What kind of problems do the Indian PBX manufacturers face?
I would break up the problems faced by the Indian manufacturers into four
types–technology, government apathy, expensive
business inputs, and unfavorable business environment. Indian companies that
are into development of switches are working on disjointed solutions, while a
customer like a basic service provider or a large call center requires an
integrated product. We have companies that have DSL solutions, PBX switches, WLL/DECT
technology, or conventional switches with SS7 support. Then we have software
companies that have excellent stand-alone solutions for billing, IVR, NMS or CRM
applications. To meet the end customer’s requirements, we need coordinated and
well-integrated Indian solutions.
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Rajesh Tuli |
Government policies towards switch manufacturers seem to be aimed at throwing
local manufacturers out of business. Imported goods attract 31 percent of
customs duty and CVD, but locally produced goods attract only 16 percent of
excise duty. Thus, to an outsider it seems that locally manufactured goods have
a protection of 15 percent vis-a-vis imported products. But on closer scrutiny,
one will understand that this is a myth. In reality, importer pays only on the
import price, but overheads like installation, commissioning, software and
profit, escape the incidence of tax, while a local law-abiding manufacturer has
to pay on the end realizable value from end customer, which is normally the
double of import price.
As if this much is not bad enough the direct importer pays SADD of 4 percent,
while local manufacturer pays a 12-percent sales tax . This anomaly is enough to
kill local manufacturing.
Classical economics defines three ingredients for any business–land,
capital and labor. Land in the present context would mean manufacturing
infrastructure, which is one of the most expensive in India. Insufficient
erratic power supply results in backup overheads. Capital is an expensive
ingredient to an Indian manufacturer as our interest costs are much higher than
the bank rates in Japan and the US. Labor is not cheap in the high technology
areas. Indian labor might cost low on the basis of each man-day but our
productivity per person is abysmally low. This is because of a lack of
capital-intensive automation and our low production volume.
Don’t you think marketing and branding is a big issue with Indian
manufacturers?
It is a big issue with any manufacturer but that can be taken care of,
provided the Indian environment provides some protection and support. It is an
expensive and risky exercise. The Indian manufacturers in these high-tech areas
cannot stand competition from multinational players who enjoy economies of
scale, global sourcing and financial muscle. One has to be sure of comparative
advantage before taking up this expensive exercise.
Technologically, foreign brands are much superior. What efforts are you
making in R&D?
I don’t completely agree with your contention that foreign brands are far
ahead of the indigenously made PBXs. We have products that are comparable and in
certain areas of technology even better than multinational products. We can
offer very cost-effective solutions for voice and data switching simultaneously
on the existing copper wire. For mass deployment of VoIP on existing low-cost
analog telephony devices, we can offer integrated and extremely cost-effective,
single switch solutions.
There are several country-specific cost-effective solutions that can be
developed, which might not offer the flexibility of RAD and Cisco, but would
meet our basic requirements with utmost ease at a fraction of cost.