Channels

Maturing IT channel takes on more responsibility

The Indian IT channel has come a long way in the last one year, and though the hard times have wreaked their havoc among most channel players, they also brought in the much-needed maturity and responsibility that the distribution segment needed. Chris Ann Fichardo says partners and resellers are finally ready to take on their new growth-oriented roles, which will help them survive and thrive in the long-term

The last one year has seen the IT distributor channel in India mature and consolidate. It has also been one of the toughest times the channel has had to live through.

The year saw shrinking margins, lack of funds, and in some instances, even closure of business. In a bid to improve business practices, vendors adopted a ‘shape up or ship out’ approach when dealing with their channel partners. And though these measures seemed draconian from the outside, the exercise in discipline appears to have worked.

Says Jangoo Dalal, channels and business development manager at Cisco, “The last year may be seen as the year of consolidation. Players across the board faced challenging times. It is in the tough times that value-added services and commitment to customer satisfaction pay off. Genuine solution providers—integrators and value-added players—were able to survive the slowdown much better. The Indian IT channel trade has certainly matured over the last year.”

The biggest challenge or opportunity —depending upon how one looks at it—for Indian resellers is to scale up to changing IT demands of the Indian SME, says Jangoo Dalal

The consolidation mantra
Though the growing-up process was tough, at the end of the day, it’s a professional, growth-oriented and mature channel that has emerged. And here is where the next stage of the channel story unfolds.

In its infancy, the channel rode the growth wave; then came the slowdown—in the formative days of the channel—and partners had to adapt to the tough business environment. It is only now that the channel will see real growth and reach a certain level of maturity.

Till date, vendors have played a hand-holding role, but it’s now time for them to assume the role of a mentor. Specialisation is where the money really is, and hence vendors want their channel partners to become more proactive in developing specialised skills.

Says Sandeep Meh-rotra, channel account manager for Adobe, “The margins in the demand fulfilment mode will keep coming down and hence the channel needs to get more focused on certain verticals and build expertise around those verticals, instead of trying to be present everywhere.”

This seems to be the advice for channel players across IT segments, be it software, networking, peripherals or hardware. From a margin-oriented approach, the channel now has to adopt and develop growth-oriented policies. And while the initiative has to come from the partners themselves, vendors are more than willing to help them along the way.

Intel, for one, plans to continue its in-country expansion programme. Says Amar Babu, general manager for channels at Intel (India), “We are increasing our training, programmes, merchandising, etc, to more cities and hope to drive growth in the smaller markets. Our ‘Digital PC Parties’ have been successful and we will continue to invest in the same. We are also working with our partners to identify and skill them on relevant solutions for SMEs.”

Networking major Cisco is also planning to build and expand its Cisco University programme. Through this programme Cisco trains its resellers in networking concepts as well as provides them with hands-on-training. Till date, the company has trained about 1,500 sales and technical personnel in areas such as LAN, switching, routing, VPN and IP telephony and wireless.

Adobe too plans to provide the channel with regular training to upgrade their skills, and hence be more effective in the field. “We want to provide predictability in terms of margins for them [resellers] to invest in our business, and also create demand in the verticals where our products are being used. But most importantly we want to make our channel more proactive than reactive, in terms of developing new business and generating demand in the market,” says Mehrotra, while elaborating on his company’s channel plans.

With the Indian market projected to grow at over 20 percent, channel players are well positioned to drive this growth, especially by leveraging on opportunities in wireless and security solutions, says Amar Babu

Self help—the best help
A while ago, channel players were looking for growth opportunities. In an environment where competition kept increasing and margins steadily decreased, most of them were even questioning their decision to remain in the business. Today, the churn-out has happened, those looking to make a quick buck have taken the equally quick exit route, while those who had invested wisely in the business are now reaping the benefits.

Lucrative margins still remain an elusive goal, but at least the growth opportunities have begun to spring up. “Move up the value chain,” is the constant chant from the vendors. And now it’s time for the channel to take the initiative.

Market observers say that if the channel has to grow, it has to develop its own growth path and stop depending on the vendors to provide it to them.

And for those interested in growth, the opportunities are slowly but surely emerging. Says Intel’s Babu, “The Indian market is projected to grow at over 20 percent and channels are well positioned to drive this growth. The home and SME segments are growing and the channel has a natural strength in these segments. There will be new opportunities to move up the value chain with wireless and security solutions.”

Elaborating on the opportunities presented to the channel at the macro level, channel partners say that it is in security, consumer devices and networking where the growth will come from. Networking vendors state that an open telecommunications regulatory regime will encourage greater adoption of networking technologies in the corporate sector. “For the coming year, the distributor channel will see growth coming from corporates, educational institutions, the manufacturing sector, banking and finance, and the services sector,” predicts Cisco’s Dalal.

However, to take advantage of these growth opportunities the channel needs to spruce up its act. Says Adobe’s Mehrotra, “With customers becoming more educated on the products, channel partners need to get more technically competent to address their needs. This would also help them in up-selling to their existing clients. Channel partners now need to be more proactive in their approach and get into demand generation, instead being dependent on demand fulfilment.”

The channel is doing its bit to meet up to these expectations. In a survey conducted by Express Computer a few months ago, nearly all the 300 channel partners quizzed said that they have already adopted measures like cross-selling of products, solutions consulting, up-selling and selling next-generation consumer devices. Interestingly, nearly 42 percent of the resellers surveyed perceived consumer devices as the next big opportunity, as against old-time channel favourites like the storage, networking and security segments.

Adobe’s focus this year on the channels front is to be more proactive than reactive, in terms of developing new business and generating demand in the market, says Sandeep Mehrotra

At the turn of the day
Round one—the evolution of the Indian IT distribution channel—was the round of the vendors. It was they who decided the rules of the game, and channel partners had to play by the set rules. Now it’s time for Round Two. The round wherein the partner will play a more dominant role. It’s the channel that will decide which vendor is a long-term player and whom to put money on.

Resellers will specialise, for it is essential to their survival, but the area and level of specialisation will be driven by them and not by the vendor.

However, there are certain weak spots that channel players should watch out for. According to Amar Babu, one of the most prominent danger signals is assuming that the market will drive growth. “Market growth has to be driven by the players in the market and hence effort is required to realise the growth,” he adds.

Mehrotra cautions players against becoming lax and says that as customers are looking for solutions, the channel needs to acquire more technical skills to address customer needs. “They need to take the approach of not just selling a box but selling solutions inside a box,” he emphasises.

Adds Dalal, “Today, customers are looking for a complete solution which comprises of networking products and other IT-related equipment such as PCs, cables, software and services. This includes post-sales maintenance, network uptime, etc. Undoubtedly, such a solution can only be provided by resellers who are trained to deliver such value-added services. Therefore, the biggest challenge or opportunity—depending upon how one looks at it—for the Indian reseller is to scale up to changing IT demands of the Indian SME.”

Channel players do seem to be seriously taking on the responsibility now expected of them. In the last year we have seen instances of different segments of the channel coming together as a united front and owning up to most of the malpractices indulged in the past. The channel also now tackles more mature issues like warranty and credit, rather than just haggling over margins.

After all, with maturity comes responsibility, and the channel is more than ready to take on this new avatar.