The Hindu Business Line : The turf wars are on

What resides in your PC? Virus? Or Quick Heal?' So runs a commercial from an anti-virus maker on FM radio. The radio may be an unusual but effective medium for an anti-virus company to create brand awareness.

As India emerges as one of the fastest growing markets, the battle among anti-virus companies, dominated by the multinationals, to grab a slice of the market is becoming intense, reminiscent of the cola wars of the mid 90's.

Welcome to the virus or the anti-virus wars!!

Anti-virus (AV) software has so far been dominated by a clutch of multinational companies, Symantec, Kaspersky and Trend Micro. But some domestic vendors have also entered the fray, such as CAT Computer Services Pvt Ltd from Pune and K7 Computing Pvt Ltd from Chennai.

Increasing IT adoption

A key driver of anti-virus ware is the massive computerisation and increasing telecom density in the country. By global standards, India's computer penetration is still low. So is telecom density. PC penetration in India is barely about 2 per cent of the population. Mexico's PC penetration, for instance, is about 47 per 100 and for Russia, it is about 15.

As for telecom density, despite the phenomenal increase in the telecom network, density is about 9 per 100 people. The comparable figure for China is 52 and the Asian average is 14.

Says Diptarup Chakraborti, principal research analyst at Gartner, "Increased IT adoption in enterprises — government and corporate sectors — and rising PC penetration have created awareness about the need for anti-virus ware."

Moreover, as Internet usage grows, and with more people accessing the Net for online transactions, the need to protect data is being felt more keenly.

CERT figures

That the virtual environment is clearly not fully secure is apparent from data from the Computer Emergency Response Team (CERT), the electronic security arm of the Government. In March this year alone, 47 security incidents were reported to CERT-In from various National/International agencies.

About 73 per cent Phishing (the act of tricking someone into giving confidential information or tricking gullible users into doing something that they would not or should not do. For example: sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft) incidents were reported. At least 4 per cent of the incidents related to virus/worm under the malicious code category and 23 per cent of unauthorised scanning incidents were reported.

As compared to the previous month, the number of virus/worm incidents has decreased while scanning and phishing incidents have increased. "This, is turn, is driving the anti-virus ware market," Chakraborti says.

Riding piggyback

Also, anti-virus software is riding piggyback on personal computer (PC) sales. High-end PCs costing upwards of Rs 35,000 come with anti-virus software in their pricing. Further, laptops are being bundled with pre-installed anti-virus ware. As sales of PCs and notebooks picks up, anti-virus ware also sees a proportionate increase in sales, says Chakraborti.

Along 2 levels

Broadly the anti-virus market could be split along two levels. The Enterprise Market (government, corporate users — financial institutions, petroleum and manufacturing entities) and retail PC users.

The secure content market in India is estimated to be around Rs 200 crore. IDC India estimates that the market could grow to Rs 480 crore by 2008, or by about 140 per cent in a year's time.

But Cyber Security Expert Subimal Bhattacharya says, "This figure does not factor in the grey market." The grey market or pirated software market is estimated at about four times this figure.

Secure content management covers anti-virus protection, messaging security/e-mail filtering and Web content management/Web content filtering components. Antivirus alone is estimated to contribute 75 per cent of this segment. Inclusive of enterprise networks, anti virus ware markets could grow to over Rs 1,000 crore, says Bhattacharya. This could happen by 2009 as financial institutions, and corporate ventures across the length and breadth of the country increasingly begin resorting to IT-driven applications.

Besides, another major driver are the e-Governance projects of governments and local bodies in the country. "Financial inclusion alone will be a key catalyst for the explosion in the anti-virus ware market," says Bhattacharya.

This year itself, markets are expected to grow by at least another Rs 75 crore for the organised sector or enterprise networks. But it is only by 2008 and 2009 that the balance sheets of all the anti-virus companies begin overflowing with cash.

It is for this market that both global and domestic companies are in the slugfest.

From the consumer market perspective, users appear to prefer original anti-virus ware. A good portion of the sales are accrued from Net downloads.

As in the US, users in India too prefer to download anti-virus ware, especially for the updates. Downloads, says Chakraborti, have been on the rise in the past four to five quarters.

Symantec and Trend Micro of the US are dominant players in the Indian market, at least for now. These two, along with McAfee, are focused on the enterprise markets completely, and enjoy a head start.

But smaller players have raised the pitch and competition is likely to become more intense in the coming months as they wrestle with global companies for space in the high-value enterprise markets, particularly e-Governance and financial institutions.

Upgrading offices

The competitive environment has prompted the global companies to upgrade liaison offices into full-fledged subsidiaries or operate through tie-up arrangements. Trend Micro's liaison offices in India have been upgraded into full-fledged subsidiaries. Symantec also has a fully-owned domestic operation.

Trend Micro's country manager, Niraj Kaushik, says, "By the end of 2007, we plan to more than double our current headcount of 20 professionals. We have had 100 per cent growth year-on-year in India since inception and we expect the growth to continue at the same pace over the next couple of years." Symantec has opened response centres in Pune and Chennai.

Kaspersky, a Russian anti-virus company, has tied up with the Hyderabad-based Zoom Technologies for researching and monitoring virus traffic.

Despite the presence of domestic players in the anti-virus ware market, Bhattacharya says, "The enterprise network markets will continue to be dominated by big multinational companies such as Symantec."

Says Symantec's India managing director, Vishal Dhupar, the "Indian security market has traditionally been driven by the enterprise segment. India has been and continues to be a very important market for Symantec. We have packaged Symantec's offerings for the Indian market in a manner that enables customers to opt for one module at a time. This makes it easy for them to adopt new technology and upgrade it at regular intervals within their IT budgets."

Further, Symantec believes that many opportunities in India have still not been optimised.

SMBs, small cities beckon

Hence, not surprisingly, it is the small and medium business (SMB) units or micro enterprise networks that companies such as the Pune-based CAT are focusing on, clearly aware that they may not be in a position to compete with transnational companies.

As in the cola wars, domestic vendors are targeting tier-two and three cities.

Says J Prasanna, Joint Secretary, Cyber Society of India, "Smaller companies need better product features such as hijack restore, generic root kitdetector, and native boot cleaner, to clean infected machines and privacy tools when compared to larger companies. They also need to concentrate on smaller towns where the actual PC explosion is taking place."

CAT has already got its products certified by West Coast Labs for Checkmark Level II certification and won the Virus Bulleting 100 per cent award 17 consecutive times for its anti-virus ware branded `Quick Heal'.

K7 has obtained checkmark Level I and Windows Vista certified from Microsoft, the only Indian anti-virus ware company to do so.

The certifications indicate that Indian companies are not content with being just vendors to domestic SMBs for sustaining growth. Instead they are preparing for global forays.

CAT has already aggressively pitched for the SMB segment in tier-two cities that are beginning to ride the computerisation boom. CAT's director, Sanjay Katkar, says, "We derive close to 90 per cent of our sales revenues from these cities."

Price sensitivity factor

The SMB and non-metro focus of domestic players is also largely driven by price sensitivity. Quick Heal, for instance, has been priced as low as Rs 500, though the fully loaded package that includes firewalls, anti-spam and anti-spyware is priced upwards of Rs 2,500. None of the MNC products however, is priced anywhere close to the domestic vendors. In fact they are priced at a substantial premium.

Yet MNCs are also not prepared to lose out on the SMB markets. The SMB sector is the fastest growing market, presently. Estimates are that 44 per cent of the total IT spend or a mind-boggling Rs 26,100 crore (about $7 billion) comes from the SMB segment.

Says Kaushik, "We are now moving towards further expanding our market. This is happening with more focus towards SMB space products, which are both cost-effective and maintainable, issues most relevant to them."

Price engineering, therefore, is the game played by MNCs to gain a foothold in the SMB markets. MNCs offer package deals in the form of perpetual contracts. These contracts allow for high-priced initial purchases with free downloads at periodic intervals. Alternatively, the pricing is worked by low prices initially, though there are no free downloads.

For positioning themselves in the market, MNCs have entered into direct arrangements with hardware makers, converting their anti virus wares as part of the original equipment. Accordingly this status allows the PC or the SMB server buyers to also purchase the anti-virus ware prices to be loaded into the hardware prices.

However, the MNC arrangements work well only with branded PC makers. The price-sensitive tier-two and three-tier markets are more dominated by assembled hardware. Aiming for these markets requires a different channel.

CAT uses retail chains for accessing these price-sensitive customers and focusing largely on these smaller cities/towns.

Clearly there is market segmentation taking place, though this could very well be a prelude to consolidation — as in the case of the cola wars!!

vishwa@thehindu.co.in

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The turf wars are on