What is a Strategic Window?
The term strategic window is the limited periods during which the “fit” between the key requirements of a market and the particular competencies of a firm competing in that market is at an optimum. In this paper we will use VXL Instrument’s case to elaborate the concept.
What is VXL’s Business?
VXL Instruments is enabling companies around the world build a flexible, secure, manageable and cost-efficient IT infrastructure. Its range of thin client devices helps enterprises beat the cycle of desktop obsolescence, free internal resources from non-productive functions, and save millions of dollars that is spent in securing systems. The thin client is a server-centric computing model in which the application software, data, and CPU power resides on a network server rather than on the client computer.VXL Instruments won “Highest IT-Hardware Exporter Award in Non-SSI category” for year 2006-2007.
VXL’s Dilemma
VXL Instruments is leading manufacturer of thin client devices and commands 11% share in global market. Its major chunk of sales comes from export to US and EU. The company is trying to explore new market in India for its thin client devices. Competitors like Wyse and HP offer diverse range of product not only in west but also in India. Therefore, it’s high time that company starts thinking about Indian market.
How to market TC in India?
Company’s products like TC23xx and TC73xx are reliable and cost-effective. The (thin client) TC can help in eradicating various pain in server based computing. It is very useful in case of SME’s (Small and medium scale enterprises) where computing requirements are pretty specific. In case of sectors like hospitality, we need to explore various value unlocking features so that they can charge a premium. The major challenges are following:
1. How to provide maximum utility without making product too much complex?
2. How to convince existing clients to change from fat clients to thin clients?
3. How to market TC in India?
Actually the answer of third question will give us a frame work for finding the answers for first two questions.
I will consider VXL a minimum risk taking company. It’s more product centric than customer centric. Therefore, its products are world class but market penetration is not that impressive. Presently, VXL markets its products through client interaction and third party distributors like Priya Limited. This approach reduces marketing expenses but the approach has its own limitations.
In 2005, Mumbai-based distributor Priya Ltd invested $2 million (around Rs 10 crore) in equity in VXL Instruments. The investment was part of the trade finance arrangement that gave VXL $9 million (around Rs 45 crore) aimed at funding its growth.
VXL chalked out expansion plans and a growth strategy with a view to increase its market share of thin client to 25 percent by 2007-2008. It has made inroad in different verticals like ERP, Health, Telecom, Education and Banking with client list including SAP Belgium, Birmingham City Hospital UK, DOT India, British Telecom, IIM Lucknow, IIT Roorkie, Haga Bank Jakarta and HDFC India etc. But presently its market share is much below its target.
Product Awareness & Customer Perception
We can roughly divide the customers into two categories:
* Techno Savvy Customers with financial Muscle: These type of customers, already know about the products (TC) and we need to convince them that thin client is a better option over Fat client. For example Velankani group’s upcoming 5-Star hotel in Electronic City, Bangalore. The Velankani’s are in IT and infrastructure and they are aware about technology and its implementation. According to Mr. R. Shiva Kumar (Manager Information System, Velankani), these types of customers should better be approached when the product is in its embryonic stage. Once they acquire fat clients (FC) for their project, they won’t be interested in TC due to switch over cost. Here we need to market TC as a device which will not only reduce the total cost of ownership but also provide simple solution for all comfort requirements.
* Less Techno Savvy with Medium Range Investment Capabilities: These types of customers don’t have their own IT department. They generally play safe and go for the fat client technology being used by other players in their segment. More over they consider their computing needs are minimal and don’t find IT investments much attractive. Here, we need to educate them about various advantage of server based computing and advantage of TC over FC. These types of firms should be approached for providing total solution.
Market Redefinition
Frequently, as markets evolve, the fundamental definition of the market changes in ways which increasingly disqualify some competitors while providing opportunity for the others. The trend towards marketing “system” of products as opposed to individual piece of equipments provides many examples of this phenomenon. We will discuss this point with the help of Docutel case.
Docutel: This manufacturer of automatic teller machine (ATM’s) supplied virtually all the ATM’s in US up to late 1974. In early 1975, Docutel found itself losing its market share to large computer companies such as Burroughs, Honeywell, and IBM as these manufacturers began to look at the banks’ total EFTS (Electronic Fund Transfer System) needs. They offered the bank a package of equipment representing a complete system of which the ATM was only a component. In essence their success can be attributed to the fact that they redefined the market in a way that increasingly appeared to disqualify Docutel as a potential supplier.
Conclusion
Market redefinition is not only limited to the banking industry; similar trends are underway in scientific instrumentation (Steel, Cement, and Aluminium Industries), process control equipments (Siemens, Vesuvius and SMS redefined the market); the machine tool industry, office & household equipment (VXL is already a player) and electronic control gear as some of the other examples. In each case, manufacturers basing their approach on the marketing of individual hardware items are seeing their “strategic window” closing as computer systems producers move in to take advantage of emerging opportunities. HP has capitalized sufficient TC market by virtue of some aggressive M&A. In India companies like HCL Technologies and Satyam are planning to enter in TC market as a total solution provider. Wipro is also exploring opportunities in SME. We can expect Wipro to venture in this segment, in near future.
As the competition grows SME’s are also becoming lean. Most of firms are following make-to-order philosophy of manufacturing. All these need free flow of materials, information and finances imperative. As the practices are changing, many new applications of networking technology have evolved. Here, we can see a scope for VXL being a consultancy provider and not a mere product manufacturer.