The year 1998-99 emerged as a mixed year for the Indian hardware industry in India. While it achieved a critical mass in volume terms and value of shipments, it shrank by approximately 18.89% over its past year’s performance in revenue terms. The revenues of the hardware industry stood at Rs. 42.50 billion in 1998-99, as against Rs. 52.4 billion in revenues during 1997-98. This is partly due to unexpectedly weak exports performance. The year also witnessed cut throat price wars, entry of new players, new introductions in VFM (Value for Money) segments, and this resulted in growth in volumes, albeit at reducing margins.

The increasing thrust by private sector to have a connected enterprise and implement state-of-the-art enterprise computing systems contributed to this thrust. At the same time, there has been a growing awareness in the small and medium scale sector (SMEs) and SOHO of the benefits of IT. They contributed about 32% of total hardware shipments. With this contribution, their purchases may not be counted anymore as small compared to large corporate even as SMEs along with SOHO segment are being credited for driving domestic IT industry’s growth during 1998-99. In fact, it was their preferences for the nature of the systems and network architectures that kept the mood buoyant in the hardware industry. They signified a new generation of users who are not looking at moving on an organic growth path of using IT for backroom operations and then using it as a front end for decision making process.

Over the years, the hardware industry in India has been steadily losing its industry share in favor of software and services industry, in conformity with international norms. During the year, software industry contributed 65% of total Indian IT industry’s revenues. Notably, :

• Overall, hardware industry shrank by about 18.89% in revenue terms in the year 1998-99, as compared to revenues of 1997-98 but, overall PC unit shipments grew by 30.2 percent in volume terms

• Servers market grew by about 8.17% during the period in volume terms

• A highlighted price war was unleashed with domestic majors as well as MNC companies promising to give best deal to the user. It clearly was a factor that helped to improve hardware performance (in volume terms). With tight money conditions, the market saw buyers being wooed by extremely competitively priced products with standard international features and quality.

• It was an year in succession for market share supremacy of Pentium chips. While Intel captured a large chunk of high end user market with Pentium II based systems, Pentium Celeron / II held about 63% of total microprocessors market.