The Hindu Business Line : Go with the current

IF a power line is out, what does one do? Rue one's bad luck and sit back beaten or take the challenge of finding alternatives to keep the current going and business thriving?

The analogy holds a lesson for IT vendors.

According to IT industry observers, although the IT sector as such is experiencing a meltdown, other sectors such as banking, finance, education, healthcare and process automation are in good health. And IT vendors must try these out vigorously rather than try to be purely IT-centric and turn a blind eye to the potential these sectors offer to grow business and make profits.

While the IT boom lasted, suppliers to the industry rejoiced over landing large orders. But today, the same vendors are in deep trouble because they were not open to tapping alternatives, feels R. Chellappan, Managing Director, Numeric Power Systems, a manufacturer of UPS (uninterruptible power supply) systems.

Numeric Power, caught precisely in such a situation, has started to focus on non-IT sectors such as banking, finance, insurance, healthcare, education and government where automation is catching on, he says.

A couple of years ago, most IT vendors planned their roadmaps based on reports, including those of Nasscom-McKinsey, IDC and Gartner, which saw a rosy picture for the Indian software sector. However, the dotcom bust, coupled with the downturn in the US economy and the September 11 attacks, have led to a dramatic reversal of fortune. Two years ago, tremendous potential was seen for the IT industry, which fuelled plans for Internet data centres (IDCs), e-commerce, Internet services providers (ISPs) and telecom initiatives. IT vendors, including Numeric Power, planned accordingly. However, not even 50 per cent of the plans have materialised, Chellappan says.

"We expected about 20 per cent revenue growth from the IT sector, but it was around 10 per cent. It is likely to be the same this year too. Now, we need to focus more on non-IT sectors to compensate the 10 per cent loss." he says. Over 60 per cent of the company's revenue is from IT-related industries.

Numeric Power services over 60,000 UPS installations for about 7,000 customers, including Infosys and Wipro, in India, and abroad. As far as focus goes, at the high-end are telecom, Internet Service Providers (ISPs), IDCs, software development and process automation, where high-range UPS systems are used.

Next comes the banking, finance and insurance space, followed by government, corporate and public-sector undertakings. The company also serves the small-office-home-office (SOHO) sector.

According to Chellappan, in the last one year, software application has suffered a beating. The pace of e-commerce has been very slow and some ISPs are not really active.

All these have had a ripple effect on IT vendors. Also, following the IT downturn, most software firms have put their infrastructure expansion plans on hold, which has affected companies like Numeric.

While business from large IT firms has been hit,, the SOHO market continues to support the company. It is a huge market, and growing at about 20 per cent per annum. In the last two years, the company sold about 30,000 UPS systems to the SOHO market, he says.

Numeric Power has three plants. The Chennai plant manufactures about 1,500 UPS systems per annum, from 5 KVA to 100 KVA. One plant at Pondicherry manufactures 7,500-10,000 UPS systems per annum of 0-5KVA capacity, while a second plant there produces 25,000 units per month of small UPS systems for the SOHO segment.

Numeric Power employs over 800 workers in different locations. Other than UPS systems, the company has a sheet metal plant near Chennai to manufacture UPS cabinets, about 200 per day, and a magnetic component plant to produce transformers, says Chellappan.

raja@thehindu.co.in

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