The Indian economy is expected to be the fastest growing large economy in the coming years. For the global security industry, the country presents fresh opportunities, especially in the wake of slowdown in China. a&s recently interviewed Prasad Patil, Director of MIPL, to know more about the possibilities and chall
The Indian economy is expected to be the fastest growing large economy in the coming years. For the global security industry, the country presents fresh opportunities, especially in the wake of slowdown in China.
a&s recently interviewed Prasad Patil, Director of MIPL, to know more about the possibilities and challenges that India presents.
a&s:Some of the common challenges foreign companies entering India face are the stark cultural differences, slow government system and weak infrastructure. How can they overcome these challenges?
Patil:Foreign companies who want to make a mark in the Indian security technology market must be ready to understand and assimilate the local culture and systems – in a manner of speaking it is true of all international markets, but more so in India. In India, not only is the business environment substantially different from the western countries, even within India, there are stark differences in various states and sometimes even between various cities in a state! There is no set formula to tackle these challenges. However, the first step is to appreciate the cultural nuances and then try to adapt to them. Having a local partner or advisor will help to achieve this.
In terms of “slow government system” and “weak infrastructure”, my view is that these are evolving parameters. Already, we are seeing policy level shifts to improve efficiency in decision-making and in project implementation. This has already been reflected in the 12-rank jump that India has experienced in the global “Ease of Doing Business” index recently. Historically though, it is definitely true that patience is a big virtue when dealing with governments in India.
Having said that, where government level projects are concerned, I am happy to state that our company has been involved in few of the fastest implemented security technology safe city projects. There are some outstanding individuals occupying key leadership positions in the central and state governments and these “leaders” are driving the pace of projects themselves. Also, a slew of recent reforms have ensured that there is greater transparency and accountability now at the government level. And things are bound to only improve further.
a&s:Apart from the above mentioned challenges, are there any others that you think are relevant?
Patil:Certainly, availability of skilled resources is a perennial challenge. And this is not only true of labor but also for managerial and technical positions. “Skilling” is an absolutely vital necessity for the security technology industry in India. Companies willing to tap into the Indian Security market must also keep a certain budget aside for training their manpower. Another challenge is improving operational efficiency of human resources – which includes inculcating higher levels of professionalism, facilitating minimum response time and developing the ability to resist over-commitments on projects. Lack of these skills erodes customer trust not only for the company but for the entire industry as a whole.
a&s:What is your advice for foreign companies looking to enter India now? How should they go about it?
Patil:India is going to be one of the contenders for the fastest growth in the security technology sector in the next five years. I have considered several factors while making this presumption – reforms, economic growth, higher security awareness and better technology are a few of them. The Indian government's push for smarter cities is forcing city administrations to hold a mirror, assess their current status and design programs which will improve the quality of life. Having being involved in the smart city program ourselves at the consulting side, we are experiencing the enthusiasm at all levels in the smart city paradigm.
Security & Safety is a significant factor that is being considered in the rush towards smartness – this should be great news for the smarter companies not only in India, but also internationally. However, it is necessary that companies recognize the social element in this opportunity. India has great many challenges on the security front – women's security, disaster response, and crime data mapping being a few. International companies must find a way to devise solutions to these local risks (by drawing upon their expertise and experience) so that that the solutions which are thereby generated find popular resonance.
a&s:Compared to other countries, what are the unique features for the Indian distribution market?
Patil:The distribution market for the enterprise level procurement is in fact not fragmented and is dominated by a few global distributors of security products, some of whom are also into IT product distribution. These distributors are quite professional in their approach and are performing their services quite admirably. However, considering the peculiar characteristics of the Indian security market and its current position on the learning curve, even distributors may do well if they move into more a value added role, rather than mere logistics. Demand generation and support for customer demonstrations are a critical requirement that can be supported by the distributors well.
a&s:What steps from the current government are helpful to foreign companies?
Patil:Among the current reforms being carried out, initiatives such as “Make in India”, “Digital India”, “Skill India” and “Smart Cities” are all beneficial for our industry, both from a demand and supply perspective. Specifically for international companies, definitely, the ability to use India as a manufacturing base for at least a part of their overall manufacturing requirement seems to be attractive, given that the government has promised incentives as well as faster clearances. In terms of FDI the private security industry has a cap of 49 % and although that is unlikely to change, it might help if the government allows higher FDI levels for the electronic security segments. This will incentivize bigger SI companies to target the large security projects, which typically are a bane in terms of project completion. It will also enable learning for the Indian companies as well in terms of better project management practices and skill development.
a&s:Which verticals and market segments are best suited for foreign companies to enter in India?
Patil:I would like to speak for the electronic security space – and although the whole segment looks attractive, the system integration space in large ticket security projects is an area that should interest foreign companies. In this space (project value more than US$100 million, there are very few Indian players and typically projects have either not taken off for a long time or have suffered during execution.
Another sector is access control where the potential is tremendous given the extremely low level of current penetration as well as technological complexity. A third segment is home security systems with response mechanisms.
As India becomes upwardly mobile, Indians will begin to feel the need to protect themselves and their assets. The ultimate objective of the industry should be the “retailisation” wherein security systems reach the home and become a part and parcel of the daily routine.
a&s:How does the market see Asian brands against Western brands? Which is more in demand in specific verticals and why?
Patil:Generally, on the software front, we have seen customers prefer western brands and on the hardware front, brands from Asian countries are able to stand their own.
Within the CCTV segment, we have seen that the homeland security sector prefers European and American brands, whereas home and retail segments use Asian products. This could change in the near future, since many purchasers are realizing that most of the hardware manufacturing is done in Asia itself, whichever brand it may be. Also, prices are coming down year on year, which is good for the buyers. The onus is really on the manufacturers to justify the expense on their product. It is also imperative that manufacturers upgrade their technologies continuously if they want to command a premium – and it is in this respect that western brands are able to score with at least a perception of investing in research and delivering on innovation.
a&s:How does the market see Chinese products? Are they popular among distributors? Why?
Patil:It's a complicated question. Personally, there is no reason to not buy goods from China – as long as they provide comparable quality products. Since we deal with enterprise security purchases, our primary evaluation criterion is the technical competence. If Chinese products are able to score on this parameter, it's hard for the others to compete with them.
In terms of distributors, Chinese products certainly seem to offer great value as is seen in the multitude of Chinese security products that occupy prime space in security trade shows. One reason is obviously their attractive sourcing costs, which can be leveraged by Indian distributors for higher margins. However, if Chinese products can move up the value chain – rather than focusing merely on the price points – it will benefit them as well as the industry.