ABB to focus on product, service segments

Mumbai, January 23: | Updated: Jan 24 2002, 05:30am hrs
ASEA Brown Boveri (ABB) -- the global leaders in power and automation technologies -- in a major shift in its business strategy, is planning to give a boost to the products and services segments of its business.

Traditionally, the company has been deriving around 80 per cent of its business from its projects segment, while products and services contributed only 20 per cent to the revenues.

According to the new strategy, the company plans to focus in a major way on products and services and in the next three to four years plans to increase the share of revenues coming from products and services to 40 per cent, while projects will contribute 60 per cent to the business. ABB head of group function communications India Harmeet Bawa, however, clarified that the company is not scaling down on projects but will increase its presence in products and services. He said that in the next three to four years the company plans to double its turnover.

In line with the new strategy to give an impetus to its products and services, the company has not only introduced a whole new range of products but has also firmed up plans to double its channel partners in the next two to three years.

ABB presently has at least 200 channel partners or dealers. Mr Bawa said that as the growth in the projects business will be marginal in the future -- because of the very nature of the business -- products and services will give the company the necessary impetus for growth. ABB is also creating a virtual organisation for ‘services’ which will perform as a separate business arm for the company unlike its earlier practice, wherein services used to be just another function of the project division.

The company will not only offer services for its own projects and products but will also offer its expertise to outside parties. The company will also set up its call centres to offer services and consultation.

Mr Bawa said that the company stands to gain largely from emphasising on products and services as this would reduce the ‘order to revenue’ cycle time unlike in projects where it is very large.

The company can also have a better cash flow, higher margins and a very low working capital requirement as compared to projects where working capital requirement is the highest. Under its new strategy, ABB will offer a basket of products to its channel partners. In line with this strategy,

ABB is expanding its range and launching several new low voltage products like the electrical installation bus (EIB) concept for building automation among others.

ABB officials said that new low voltage products that have been introduced will be imported and as soon as the company achieves a critical mass in the market, it may set up a manufacturing facility.