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 company competing in that market is optimal. In this article we will use the VXL Instrument case to elaborate the concept.
What is VXL’s business?
VXL Instruments enables companies around the world to build a flexible, secure, manageable, and cost-effective IT infrastructure. Its range of thin client devices help companies overcome the cycle of desktop obsolescence, free up internal resources from non-productive functions, and save millions of dollars spent protecting systems. The thin client is a server-centric computing model in which the application software, data, and CPU power reside on a network server rather than on the client computer. VXL Instruments won the “Highest IT Hardware Exporter Award in the Non-SSI Category” for the year 2006-2007.
The VXL dilemma
VXL Instruments is a leading manufacturer of thin client devices and has an 11% share of the global market. Most of its sales come from export to the US and the EU. The company is trying to explore a new market in India for its thin client devices. Competitors like Wyse and HP offer a wide range of products not only in the west but also in India. Therefore, it is time for the company to start thinking about the Indian market.
How to market the TC in India?
The company’s products such as TC23xx and TC73xx are reliable and cost-effective. The TC (thin client) can help eradicate several problems in server-based computing. It is very useful in the case of SMEs (small and medium-sized companies) where the IT requirements are quite specific. In the case of industries like hospitality, we need to explore various value unlock features so they can charge a premium. The main challenges are the following:
1. How to provide maximum profit without making the product too complex?
2. How to convince existing clients to switch from thick clients to thin clients?
3. How to market the TC in India?
Actually, the answer to the third question will give us a framework to find the answers to the first two questions.
I will regard VXL as a minimal risk company. It’s more product-centric than customer-centric. Therefore, their products are world class but the market penetration is not that impressive. Currently, VXL markets its products through interaction with the customer and external distributors such as 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 million) in shares of VXL Instruments. The investment was part of the trade finance deal that gave VXL $ 9 million (around Rs 45 crore) intended to finance its growth.
VXL designed expansion plans and a growth strategy with a view to increasing its thin client market share to 25 percent by 2007-2008. He has made inroads into different verticals such as ERP, healthcare, telecommunications, education and banking with client lists including SAP Belgium, Birmingham City Hospital UK, DOT India, British Telecom, IIM Lucknow, IIT Roorkie, Haga Bank Jakarta and HDFC India etc. . But currently its market share is well below its target.
Product knowledge and customer perception
We can roughly divide clients into two categories:
* Techno Savvy clients with financial muscle: These types of clients already know the products (TC) and we need to convince them that the thin client is a better option than the Fat client. For example, the upcoming 5-star hotel of the Velankani group in Electronic City, Bangalore. The Velankani are in IT and infrastructure and are aware of the technology and its implementation. According to Mr. R. Shiva Kumar (Information System Manager, Velankani), it is best to approach these types of customers when the product is in its embryonic stage. Once they acquire fat clients (FC) for your project, they will not be interested in CT due to the cost of the switch. Here we need to market TC as a device that will not only lower the total cost of ownership, but also provide a simple solution for all comfort requirements.
* Less tech savvy with mid-range investment capabilities – These types of clients don’t have their own IT department. They generally play it safe and opt for the thick client technology used by other players in their segment. In addition, they consider that their IT needs are minimal and do not find IT investments very attractive. Here, we need to educate them about the various advantages of server-based computing and the advantage of TC over FC. These types of companies must be approached to provide a total solution.
Market redefinition
Often, as markets evolve, the fundamental definition of the market changes in ways that increasingly disqualify some competitors while providing opportunities for others. The trend toward marketing the “system” of products rather than individual equipment provides many examples of this phenomenon. We will discuss this point with the help of the Docutel case.
Docutel – This automated teller machine (ATM) manufacturer supplied virtually all ATMs in the US until the end of 1974. In early 1975, Docutel found itself losing its market share to large computer companies such as Burroughs, Honeywell and IBM when these manufacturers started. to see the total EFTS (Electronic Funds Transfer System) needs of banks. They offered the bank an equipment package that represented a complete system of which the ATM was only one component. In essence, their success can be attributed to the fact that they redefined the market in a way that seemed to increasingly disqualify Docutel as a potential supplier.
Conclution
The redefinition of the market is not just limited to the banking sector; Similar trends are underway in scientific instrumentation (steel, cement and aluminum industries), process control equipment (Siemens, Vesuvius and SMS redefined the market); the industry of machine tools, office and household equipment (VXL is already a player) and electronic control equipment like some of the other examples. In each case, manufacturers that base their focus on commercializing individual hardware items are seeing their “strategic window” closing as producers of computer systems move to take advantage of emerging opportunities. HP has capitalized enough of the CT market by virtue of some aggressive mergers and acquisitions. In India, companies such as HCL Technologies and Satyam plan to enter the TC market as a total solution provider. Wipro is also exploring opportunities in SMEs. We can expect Wipro to venture into this segment in the near future.
As competition grows, SMEs also become lean. Most companies follow the make-to-order philosophy. All of these need an imperative free flow of materials, information, and finances. As practices change, many new applications of network technology have evolved. Here, we can see a margin for VXL to be a consulting provider and not a mere manufacturer of products.
