Survival Tips For Turbulent Times

Much has been written about the meltdown and its impact on the IT industry
and how much it has impacted the industry. But as it stands today, there is a
lot more that the country has to worry about. With the political situation in a
turmoil and terrorist activities at an all time high, the country is on
tenterhooks.

While first it was the looming news of the slowdown in US and the fluctuating
dollar, the recent trail of bombs and bomb-scares have only added to the
distress felt by the industry. While the festive season is usually one that the
IT looks forward to, due to the increase in buying and loosening up of the
purse-strings, this year much of the excitement and hoopla was doused owing to
the prevailing situation.

In such a situation, what channel partners need to do is have lots of
patience and stay calm. Vendors also need to offer a helping hand to solution
providers (SPs) and vice versa. While everyone is looking at the meltdown and
its impact, we have done an advisory report to give vendors as well as SPs an
idea of what they should be focusing on during this time. Here's a look at what
leading vendors and SPs in the country had to say.

Why the panic?

While the media has been crying hoarse about the meltdown and its impact on
India, there are still many people who feel there is not really much to bemoan.
Yes, the economy is undergoing a crisis of sorts, but the industry is of the
general feeling that the situation is bound to get better. Customers have become
wary of the situation and have started pulling their purse-strings but this will
not in any way mean that IT expenditure is going to stop.

A few wise people will tell you that this is not the time to panic. On the
contrary it is a time to take stock of the situation and adopt more efficient
ways to run your business. After interacting with leading SPs and vendors in the
country, we got the general impressions that though these are trying times,
there is really not all that much to panic over. We got vendors and SPs to share
their experiences over the last few months and their advice to one another in
ensuring that the sailing is smooth.

Cruise control

Vendors we spoke to were rather calm about the prevailing situation in the
country. Most seemed to feel it was not a time to get worried sick. Though the
fluctuating dollar rate has been a cause of concern it does not mean we are in a
crisis situation. Most vendors even claimed that their sales had not been impact
vis-à-vis last year. Sharing his thoughts on the situation, Dinesh Sehgal,
Regional Director-India, Sri Lanka and Bangladesh, Tandberg said, "People are
getting cautions about their expenditure. They are asking questions like, 'do we
need it or want it?' This extra cautious approach is a result of the uncertain
situation." Sehgal added that despite the element of caution, Tandberg was
witnessing robust growth in domestic consumption sector.

This is a time when many organizations will be asking themselves pertinent
questions about IT purchases. Sehgal shared his view about theory of
substitution, ie if taking a flight is expensive what are the alternatives that
will save one the extra cost? He advised that at this time, SPs could benefit by
advising their customers on how they can cut down costs. Tandberg on its part
has been educating its partners by sharing case studies from the US. Sehgal's
advice to SPs is, "Focus on building long-term value with customers, even if
that means taking a short-term hit, because that will reap benefits."

For D-Link, the growth QoQ has been less as per the set target but according
to Kandarp Jhala, AVP-National Channel, D-Link India, this is due to cautious
customers. "The market dynamics are changing, we are witnessing a delayed
response from customers regarding their IT purchases. But requirements will
always be there, all that is required is better planning," opined Jhala.

D-Link is among the many vendors who have increased the prices of their
products. In October the vendor increased prices by five to seven percent,
depending on the product category, and attributed the hike to the dollar
exchange rate. While conducting channel activities like Empower Partner Program,
to help their channel perform better, Jhala also feels that there are steps SPs
can also take to make the going easier for themselves. "SPs should focus more on
offering solutions and services as this will help them get closer to their
customers," said Jhala. By offering maximum value to products an SP can win the
loyalty of a customer. He added that an over cautious approach can be bad, so
SPs should not be daunted, but rather look at doing incremental business because
infrastructure requirements will always be there.

A few SPs also felt that there was unnecessary hype created around the
economic situation in the country. "The hype around economic slowdown and
recession have been created by media and I would say that at the moment there is
no need to panic. Fundamentals of business don't change that quickly. Though I
agree that the financial sector has been hit and that has happened majorly
because of a lot of gambling that they involve. Despite all the talks around
slowdown people who have to make their investments will continue to do so,"
opined Ranjan Chopra of New Delhi-based Team Computers.

Considering the current scenario vendors should allow us to operate on higher margins and increase the credit limit by at least 15 to 20 days Ranjan Chopra CEO, Team Computers	Vendors must support partners through collaborative efforts on lead generation, market addressal and solution skilling V Murali CEO, Precision Infomatic	SPs should focus more on offering solutions and services as this will help them get closer to their customers Kandarp Jhala AVP-National Channel, D-Link India

Cost cutting mantra

While exercising caution may be the new buzzword, this can also translate to
business for some vendors. "Looking over the economic situation in the current
time period, people are now opting for managed services so that they can avail
multiple applications in one package. Cost has become a factor. Everybody is in
a cost cutting mode and hence optimum utilization of the resources is a concern
for everyone. Earlier people put their money to strengthen the IT
infrastructure, now they are utilizing the IT to get the maximum value of any
product," said Sushant Dwivedy, Business Group Lead-MBS, Microsoft Corporation
(India). He added that because of the economic slowdown, the application market
would grow, as customer would demand for more functions in one package. "As per
my view on growth of the economy, the economic scenario is changing but the
market sentiments are weak. People are worried of financial aspects and this is
weakening the market," shared Dwivedy.

Talking about how SPs can overcome the situation, Dwivedy advised, "SPs
should provide maximum value to the products so that customers can get maximum
benefit out of their purchase. Also, whatever projects they are executing should
be managed more professionally. Implementation of the project and on-time
delivery should be given priority as this would result in timely payment."

One of the major differences one can make out in customer spending during
these times is that of need and want. While earlier customers were more
concerned with the technology and brands, now their focus has shifted to cost.
"Cost has become a deciding factor and this is due to the slowdown and the
dollar rate," shared Ismeet Singh, System Engineer, Cisco Systems (India).

Price hikes

It is vital that vendors maintain price stability. Though sometimes it is in
the hands of the vendor, there are occassions they are also helpless. But by
minimizing the impact of the price hike on the channel the vendor can gain the
partners loyalty. While some vendors claim that they have not hiked the prices
of their products, others admit to a slight increase but attribute it to the
fluctuating dollar rate. "Dollar appreciation is an overall market phenomenon
and the entire channel is aware of the current economic scenario. To maintain
healthy business practices and ensure that our channel partners continue to have
profitable business; the dollar impact has been streamlined through price
corrections and specific channel schemes launched by Logitech. Logitech India
has always believed in carrying out transparent and just business practices in
the country. In the same light, the price has already been hiked for the entire
range of products. However, looking at market dynamics, Logitech India has also
launched aggressive channel programs to sustain market momentum and help channel
glide through these challenging times," shared Subrotah Biswas, Country
Manager-India and SAARC, Logitech.

Sharing his thoughts on whether he saw the situation improving, Biswas said
that though it is hard to tell how the market will be like six months from now
there was bound to be a slow but steady improvement.

TVS-E is another vendor who has increased the price of its products by over
six to 10 percent in two stages, to cover up the forex impact.

Winning loyalty

Speaking on the measures that TVS-E plans to take encourage its channel
partners during this period, R Jaishankar, Head-Sales and Marketing, TVS
Electronics said, "We will continue supporting both the 2 and 3-tier cities
through stretch incentives that can support their additional costs else add to
their margins." It is one of the activities that all vendors should look at
doing. It is important to encourage the SPs, and that can be done by ensuring
the partners get healthy margins. This will win the vendor brownie points and go
a long way in building relations with the channel.

According to Chopra of Team Computers, vendors have cut down on their credit
limits. "They should increase the credit limit by at least 15 to 20 days
depending up the time frame they offer. Besides we have been working on lower
margins and considering the current scenario vendors should allow us to operate
on more margins. This will support our business to a great extent."

This is a time when vendors need to strengthen their bonds with existing
channel. Vendors also need to look at whether they actually need more partners
on board. Instead they should focus on the channel they already have and
conducting one-on-one activities with them rather than over doing their
marketing spends. Over crowding the market would only discourage the channel and
entice them to push other products in the market.

Tandberg has been working closely with its channel and ensuring they do not
lose out in any way. Rewarding and certifying the channel and offering them demo
units are a few steps they are taking to build relations with their channel.

Speaking about the ways in which vendors can work with the channel, V Murali,
CEO, Precision Infomatic, Chennai said, "The vendors must support partners
through collaborative efforts on lead generation, market addressal and solution
skilling. Vendors have to come out of the 'deal' mode and look at true
partnerships for a healthy channel."

Self help time

Difficult times call for drastic measures, and many vendors claim that they
have been obliging with SPs for the same. Whether it is in the form of training,
launching promos/rebate programs or education, many vendors have been offering
their support to SPs. But there are certain steps that SPs can also take to help
themselves. "Get closer to you customer and spend less, are proven mantra to
tide over," advised Jaishankar. A similar sentiment was shared by Sehgal of
Tandberg who advised that SPs should look at building long-term relations with
customers, even if that meant taking a short-term hit. By spending less, SPs can
focus on their manpower.

While sales are down, they will not be out all together. And while sales of
products are slow the demand for services will not stop. Hence, SPs should look
at providing best-in-class services. "Whatever projects they are executing
should be managed more professionally. Implemen-tation of the project and
on-time delivery should be given priority as this would result in timely
payment," advised Dwivedy.

For Ajay Sawant, MD, Mumbai-based Orient Technologies, business has not been
up to the expectation, but his company managed to maintain a healthy growth
rate. "We are concentrating mainly on faster payment recovery. Apart from that
we see a lot of opportunities for SMB growth. Hence we are focusing on SMBs,"
shared Sawant.

Chopra opined that SPs should focus on their budgeting and become stricter on
that.

"This is also the right time to make marketing investments and spending as
the demand from the customers have been increasing. This aside we are also
looking forward to cutting down the number of employees. This means that we will
do away with a few of the non-performing employees as this is also the most
opportune time to take such a decision," said Chopra.

Next 6 months

According to Murali of Precision Infomatic the full impact would be felt
over the next quarter and continue perhaps till end of 2009. "The best way to
combat these tough times would be to closely monitor productivity of the people,
reduce costs and improvise on solutions. The judicious combination of these
factors would ensure stability, sustain business growths and additional
margins," shared Murali.

Biswas of Logitech opined that being a time-bound phenomenon it is hard to
say how the market would be six months from now, but he added that Logitech had
its business strategies in place looking at all possible contingencies.

The industry at large feels that though the market is a little sluggish, it
surely does not call for panic. It is a time to review costs, exercise caution,
strengthen relations and excel in offering services. If you have these under
control you can be sure you'll be sailing over the worst.

Ruth samson

ruths@cybermedia.co.in

(Inputs from Amrita Tejasvi, Pooja Sharma, NR Sethuraman and Manisha Kumari)