Partners in TN allege direct billing

Chennai: A month back, we had carried the news about Information Technology Traders Association (ITTA), Puducherry complaining about breadth or direct billing. Now, partners in Salem and Erode in Tamil Nadu have also brought up the issue of direct billing which they claim has been existing in their region for a long time. According to partners the vendors' practice of direct billing is taking a toll on their day-to-day business. Claiming that vendors like Acer and HCL target customers directly and poach the orders of channel partners, D Rajamanickam, President, Salem IT Association (SITA) said that partners are losing nearly 5,000 orders every year due to this practice.

“There are nearly 50 educational institutions in Salem and nearby areas. We have been dependent on those institutions directly or indirectly for business. Most often we hear from our partners that they failed to close orders due to direct billing by vendors,” Rajamanickam informed.

He claimed that the vendors also indulge in undercutting while billing directly to the institutions. “Companies like Acer and HCL are selling at nearly 30 to 40 percent less than the partners' price. This tarnishes the image of the dealers among our customers, as they feel that we are making more profits.”

Even S Prakash, CEO of Salem-based Vashini System Solutions felt that direct billing puts the dealers in a fix. “We lose our credibility with customers when vendors go and bill them directly at steep discounts. We are unable to go to the customers for any of our future business opportunities due to the unimpressive activities of vendors,” Prakash claimed.

He also pointed out that a couple of the business orders that were closed by him were then bagged by HCL's direct billing team, offering more than 25 percent discount. “Despite getting the purchase order from my clients, I had to abstain from the deals as HCL offered the same products, which I offered to the clients, for a huge discount. It is very sad that vendors try to bag even minuscule orders from partners,” Prakash averred.

C Balakrishnan, President, Erode IT Association (EDITA) said that almost all the vendors are destroying the market through the divide and rule method. He claimed that vendors like Acer hand pick a particular partner for namesake and bill large volumes through him to almost all educational institutions, leaving the other partners in the lurch. “When most of the business orders are routed through a particular partner, the others are hardly left with any business. Secondly, they bill at a much discounted prices of nearly Rs 3,000 to 4,000, which spoils the reputation of the entire community, as customers feel that we are making huge profits in the deals,” claimed Balakrishnan.

He further pointed out that he had missed many orders due to direct billing by vendors. “In some cases, partners are also not included in taking the orders and vendors directly bill our customers. There have been many instances of our partners missing orders due to the direct approach taken by vendors. Particularly, we have seen HCL competing with their partners for even small orders.”

When we contacted Acer, the vendor refused its involvement in any kind of direct billing.

Claiming that Acer has a business model that is consistently indirect, S Rajendran, Chief Marketing Officer, Acer India said that the model has been practiced assiduously across the world, including in India. “In India, in the regions mentioned, Acer has done some educational deals, importantly, all through the channel. Thus some of the large educational institutions that have been patronizing the Acer brand, have all been serviced through channel partners. It is only in the case of some large government deals, where the prerequisite for participation is a direct supply (on account of the need for multi-location billing and installation), has Acer serviced the needs directly,” clarified Rajendran.

Pointing out that in IT hardware business the scope for margins is very minimal, he said that for a mature, intensely competitive industry, the figures are in the very low single digits and thus the remark of “30 to 40 percent lesser prices” was not consistent with the current business realities.

Agreeing that in most of the projects Acer bills through a partner, Rajamanickam, President, SITA clarified that vendors hand pick a partner from a region and bill through them, bypassing the channels in that particular region at a steep discounted price. “We agree that Acer bills through the partners. But those orders are direct orders taken by the company and billed through a partner of their choice for name sake. However one thing they can't reject is the special price clearing offered to the customers, which are nearly 30 to 40 percent lower than the ones offered by us. Despite the involvement of a partner, the orders are direct orders and it makes no difference in having a partner in those deals as the other channels lose business regularly,” he argued.

He also pointed out that most of the channels picked by the vendors are from other regions. “There seems to be no territory restrictions for a partner, and any partner can operate in any region without confining to his territory,”added Rajamanickam.

In response, Rajendran clarified that the partners are generally authorized to operate anywhere within the state.

Despite repeated attempts to contact HCL, there was no response from them.