Siemens Ltd: Convergence Advantage

Siemens is no new name to the Indian market. Right from supplying India’s first 50-line switch in 1885 to today, Siemens has remained a major player in Indian communications.

The whole communications business is changing. So is Siemens. Keeping with its world-wide strategy, the group has reorganized itself into focused subsidiaries and JV to face the new challenges. Siemens has now Siemens Nixdorf and Siemens Telecom (product focus); Siemens Information Systems Ltd (SISL-services). While Siemens Public Communication Networks Ltd (SCPNL-carrier networks business), the Private Networks (PN) division of Siemens Ltd focuses on enterprise networks.

Business Model



All the IT/communications business are conducted through separate entities, except for the enterprise networks, which Siemens Ltd directly handles. Says SB Banerjee, executive vice-president (PN division), Siemens Ltd, “This is in tune with our world-wide strategy. This division would be responsible for enterprise products and services. “True, irrespective of whether it would be a separate company in the future or not, the rational behind the re-organization is clearly to focus on convergence and to reposition itself as a solution provider rather than a box seller.” 

There are three clear focuses–business systems, enterprise systems, and services. The enterprise systems division provides solutions that would encompass a unified network for voice, data, and video. The business systems portfolio would offer low-end EPABX/KTS under Hicom range (up to 384 ports), while the enterprise portfolio would engulf its Hicom range of products above the 384-ports category. The service division will focus on network integration. Between these three, it has another layer that would provide various applications like voice mail, faxmail, ISDN, videoconference, call centres, and ATM backbone. With six regions for field sales and services–the four metros, Bangalore and Ahmedabad–it handles the business systems business through channels, while the enterprise systems business is direct. For the data side of networks, it has tie-ups with 3Com, Nortel, and Cisco too. 

But why enterprise? “The market in India has been growing under 20 percent and is estimated to be close to Rs 1,200 crore. The network products market though is highly fragmented accounting for two-thirds of that, the rest is the EPABX/KTS and services segment. The EPABX market has been growing over 10 percent annually and the call centres by 35 percent. And that is the reason why being present in the combined market is important,” opines Banerjee.

Most would acknowledge Siemens’s strength in EPABX/KTS. According to Banerjee, Siemens, has gained more than 2 percent in market share in the last two years, with substantial penetration in non-metro market segments such as Defence/Railways. And its share in the EPABX and KTS market is approximately 13 percent. Our estimate of the KTS and EPABX market in India at present is Rs 350 crore by value and approximately 600,000 in terms of line units.” Strategy and Positioning



The international trends show initiatives towards use of convergence in technology to meet the projected growth of communication. And growth of Internet/e-commerce will drive this development further. The needs of the enterprises are growing not only in terms of speedy communication but other facilities. These are becoming part of the essential infrastructure for today’s enterprises/institutions.

From that of being a box seller, it is now concentrating on solutions selling. It would concentrate on key account management, channel management, and come up with new products and approach newer markets. Its efforts would be in positioning Hicom as platform at the lower end and as server at the high-end. Apart from the sales, its pre sale and post sale service strategy is being revamped. It has built a skill-based customer support centre in Mumbai. 

Growth Prospects



The decision to position itself is beginning to payoff for the division. The PN division in fiscal 1997-98 (financial year for Siemens is October-September), did business worth Rs 45 crore, which jumped to Rs 60 crore the next year. In financial year 2000, the division targets business revenues worth Rs 90 crore.