What Can We Expect In 2009?

Till the first half of 2008, everything was fine. We all thought that the
party India was hosting would last forever. We forgot the good old saying that
what goes up must come down.

While we have been reading about the sub prime crisis for some time, the
swiftness with which some of the well known financial companies in US went
down-under between July and September took us all by surprise. Suddenly we
became aware that the financial sector wasnot best the place to be doing
business in.

Today, we wonder how long the three giant automakers of US will get their
helpline. Except for the global oil price, which is sliding down, we are
concerned with dollar rates, the flailing US economy as well as our own besides
the general elections to be held in May 2009.

Coupled with all these we have had one of the worst terrorist attacks in
Mumbai. There have been sporadic cases of bomb explosions and terrors attacks
all through this year as well. So what's in store for us partners in 2009? Will
the situation get any better or worse? Or will it continue to maintain its
current status quo?

By: Gopalan Balakrishnan

Watch the signs closely

The new Economic Advisor to our Prime Minister Raghuram Rajan strongly
believes that bad days are ahead. He predicts a dip in the Gross Domestic
Product (GDP) to be in the range of five percent to seven percent.

For the IT industry in general and the channel community in particular the
trend for this year will be known when the three giant software companies start
announcing their quarterly results in the first part of January along with their
outlook for the year ahead. It is generally believed that a continued strong
dollar could negate the slowdown.

Other exports dependent on imports may not be much impacted. The drop in
exports could be more than offset by the drop on imports. However this could
mean job loss and uncertainty and could lead to further straining of the credit
resource.

IT channel partners dependent on pure hardware and that too in the PC market
or just license software sale will continue to have to manage very skillfully.
They should perhaps think of innovative ways for survival and use this situation
to have a fresh relook at their business model.

We have close to 50 to 70 partners in the turnover range of Rs 50 crore to Rs
200 crore. The going would get tough for them with lower sales or no growth,
longer sales cycle and longer credit period. There is news that one of India's
leading and highly profitable company proposing will start offering 365 days
credit.

Now for the good news

There is some good news in store for partners as they would be relieved of
some attrition problems during this period. This is yet another golden
opportunity for them to unite and face the situation more boldly.

Last month, some feeble attempt was made by some of the better known HP
partners in Mumbai but the steam did not last long. What is needed is a much
cohesive effort not only amongst HP partners but the entire community.

It is expected that vendors too would respond adequately to meet the
situation with better margins and liberal terms. Fortunately, we are hearing of
a leading vendor coming up with a better back end rebate scheme soon for 2009.
We will have to wait for the fine print though.

The final verdict

Where does all this end up? My reading would be that the channel community
would continue to be challenged during the first half of 2009. If the economy
does not improve and or we have a fractured mandate the negative sentiments will
continue for longer.

We have suddenly seen a huge drop in inflation. Some prophecies now state
this could be an indicator of deflation or depression which could be worse than
inflation.

To conclude, I would advocate cautious approach for the channel community as
the majority mostly skate on thin ice; and the need for strong unity. They need
to shed inhibitions and come together. They need to learn the art of competing
and at the same time combining and preserve cash to the extent possible.

The goal should be bottom line and bottom line alone and not do deals for the
sake of turnover. And just like what goes up comes down, what goes down will
come up, only this time it could be bit longer perhaps as long as it was up. And
hopefully we all have deep pockets to survive this period.

(The author is MD-Avnet Partner Solutions, Avnet India)