HARD DISK DRIVES: Partners Ask For Better Service

The hard disk drives (HDD) market in India is expected to grow at a CAGR of 42.4%. The figure does look attractive but the growth in the first half of the current FY has been only around 12%, from H1 2002. 

Though HDDs comprise a small part of the peripheral business, Narendra Jain of MC Infotech saw a 15% increase in H1 2003. Computer Empire sold Samsung HDDs worth Rs 6 crore and Rs 5.5 crore worth of Seagate units. Amravati’s Juneja Computers had 28% of its JAS business coming from HDDs, which amounts to around Rs 3.5 lakh. 

Comnet Vision sold HDD worth Rs 75 lakh in H1 2003, a slight dip from Rs 80 lakh it garnered during this period the year before. “This is primarily because the per unit cost of a HDD has come down and not because the volume of sales has lessened,” explains PK Sharma, CEO of Comnet Vision. 

The Coimbatore HDD market also noticed a drop in sales in the JAS quarter due to reduced buying from the educational segment. M Natarajan of Galaxy Computers says, “Earlier educational institutions would purchase 1,500 machines every year. But now with their purchases dropping to around 300, our sales have too taken a hit.” His company sold an average of 100 HDDs monthly.

Vendors had a lot to smile about this year. Maxtor’s global fortunes looked up in JAS 2003, with a revenue of $1.066 billion and net income of $29.9 million. During the same period last of 2002, revenue was $819.7 million, with a net loss of $163.6 million. Seagate´s APac revenue, which was 38% of the total global revenue in AMJ 2003, rose slightly to 39% in JAS. 

LEADING THE PACK

Samsung ruled the roost, stealing a march on arch competitor, Seagate. Most tier-two partners peg Samsung’s marketshare at 55%, while Seagate enjoyed 40% and Maxtor took the remaining 5%. Samsung sales took a jump after it decided to offer a three-year warranty period on HDDs, where Seagate and Maxtor stuck to their guns of offering a one-year warranty. 

Quite a few dealers like Computer Empire and Champion Computers even took to stocking only Samsung, as buyers preferred a brand with longer warranty periods. Says Narendra, “We decided to sell only Samsung, as customers would specifically ask for it, even when we would highlight the technical superiority of other brands.”

Samsung also scored due to the presence of its service centers in most cities. At places where it did not have a dedicated service center, Samsung leveraged its electronic consumer good outlets to give basic post-sales service. Harish Puri, CEO, Computer Empire points out, “Samsung had a direct service center model right from the beginning, whereas Seagate launched their Seacare service network only three months ago.”

There is yet another reason for Samsung surging ahead of Seagate in the HDD game. And this was Seagate’s decision to lower the warranty period. Bharat Bhushan, CEO of RR Systems informs, “Seagate´s decision to lower the warranty period to one year has definitely taken away bulk of their share. Their strategy was to reduce the price and the warranty period, but this business model has not worked to their liking,” adding that Samsung gained almost 30% in the aftermath of the Seagate HDD warranty period reduction.

In several areas, Maxtor stocks were not accessible. For instance, in Coimbatore, Samsung and Seagate were the only two brands. And since Seagate was priced a little cheaper, it dominated with a 60% marketshare. Adds Natarajan, “There is no recall for other brands like Maxtor and Western Digital in this city.”

Partners are not expecting a very good HDD business in the OND quarter. Kapil Wadhwa, CEO of Champion Computers states, “We expected sales to increase in the festive season, but it did not happen.” He adds that it is difficult to predict whether business will pick up or slide down, since HDD prices keep changing constantly and shortages are a routine affair.

PK Sharma points out that compared to OND 2002-03, the market has grown in terms of sales volume this quarter, but overall, the reseller bottomlines have not been encouraging. 

SUPPLIES, PRICES STABILIZE

One unique facet of the HDD market is the shortage that surfaces in the OND quarter. But this time around, partners report that supply and prices are stable in most places. Last year HDD prices in OND had shot up by Rs 450 to Rs 600, as rumors spread that Readrite Corporation, a company supplying electronic components for HDDs, had filed for bankruptcy. But ReadWrite negated these speculations and prices came down by Rs 250 to Rs 300. 

“Maxtor works closely with its distributors, local OEMs and resellers, which helps in efficient product forecasting and delivery on demand”

Yogesh Kamat, Sales Manager, Indian Subcontinent, Maxtor Corporation

HDD shortages and price hikes usually occur in OND quarter, due to the increased OEM purchases for Christmas sales in the US and Western Europe. This is also the time when cellphone companies launch newer models and there is a sudden spurt in demand for ICs and PCBs. 

Seagate clarifies that sometime, due to unexpected developments or market dynamics, there is a sudden spurt in demand, which can lead to shortage for a short duration. “However, we can quickly respond to these changes because of our flexible manufacturing capabilities. Seagate maintains close contact with its distributors and channel partners, through our relationship managers who are in all the major markets, and are thus able to predict market requirements,” adds
Sharad.

Maxtor, too, makes sure that it keeps its partners abreast of impending product movements and changes so that they can change their requirements accordingly. To this PK Sharma quips “Vendors do communicate about imminent price hikes, but they usually don´t inform us if they are reducing the price!” 

Bharat, on the other hand, opines that vendors dont communicate about minor price changes. But some dealers have been so attuned to the frequent price changes that they take it in their stride. 

Amarjeet says that given the volatile nature of the HDD market, dealers have to check the HDD prices daily, just like sharebrokers do with stocks. This is precisely why dealers like Kapil and Natarajan, ensure that they are well-stocked to weather any likely supply issues that crop up unexpectedly. 

Recently, Samsung came under fire for a shortage, which caused an increase of Rs 100 to Rs 200 in the prices of its entry-level HDDs in major cities. This shortage was a result of the winding up of Read Write, Samsung’s supplier for HDD heads.

While conceding that there were some problems in the supply chain, Sonal Anand, National Product Head, Electronics IT & Telecom Division, Samsung India, states that things are under control now. “There is a nationwide HDD support network from Samsung. We are also implementing other initiatives to improve it further,” affirms he.

THE SERVICE JUGGERNAUT 

Though partners have learned to deal with frequent price fluctuations and shortage, it is service that gets their goat. This is especially true in small cities like Amravati and
Coimbatore.

“Samsung has implemented a web-based replacement service which helps us maintain a database of all HDDs imported in India”

Sonal Anand, National Product Head,  Electronics IT & Telecom Division, Samsung India,Â

Says Amarjeet, “We have to go Nagpur to get service. This is especially in the case of Seagate, which does not revert to any queries about service centers. Though Samsung keeps changing its service center locations, at least we get a reply from them.” 

Sandeep Agarwal of Bhama Data Products agrees, “If a dedicated service center for HDDs is opened in small cities, then sales will increase by at least 20%.” He points out that often customers go to nearby towns which have a service center, rather than purchase from small cities.

Vendors, however, have full confidence in their service network. Maxtor gets warranty-fulfillment from its distributors and feels that it is in distys’ best interests to provide customers with service, as this has become the most critical and single differentiating factor while making purchase decisions. 

Sharad too explains about Seagate’s expansion of its SeaCare Centers to additional 31 cities. “Currently, customers can avail on an average, two days turnaround from the Chennai center. The new SeaCare Centers will become fully operational very soon,” he adds.

Sonal points that Samsung has made considerable investment in developing a strong service network. “In fact, it has gone a step further in establishing e-relationships by implementing a unique web-based replacement service for its HDDs. The system will also help Samsung maintain a database of all HDDs imported into the country by its distributors,” he notes.

THE WARRANTY WAR RAGES ON

When Seagate decided to reduce its warranty period from three to one-year in September 2002, it stirred a hornet’s nest. Seagate’s distributor, Cyberstar agrees with the decision. Says Narendra Dubey of Cyberstar, “It was illogical to continue with three-year warranty for a product range that undergoes value additions every six months.” 

Sharad Shrivastava, Country Manager, Seagate justifies this move, since the maximum instance of drive failures occurs in the first few weeks of installation. “Initially, users were a little taken aback, but I think we have very successfully addressed their concerns. In fact, we have more than exceeded their expectation, by launching the ‘Peace of Mind’ initiative under which, the user is assured of repair/exchange of any faulty part in his computer, if he opts for the special insurance package worked out through the National Insurance Company. The only pre condition in the whole scheme is that the computer must have a Seagate HDD,”states he.

But not all partner appreciated this move. Samsung, which continued with its three-year policy was the clear winner in this scenario. This is not surprising considering that Indian users are price-conscious and want longer periods of warranty.

While PK Sharma points out that Samsung gained about 30% marketshare after Seagate and Maxtor´s decision to reduce the warranty period from three years to one year, Amarjeet Juneja, Proprietor, Juneja Computers, Amravati states that customers are even willing to pay Rs 200 - Rs 300 extra for a Samsung HDD, just to get the extended warranty. 

Harish echoes this opinion saying that Seagate´s decision to reduce the warranty period has been its pitfall. “At one point in time, Seagate enjoyed almost 90% marketshare. But today, Samsung has captured more than half of the market share,” notes he. 

But there are dealers who have a different take on the issue. Natarajan, for one, prefers the one-year warranty period policy.

“As a dealer, I make a margin of Rs 100 on a HDD and therefore it is not feasible for me to offer a three-warranty on it. With the reduced warranty, I can always sell another HDD to the same buyer year-after-year. It helps in increasing business and I can also provide an annual maintainence contract,” adds he.

Maxtor too continued to offer three-year warranty for its drives. However, the vendors needs to take concerted efforts, to make headway into the Indian market, where Seagate and Samsung reign supreme. Western Digital followed Seagate’s footstep, but since the sales of this brand in the country were negligible, it did not have much impact on partner’s business. 

COSY UP TO SCSI

A couple of years ago, SCSI interface was ushered in as new kid on the HDD block. Partners who were dealing in it spoke of comparatively good margins and it was touted to replace the ATA drives. 

But now partners say that the shift from ATA to SCSI has not taken place in desktops, though almost all servers are SCSI-based. Ponits out PK Sharma, “SCSI´s contribution to total HDD sales would be around 3%.” Typically, dealers earn only 2-3% margin on it.” 

Serial Attached SCSI is a new near-cabinet and disk interface technology that will leverage the best of the SCSI, serial ATA and fiber channel interfaces to bring new capabilities, high levels of availability, and more scalable performance to future generations of servers and storage systems. 

It uses a serial, point-to-point topology to overcome the performance barriers associated with storage systems based on parallel bus or arbitrated loop architectures. It will also connect with lower-cost, high-capacity serial ATA disks as well as high-availability, high-performance Serial Attached SCSI drives. This ability to support two classes of disk drives will offer system managers new levels of flexibility to manage and scale storage resources. The first Serial Attached SCSI systems and disk drives are expected to appear in the marketplace during 2004.

Maxtor is promoting both IDE and SCSI drives and is also an active member of the ANSI INCITS T10 Technical Committee, which is responsible for developing all SCSI standards, including the standards for Ultra320 and Serial Attached SCSI. 

Seagate too views SCSI drives as a key focus area, particularly in the enterprise and server computing space. It is working with SIs (SIs), enterprise partners and local OEMs on designing in SCSI drives into their system/solutions. “Our main focus for SCSI drives are in the film and television/broadcast industry and corporate segment,” informs
Sharad.

Samsung, on the other hand, does not deal in SCSI drives as it believes they are not in common use and will get phased out in the near future. “Our focus is on SATA drives, which are high-end drives, for corporates, end-user deals and OEM bulk orders,” Sonal states. “We plan to appoint special Samsung Storage Partner program for the promotion of these drives in six main metros ­ Delhi, Mumbai, Bangalore, Kolkata, Hyderabad and
Chennai.”

INCREASING BRANDSHARE

According to Gartner, India shipped 6,55,229 PCs in OND 2003, a growth of 22% from the same period last fiscal. This means that an equal number of HDDs were shipped in this timeframe through systems integrators and OEMs. Another 10% HDD sales is estimated to have come from retail sales. All this points out to the fact that India is on the growth track where HDDs are concerned.

Vendor are sparing no effort to harness this growth. Informs Yogesh Kamat, Sales Manager, Indian Subcontinent, Maxtor Corporation, “In 2003, we will continue to increase our branding in India by announcing new marketing programs for our partners and end-users, with an increased focus on the assembler segment.”

Maxtor had launched the ´Store and Score´ promotion and conducted a three-day Channel Outreach Program aimed at educating end-users and SIs about its products. It also launched the VIP Partner Program to help resellers, SIs and retailers provide better support to their customers. VIP Partners receive new product information, priority technical support and special promotions. 

For OND quarter, Maxtor has introduced a scratch card scheme called ‘Over Drive Dhamaka’ with assured gifts on every purchase.

Samsung’s key focus is on smaller cities, especially for its Turbo Upgrade offer. “We will concentrate on customer education.

Multimedia applications/movie viewing/music are today a must-have PC application. For all these, storage space is of key import. Thus, we are making a conscious attempt to upgrade the user to higher capacity and speed HDD,” says
Sonal.

Seagate recently introduced the ‘Peace of Mind’ program, wherein it partnered with National Insurance to allow users to insure PCs purchased after August 18, 2003. The insurance covers repair and replacement of computer parts, regardless of the brand. The only pre-condition is that the PC should have a Seagate
HDD. 

As vendors taking service and availability seriously, partners find a load taken off their shoulders. They can now concentrate on selling products and improving their bottomline with volume business rather than wasting money and time on servicing of
HDDs.

VINITA BHATIA  with inputs from ATANU KUMAR DAS

RMA INSTRUCTIONS

Instructions to avail of RMA service: 

Don't stack pallets or store products in high traffic areas. Only move pallets which are carefully bound. Always inspect it for damage, prior to use 

Leave drive in static shield bag until ready for use. Always open static shield bag by hand. Always place drive horizontally on a protected work surface. Use padded work surfaces and keep it away from other objects. 

Handle one drive at a time. Handle it by HDA (Black metal), never touch the PCBA. Do not lay drive on other objects or get distracted when handling drive.22

Don't bump or drop drive. Never stack individual disk drives. Never force it into a system. Keep drive away from the edge of your work surface.

Protect drive from static electricity. Always wear grounded straps when handling it. Use anti-static mats in the workstation. Keep a clean workstation. 

Handle defective drive carefully so as not to obscure cause of failure. Return drive in original packaging. Place it in box interface down. Do not place labels on the drive. 

Courtesy: Samsung