WiredScribe: The Business of IT

The Sensex was at its bullish best in 2005. And the market is expected to sustain the momentum throughout this year. Other things being equal, the BSE Sensex should touch the 10,000 mark before we bid adieu to this quarter. On a more micro level, last year, the IT industry was witness to a never-before-seen bullishness in the product distribution space The year 2005 saw distributors throw caution to the wind and expand their product portfolio and geographical reach with new fervor. Several disties also set a tentative foot in the retail space, to test the water. We even saw a spate of mergers and acquisitions and there are rumors of more consolidation in the days to come. And going by the current enthusiasm among disties, the industry is likely to see many more activities this year. Driving Factors Several factors have contributed to the optimistic trend in the distribution space. Many MNCs, which didn’t have a direct presence in India, are now expected to set up their operations her...

As pressure on margins increases, thanks to heightened competition and a more demanding customer, manufacturers have been forced to reinvent their go-tomarket strategies and relook at their existing distribution set-up in order to get closer to the end customer to gain an in-depth understanding of his requirements. The relationship between manufacturers and distributors is at crossroads thanks to industry consolidation, cutthroat competition and the emergence of new channel alliances. Today, the manufacturer wants to get closer to the end customer to not only understand the impact of its products but also ensure quicker response to market demands. Says Alok Bharadwaj, director and GM, consumer imaging & information division & volume products, Canon India, “The distribution value chain has progressed beyond simple order taking activity to providing logistical support and local stocking. But now disties need to focus on market development for its brands. Currently, local disties ...

A market boasting 25 crore potential customers, with overall incomes growing at a compounded annual growth rate of 10.95 percent cannot be ignored for long. And India's C and D class cities and rural markets offer just such an opportunity. According to studies conducted by The Rural Network, an alliance of several leading marketing organizations in the country, the number of middle class households with annual income ranging between Rs 45,000 to Rs 2,15,000 is around 2.74 crore in rural India. The study also brought to light several interesting facts that make India's hinterland markets even more interesting to IT manufacturers and distributors. Of the six-lakh villages in India, 5.22 lakh have a public telephone. By early 2005, around 41 million Kisan Credit Cards were issued with cumulative credit of Rs 977 billion, resulting in tremendous liquidity. Of 20 million Rediffmail signups, 60 percent are from small towns. The small cities also account for 50 percent of Rediff's...

Over-distribution occurs when one dealer doesn't stock a particular product thinking other dealers have extra stock of the same product. If the other dealer too runs out of stock then suddenly demand exceeds supply The impact of the zero duty regime on the information technology product market in India can be truly gauged only post budget 2005. The business will only grow once customs duty is done away with and VAT (valueadded tax) is implemented. Once zero duty is officially announced, parallel distributors will have to obtain legal sanction or face extinction. However, there are two sides to the coin. On one hand, the official distribution stands to benefit from the plethora of products and brands that will foray into the market. But the market will have to suffer the consequence of over-distribution. This phenomenon already exists in the market to a small extent. But post budget 2005 and swith the onset of zero duty it will get worse. But what is over-distribution? Analysts m...

While geographical expansion and new product lines are important for growth, even more crucial is resource planning and supply chain management systems. A successful distribution channel comprises a perfect partnership between manufacturers, distributors, resellers and system integrators. Manufacturers depend on distributors and channel partners to reach out more efficiently and cost-effectively to end customers. But how can a distributor differentiate itself? What are the prerequisites to effective distribution? 360 Magazine spoke to several key distributors in the country to understand the secret behind their success. Growth Factors A few interesting points emerged, which seem to be the common link behind all these highly successful businesses.There is a lot of focus on innovation. going retail, foraying into untested terrains, trying out new business models, etc. Many have tapped the lucrative mobile phone business and have managed to enhance both top line as well as bottom line fig...

In conversation with Shailendra Gupta, Group CEO, Tech Pacific Holdings post acquisiton of Tech Pacific by Ingram Micro. Immediately after the announcement, the market began speculating about the possible outcome of the acquisition based on conjecture. There were many rumors floating around about changes in the credit policy, product portfolio and the channel partners. status in the combined entity. But now we have begun communicating to our channel partners and things are beginning to settle down. For quite sometime now we had been looking for a strategic partner who could help strengthen our channel and widen our products and services portfolio, and our reach into new geographies. The merger will provide us economies of scale and enable us to leverage the cost structure benefits, which will be passed on to our customers. But there are concerns that this move has given birth to a monopoly. Just merging two entities does not double the strength of an organization. There is a ...

Distributors have been talking about value-added service for quite some time now. All agree that it’s the only way to survive in the emerging highly competitive scenario. But most channel partners 360 Magazine spoke to complained that this was hardly the case. Except for a select few, most distributors do not provide any value-addition, they said. But most distributors do have service centers in different cities. And most try and provide quality products and services. However, providing high-quality products and service reliability is no longer enough. Both manufacturers and channel partners demand much more from the new age distributor. So what does value-addition mean in the current sense of the term? The basic definition of value addition says it’s any factor added to a product to increase its value or price. In reality value addition can be split into three sections —presales, support sales and post sales. Presales This is one aspect of value addition, which is ignored ...

January 27, 2005 Back in June this year, when 360 Magazine first mooted the question about the impact zero duty will have on the Indian IT industry, most just shrugged it off. For most manufacturers and distributors this was something too far off in the future to worry about. But 360 Magazine’s Anniversary issue on the topic did set the industry thinking. This time round when we spoke to industry leaders, the reaction was expectedly different. With WTO’s zero duty regime now looming large over the horizon, industry leaders are a worried lot. Confusion is the order of the day with even the most optimistic industry leader sounding befuddled about the scenario that will emerge. 360 Magazine decided to put things in perspective by putting the spotlight on the benefits that will accrue while highlighting the areas of confusion. Implications The positive aspect of the move is there for all to see. The market will explode. More global brands will now foray into the Indian market....