Indian IT on the Indian IT Hardware Hardware marketmarket

LargestLargest Tracker Study Tracker Study on the Indian on the Indian IT Hardware IT Hardware

marketmarket

About ITOPS…About ITOPS… An IntroductionAn Introduction

Only Demand-Side Study on Indian IT Only Demand-Side Study on Indian IT Hardware Market…Hardware Market… Designed to deliver the much needed demand-side Designed to deliver the much needed demand-side insightsinsights

Data is collected after ‘Last Mile’

Market/ Customer Sentiments

• No undercounting/over counting stock in pipeline• Includes direct imports by customers • Accurate estimation of assembled market

• Factors in the market/ customer sentiments and opinion along with industry level indicators

Accurate assessment of Buyer Profile

Identification of Emerging Segments

Identify and observe Market Trends

• “Who bought”, “Where used”…Not dependent on ‘perceptions’ of reseller/ channel member/ vendor

• Need to monitor changes in user’s perspective to obtain cues for innovative marketing

ITOPS

The Study covers a sample of around 24,000+ entities per round

The study is conducted on a bi-annual basis covering the following time periods H1 of FY: April to September H2 of FY: October to March

… across the Top 22 cities Greater than 1 Million Pop Towns except Bhubaneshwar &

Guwahati

24,000+Entities

14,000+Households

10,000+Estabs

Largest Study on Indian IT Largest Study on Indian IT Hardware Market…Hardware Market… Coverage in 22 Cities Coverage in 22 Cities

1996-971996-97

1998-991998-99

2002-032002-03

2003-042003-04

2005-062005-06

Launchof ITOPS as an annual Study

ITOPS becomes a Bi-annual study

Launch of supplementary channel survey for in between quarters

Coverage scaled up to 22 cities from 16 cities

ITOPS completes its 10th year, thus being the longest running IT tracking study

Longest Study on Indian IT Longest Study on Indian IT Hardware Market…Hardware Market… Existence of over 11 YearsExistence of over 11 Years

Industry Validation…Industry Validation… Two Pronged Validation Process Two Pronged Validation Process

MAIT

Findings on Market-size projected to

All - India Urban market

Various IT Players

ValidationValidation

ValidationValidation

The findings from ITOPS is accepted as the official market performance of Indian IT hardware market by Manufacturers Association for Information Technology (MAIT), the nodal body for IT hardware industry in India.

Information used by Govt. of India for all IT & allied planning.

7

Sampling & Projection Household

Using SEC A-C household population as obtained in the National Readership Survey – the largest household survey in the country

Establishment No framework for sampling and projection were available Thus, a new framework called Ace Grid was developed by the ITOPS

team This Grid stratified the establishments by Principal activity performed

at the establishment classified by number of employee.Principal Activity defined:

Manufacturing/ factory/ WarehouseOfficeOutletsGovernment

No. of employees defined: < 10 employees (Small establishments)11-50 (Medium establishments)50 + (Large establishments)

The Ace Grid has found application across researches involving business segment across geographies

Sampling & Projection…Sampling & Projection…

Some Insights that ITOPS has provided …

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Insights on IT market from ITOPS

Our Insights What happened?

IT market moving towards the smaller cities – ITOPS 2001 Pro

Today, the smaller cities constitute close to 50% of the households. Vendor targeting a wider canvass benefiting the most.

PC usage not restricted to upper and upper middle class households only. It is increasingly percolating to middle and lower middle class – ITOPS 2002 Pro

Increased targeting of the segments through price reduction, interest free loan schemes helping in targeting the segment.

Students a key target segment in the households – ITOPS 2002 Pro

IT players launched PCs targeted at the students community.

WiFi adoption in the country is expected to take time! – ITOPS 2002 Pro

Though many WiFi zones have come up in major cities of the country, it is still not very popular among the Internet users.

Education the key reason for purchasing PC in a household – students the main focus – ITOPS 2002

Several PC vendors launched PCs targeted specifically at students and running special promotions for students. Universities a key focus for most Notebook vendors.

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ITOPS: Comprehensive coverage

Product coverage:

Computers - Desktop PC, Notebooks, Servers

Printers - DMP, IJP, LJP

Peripherals - Monitors, keyboard, scanner, zip

drive, CD writer, Print server

UPS - UPS

Networking - Incidence, size of networking (no. of

nodes)

Networking products - NIC, Hubs

Internet - Active internet subscribers, Modems

And the findings are…..

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Total PC (Desktops & Notebooks) sales: 2002-2008

• CAGR 2002-08: 26%

• Growth over 2006-07: 16%

Un

its

13

Total PC (Desktops & Notebooks) market: Regional spread

Figures in the brackets represent the growth in 2007-08 over 2006-07

25% 31% 27%

17%

0%

10%

20%

30%

40%

North West South East

(-13%) (39%)(10%)

(39%)

7,344,306 Units

2007-08

• PC consumption in both West and South grew by 39% each; in East it grew by 10% while in North it declined by 13%

34%

26% 23%

18%

0%

10%

20%

30%

40%

North West South East

6,341,451 Units

2006-07

14

Notebook sales: 2002-2008

• Annual sales grew by 114%; CAGR: 104%

• Households accounted for 44% of the market growing 150%, Businesses accounted for

56% of the market growing 93%

Un

its

15

Notebook sales: City-spread

• Notebooks are fast penetrating beyond the top 4 metros; growth rate 152%

16

Notebook Consumption in Businesses - by employee size%

Un

its

• Overall consumption in the business grew by 93%

• Consumption in large and medium enterprises grew by 51% and 123% respectively, in small enterprises it grew 174%

17

Desktop sales: 2002-2008

• CAGR 2002-08: 19%

• Growth over the 2006-07: 1%

Un

its

18

Desktop market: Regional spread

Figures in bracket represent the growth in 2007-08 over 2006-07

27% 30% 25%

19%

0%

10%

20%

30%

40%

North West South East

(-14%) (10%) (7%)(4%)

5,522,167 Units

2007-08

• Desktop consumption in West grew by 10%; in East it grew by 7% each; in South it grew by 4% while in North it declined by 14%

31%27% 24%

18%

0%

10%

20%

30%

40%

North West South East

5,490,591 Units

2006-07

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Desktop Market: Share of Indian, MNC & Informal

2007-08

• Consumption of Indian brands decreased 4% in absolute terms

• Sales of MNC Brands grew by 16% however that of Informal sector PCs declined by 12% in absolute terms

2006-07

20

Desktop sales: City-spread

• Consumption in Top 4 metros declined by 28% while sales outside the Top 4 metros grew by 14%

21

Desktop sales: 2002-08

• Desktop market growth over 2006-07: 1%

• Consumption in households grew by 55%; in Businesses it declined 18%

Un

its

23%28%

26%81%

72%

60%75%

25%

40%

74%

19%

77%

22

Annual Desktop sales: Business by employee size

• Overall sales to the Business segment declined by 18%

• Sales to small and medium enterprises grew by 25% and 8% respectively, however in large establishments it declined 33%

% U

nits

23

Profile of Desktop buyers: Principal activity of the establishment

% b

uyer

s

• Consumption in Government grew by 7% and in factory locations by 47%

• Consumption declined in office locations by 21% and in retail outlets by 29%

24

Profile of PC buyers in Households by Socio-economic class%

buy

ers

• Overall Households consumption grew by 55%

• Consumption in SEC A grew by 50%, in SEC B by 68% and in SEC C by 43%.

46% 46% 51% 55%44% 43%

36% 34% 28%29%

36% 39%

18% 20% 21% 16% 20% 18%

0%

20%

40%

60%

80%

100%

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

SEC A SEC B SEC C

25

Server sales: 2002-2008

• Annual sales increased: 35%; CAGR (for 6 years): 17%

Un

its

26

Server sales: Business by employee size

• Overall sales increased by 35%

• Sales to small and medium enterprises grew by 127% and 121% respectively, however in large establishments it declined 37%

% U

nits

27

Server sales: City-spread

1936

4858 5221

9

167 26

60 55

36 3522

0%

20%

40%

60%

80%

100%

2003-04 2004-05 2005-06 2006-07 2007-08

Rest of India Next 4 Top 4

• Consumption in Top 4 metros declined by 17% while sales outside the Top 4 metros grew by 64%

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Active Internet entities: March’99 – March’08

(Entities are establishments/individual with internet connection; an entity may house/ be multiple user/s)

• Overall entities with internet grew by 20% over March 2007

• Businesses accounted for 29% of the entities growing 6% while Households accounted for 71% of the market growing 27%

’00

0 U

nits

Translates to 52 million internet users

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Internet penetration: March 2008

Business Segment Home

Overall 46% 21%Top 4 Metros 50% 25%Next 4 Metros 42% 17%Other 8 Metros 46% 16%Remaining 6 Metros 28% 11%

SEC A - 43%SEC B - 16%SEC C- 6%

• Internet Penetration by Town class and Socio-Economic Classification (SEC) among Top 22 Cities

Internet penetration by

Town class

Internet penetration among households

by SEC

30

Mode of Internet access in Businesses: March 2008

Internet connections - Contribution to the total by Access type

March 2007

March 2008

Dial up 38% 16%ISDN 19% 18%Leased line 15% 7%DSL/Cable Link 38% 43%VSAT 1% 2%Data Card * 12%Others * 2%

DSL

Data Card

DSL inching ahead.

Data Card fast growing in popularity

31

The Market of 2007-08 Vs 2006-07

32

The expected Market for 2008-09

33

Thank you!