With the election of a stable government, growth in Tier 2 and Tier 3 cities, and economic recovery well under way, the MFD is projected to sustain healthy growth in 2009.

Market Dynamics

The Indian MFD market was an estimated Rs. 1245 crore in 2008. The MFD market can be broadly segmented into laser MFDs and inkjet MFDs. Laser MFDs accounted for 80 odd percent of the market with sales of Rs. 1010 crore in 2008. Inkjet MFDs accounted for the balance market with sales of Rs. 235 crore.

The Indian laser MFD market segment grew by almost 13 percent to 228,000 units in 2008, from 201,995 units in 2007. In order to better understand the laser MFD space, it is important to scan the market across two broad market segments: A-3 and A-4 laser MFDs. The A-3 market segment grew by a healthy 20 odd percent to 78,000 units in 2008, from 64,795 units in 2007. In 2008, Toshiba and Canon clearly led this market segment, with a combined market share of slightly more than 45 percent. Sharp, Xerox, and Ricoh were placed in tier 2, with a combined market share of another 45 odd percent. Players such as Panasonic, HP, and Konica Minolta accounted for the balance 10 percent of the market and fall into Tier 3. Panasonic had significant share in this balance 10 percent.

The A-4 market segment grew by slightly less than 10 percent to 150,000 units in 2008, from 137,200 units in 2007. HP continued to lead this market segment with over 50 percent market share. The major change that took place in this market in 2008 was the aggressiveness by Samsung that consolidated its second position with increased market share, lost to it by HP. Players such as Panasonic, Xerox, and Canon were placed in Tier 3 in this market segment. Players such as Brother and Kyocera also had some presence in this market segment.

The Indian inkjet MFD market witnessed some degrowth in 2008 and was estimated at 550,000 units. HP continued to lead this space with more than 70 percent market share, followed by Canon in Tier 2, and Epson in Tier 3. Other players such as Brother and Lexmark also had some limited presence.

The counterpart market'the Indian SFP inkjet market can't be ignored and was an estimated 450,000 units in 2008, witnessing some degrowth from the previous year. HP continued to lead this inkjet market segment as well, with over 65 percent market share, followed by Canon in second position, and Epson in third. Brother and Lexmark also enjoyed some limited presence in this market segment.

Demand Verticals

BFSI, IT/ITeS, government, telecom, education, manufacturing, healthcare large enterprises, SME, and SOHO sectors continued to account for majority of the demand. Government buying is largely done in Q3 while large enterprises portray a significant buying pattern in Q4. The SME sector is more consistent in the buying process across the calendar year. The online bidding process trend, powered by vendors such as Wipro, across verticals such as banking and insurance continued to be rampant. Criticism of such a process has always been over concentration on prices instead of technical specifications. However, buyers are always looking for simplification in the purchase process and the presence of such a function in the MFD space clearly reflects the sophistication levels the market has reached. Industry sources have also indicated that with the election of a stable government, the existing drive of e-governance is going to get more aggressive, which will have a direct implication for the MFD space, and this demand vertical will significantly drive growth in the future.

Outlook

The last 6-8 months have been difficult for all markets. According to industry sources, global IT spending is expected to decline by 3 percent. In the US, business and government purchase of IT goods and services is expected to decrease by 3.1 percent, in comparison to the 1.6 percent annual growth in the previous year. IT goods and services buyers have been challenged to aggressively minimize costs and maximize output.

The MFD space too has been challenged during this tough economic period. Larger customers have gone "soft" on orders. However, instead of going through a severe downturn, the MFD space has gone through a transformation in the selling process. Documentation management is a significant IT function of any business and can't be ignored. MFD vendors have replaced box selling with solution selling as the buyer community demands solutions for their business problems and not devices. The impersonal sales process has been replaced with a customer delight oriented process.

With the election of a stable government, growth in tier 2 and tier 3 cities, and economic recovery well under way, the MFD is projected to sustain healthy growth in 2009. MFDs offer a unique value proposition in the form of space utilization and are an integral part of the document management IT function. Growth is expected to come from newer avenues as well as through a transformed sales process.