Channel Buzz
The road ahead for channels
The IT industry is abuzz with talks on concepts like cloud computing, SaaS, Virtualization and RIMS. But the current economic uncertainty, is casting a shadow on their future demand. There are several questions hovering on every channel partner’s mind.
CRN Strategy Forum, held in Mumbai on October 14 at the Leela Kempinski, sought to quell those doubts and answer questions.
Dall‘man’ of the hour
To the rescue came Steven Dallman, Global Channel Chief of Intel with rich experience of 30 years at the company. A witness to major evolutions and revolutions in technology and IT channels, he spoke to a gathering of 65 leading solutions providers, systems integrators and system builders.
Channel partners must focus on services rather than selling hardware in boxes was the unequivocal message that Dallman put forth in his keynote speech at the forum.
 According to him, future business revenues will depend on how well channel partners were able to differentiate themselves from competitors on the basis of services. “As products get homogenized, margins on out of the box sale of hardware would get further squeezed. Competing with each other on cost only would hurt partners in the long run.”
One of the positive things about Indian channel, Dallman said, was their hunger for growth. “Over the last several months I have been globetrotting to countries such as Italy, Germany, UK, Turkey, Venezuela and Thailand. While the channel partners in many of these countries are trying to remain in the positive territory, Indian resellers have been talking about an average 15 percent growth rate, which is fantastic.”
He identified several trends that would create lucrative business opportunities for channel partners in the near future. One of them he said was the PC refresh business.
“Worldwide, there are over 300 million business PCs that are more than three years old and 30 million servers using single-core processors. We have done an ROI study that clearly demonstrates that by refreshing from single core Xeon servers to quad core servers, customers can expect a ROI within eight months,” he said.
According to Dallman, new form factors are also creating newer opportunities for channel partners. India has already emerged as Intel’s biggest market for nettops and there is potential in assembled netbooks for channel partners. “There will be an explosion in the market for purpose built computing appliances like the car PC, digital signage etc in the future.”
Panel discussion
Dallman’s keynote address was followed by an interesting panel discussion—The road ahead for IT channels. Moderated by Dhaval Valia, Executive Editor, CRN, the session saw R Ravichandran Director, Sales, Intel South Asia; Rajesh Kumar, Director, Business Strategy & Planning, SMB, Microsoft India; Chetan Shah, Managing Director, Xpress Computers; Aakash Saraf, CEO and Managing Director, Zenith Infotech and Ajay Sawant, Managing Director, Orient Technologies as panelists.
Valia kickstarted the discussion by asking panelists about their views on the current state of economy and how long it would take for demand in the IT industry to rebound. Ravichandran said that he saw clear signs of recovery in the global economy. He offered that Intel had seen a considerable improvement as its global Q3 results, at $9.4 billion, were much better than previous ones.
Ravichandran added that the recovery was led by consumer and SMB buying. The demand from business segment was sluggish, but, he hoped, it would pick up strongly in 2010 as the full impact of the Windows 7 launch is felt.
 Kumar presented a contrasting picture saying large enterprises were the ones showing healthy demand for packaged software, while SMBs lagged. However, the overall recovery trend in the current quarter was positive. “Certain verticals like government, telecom, pharmaceuticals, healthcare and education are showing robust growth in demand, while others like manufacturing, construction, IT-ITes and retail are still sluggish.”
Sharing the ground realities, Shah expressed that it was too early to read the growth in demand as signs of recovery. According to him, there is a lot of slush money around because of the fiscal stimulus packages released by governments. While he was optimistic about the economic revival, he expected a slow uptrend—echoing the US Federal Reserve’s statement that the economic recovery will resemble a slow and steady U-shaped curve, rather than a V-shaped one.
 Speaking about the economic scenario, Saraf said that the US economy was particularly badly hit in October-December 2008. Zenith saw a steep 23 percent fall in its business in a very short period of time. “Compared to that, India, which is actually growing at six percent GDP, is a dream market to operate in.” He, however, said that the US had reached the stage where the fall had been arrested, and growth was likely in the next 9-12 months. Saraf said a key trend during the downturn had been the fall in product revenues, which was offset by a growth in managed services, and that is what would drive future growth.
 Sawant agreed that the fall in product revenues was more than offset by the immense rise in services revenues. “Customers are ready to pay for services like RIMS, virtualization and consolidation, which help them move from a Capex model of IT to an Opex model and brings more predictability to their cost structures in tough times.”
Answering a question posed by Valia on the inflection points created by the current recession, Ravichandran said the Indian government was increasingly using the Internet for social projects in healthcare, education, infrastructure, the Unique Identity Authority, postal service and railways. “This endeavor by the government to use the Internet to bridge the social divide is a crucial inflection point in my view.”
Sawant said a key trend during the recession had been the increased interest in IT investments. “CEOs and CFOs are increasingly getting involved in IT buying decisions. The downturn is forcing people to consider ways of getting more out of less, as far as their IT investments are concerned.”
Speaking on the new concepts evolving like cloud computing and SaaS, panelists offered that these concepts are still young and will have to evolve before customers get serious about them. However, panelists advised partners that adopting these concepts at an early stage in their business strategy is a wise thing to do.
When panelists were quizzed whether LFRs (large format retailers) like Croma and Reliance Digital will kill IT retailers, panelists believed that LFRs will never take away the channel business as they have their own set of challenges like the real estate costs, skill-sets and salaries of employees.
 Ravichandran said, “The operational costs of LFRs are huge, so it is difficult for them to always be more cost-effective than IT channels. Channels have deep rooted relations with customers. I don’t think LFRs can emulate that.”
Microsoft’s Kumar argued that the nature of the Indian market is different from that of US where LFRs have taken away the retail business from channels. “The Indian market is a diverse and disparate one and contrary to the general perception that Indian customers are price conscious, I believe they are value conscious. So LFRs offering low prices than channel will take away business from partners isn’t a valid argument.”
The forum concluded with Dallman giving away copies of NR Narayana Murthy’s latest book, A Better India, A Better World to forum panelists.
CRN Strategy Forum was a resounding success with delegates taking away new ideas for business growth, improved confidence to drive their businesses and an understanding of what the future may hold for IT channels.
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