Channel peace restored in Tamil Nadu

Sethuraman NR

Chennai

September 28th, 2007

After days of protest over the discounted prices offered to Electronics
Corporation of Tamil Nadu (ELCOT) by vendors like Lenovo, Samsung and Dell, the
situation in Tamil Nadu's channel fraternity is returning to normalcy as
business has started getting back on track. Trade in the state had come to a
standstill after vendors like Lenovo and Dell were accused of providing products
to at low cost to ELCOT. The channels had in fact stopped selling Lenovo laptops
and returned their stocks to distributors.

Owing to this reaction from the channel vendors withdrew their offer to ELCOT.
In fact Lenovo has completely pulled out from ELCOT's business and Samsung has
agreed to the channels demands.

When contacted, the spokesperson for Lenovo said, "Lenovo has retreated
from the notebook offer as we did not receive even single order from ELCOT. We
took up the deal only because it was exclusive for students. We understand the
concern of our channels that this could be misused and have since come out of
the deal."

Similarly Samsung had decided to offer three year warranty for its products
sold to ELCOT, while partners were given the same products with just one year
warranty. This disparity in the warranty policy riled the channel and they asked
Samsung to either reduce the warranty period extended to ELCOT or offer the same
policy to dealers as well.

Reacting to the this demand, Samsung decided to offer the extended warranty
period to products sold through the channel as well, to create a level playing
field. Sharad Agarwal of Samsung India, said, "As per our policy we
provided such an opportunity for the government - especially for the student
community but that has created huge contempt among our channels. We will shortly
offer a three year warranty to the channels too."

These victories have buoyed the channel's confidence and they have now
decided to deal with other issues as a unified body. It has also made the
channel community realize that they can demand for a parity in vendor policies
and get their demands met.

Said PN Prasad, VP of CONFED-ITA, a group of 10 channel associations in Tamil
Nadu, said, "The whole issue arose only due to the lack of confidence in
the channel as the vendors ran for bulk bookings and increased volumes from
government agencies. Vendors have to trust the channel completely and the
channel in turn has to maintain the same level of confidence in vendors. Even if
one of the two fails, the whole system gets upset."

Added S Karthikeyan, President of CONFED-ITA, "Vendors should have clear
policies and they should always be open minded. Every partner cannot be aware
about what is going out of the industry. So when the companies create some
policies and act on that, they should inform partners about it." He added
that when a trade is carried out it should be continued without adding
complexities for seeking short term benefits.

Having one set of policies for the channel and one for other customers would
always be dangerous for the vendor, felt PK Harikrishnan, President of
Cochin-based All Kerala Computer Manufacturers and Dealers Association (AKCMDA).
"Two different strategies cannot be followed because confusions and loss
become inevitable. Every vendor must be transparent in its business dealings
with the channel," he said.

With the current channel uprising it is unlikely that any other vendor would
contemplate offering different policies to the channel or any other customer
vertical. The unity displayed by the channel community in Tamil Nadu has also
sent a clear message that partners in the state will not hesitate from taking
drastic steps like stopping business with a particular vendor for the general
betterment of their community.