IT hardware manufacturing is a term almost synonymous with failure in India. But despite the obstacles, some companies are not only driving up volumes but are showing the industry how the hardware manufacturing game can be played successfully in India. Srikanth R P looks at D-Link India, one of the rare successes in the Indian hardware manufacturing space, which is not relying only on its local manufacturing strengths but has adopted a multi-pronged strategy for growth by firing on initiatives like BPO, software services and hardware exports

To provide value, D-Link will have to innovate and this is where investments made in R&D would help the company stay ahead of competition, says K R Naik

Industry experts have always lamented the fact that the Indian hardware industry has not learnt a thing or two from its Taiwanese counterparts who started as component assemblers years ago but are world leaders in IT manufacturing today. However, if it’s inspiration that the Indian industry is looking for, they needn’t go as far as Taiwan. In India, perhaps there’s no better example than D-Link India.

D-Link is one of the very few hardware companies in India that does local manufacturing. Other than traditional networking products from its Taiwanese parent D-Link, (network interface cards, hubs, switches and modems) D-Link India’s strategy to enter into tie-ups with global brands to market and manufacture their products has paid off.

For instance, the recent decision of the company to manufacture and market motherboards in collaboration with Taiwan-based Gigabyte Technology has given it a significant market share in the Indian motherboard market.

Company officials claim that D-Link India has close to a 15 percent market share in the motherboard market with a manufacturing capacity of 20,000 motherboards per month. Besides giving D-Link India a key advantage in terms of technology, it also means full utilisation of D-Link’s manufacturing facilities in Goa. D-Link has already forged a couple of OEM tie-ups for its motherboards business. While other Indian hardware players have always been whining about doing away with duties as a precursor to kick-start hardware manufacturing in India, D-Link’s strategy to link tie-ups with other brands to market and manufacture their products in India has not only been realistic, but has turned out to be a successful strategy.

Expecting a bonanza
Another area where the company is expecting huge growth is the wireless segment. With licensing issues sorted out and prices of wireless equipment falling, D-Link is expecting large scale adoption of wireless by India Inc. As part of its strategy, it is looking at tapping educational institutions like the IITs, who have huge campuses, for deploying wireless networks. Having been involved in building Ethernet-based campus networks for educational institutions, the company stands a good chance of converting or enhancing the Ethernet-based networks to wireless networks. The coming year will also see D-Link India move more aggressively into the high-end enterprise market with a series of products like high-end switches.

Besides the VoIP and wireless segment, the company is looking at making a mark in the structured cabling arena. In the structured cabling segment, the company has already developed its own version of the CAT6 cable. The market for structured cabling is huge and since CAT6 is just catching up even globally D-Link India could have a real winner on its hands. The company is already exporting this line of products to the Middle East.

But, while local manufacturing gives D-Link India the capability to manufacture and market products at a lower cost as compared to the competition, the company has realised that manufacturing alone cannot drive growth forever, and especially when economic slowdowns bring technology spending to a standstill. To address this issue, D-Link India has taken a series of initiatives which can drive growth even in the event of a slowdown.

Says K R Naik, managing director of D-Link India, “We as a company cannot depend only on distributing and manufacturing products of our parent company to drive our growth. To provide value, we have to innovate and this is where the investments made in R&D would help us to stay ahead of the competition. We have already developed a low cost voice-over-Internet Protocol (VoIP) phone and we will be launching this soon in the Indian market. This is developed totally by the Indian R&D team.”

The main idea is to try to develop products for niche market segments, which have good growth potential. If the product is technologically superior and fulfils a niche market need D-Link India then puts forward the product to D-Link Taiwan for evaluation. If the product is considered good enough, it can then open up export opportunities for D-Link India. Naik believes that the low-cost VoIP phone has great growth potential with interest being evinced from other countries.

Having developed the product, D-Link India is looking at plans to market it in India and is already in talks with many ISPs for tie-ups. In the absence of demand from the local market, D-Link’s strategy has been to develop products in India and target them at the global market. While other players struggle to market their products abroad due to the high costs and complexities involved D-Link India being part of a global MNC faces no such issues. If a product developed from the D-Link India stable fits into the global roadmap, then D-Link India can get orders from other similar D-Link companies situated in the rest of the world. The market is undoubtedly huge as D-Link has a presence in over 105 countries across the globe. Other than the CAT6 cable and the low-cost VoIP phone, the company is working on a couple of other products that could turn out to be major successes worldwide.

Another initiative that has the potential to rake in big revenues for D-Link India is the industry’s current favourite area, Business Process Outsourcing (BPO). The company is already doing return material analysis (RMA) for D-Link’s products in India. RMA in simple terms means repairing products that are considered defective. Under the RMA services, D-Link India also analyses the factors that have contributed towards a defective product. As D-Link India already has a good technical team in India, the company is looking at becoming the preferred RMA centre for all the business units of D-Link. On similar lines, the company is also evaluating the possibility of launching a technical help desk, which too has the potential of becoming the preferred technical help desk in India. These two initiatives could open up a big new area of business for D-Link India.

Software
There is one more little-known business segment which could rake in significant revenues for D-Link India in the future. The software division, which mainly develops software for D-Link in the areas of network management, embedded systems and protocol stacks is going to get a renewed thrust in the coming years. Having built the expertise, D-Link India is now looking at exploring the option of marketing its software strengths. This would mean that D-Link India would also look at servicing software requirements of other vendors.

The coming year will also see D-Link India move more aggressively into the contract manufacturing market. As the company already has excellent manufacturing capabilities, D-Link India is in talks with major manufacturing companies across the globe to utilise its manufacturing capacities. All in all, D-Link’s strategy proves that for once there is a player in hardware manufacturing who is not crying about the negatives of the Indian market but looking at ways to capitalise on the strengths.